"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


Friday, May 23, 2014

Ukraine Election moves to the Forefront

All eyes will be on this weekend's upcoming election in Ukraine. Traders, especially gold traders, will be closely watching the reaction to the vote. Any sort of violence should provide support to the metal. In the event that little reaction occurs on the ground, some of the risk premium in the metal will be wrung out. We will have to watch and see how things transpire.

For the meantime, the range trade in gold continues with neither bulls or bears wishing to become too aggressive ahead of a long holiday weekend, especially with this big election taking place.

I am much more interested in the Euro, which continues to weaken ( European currencies are generally losing ground to the Dollar at the moment ). That is providing further lift to the Dollar as is the move higher in equities. Then again, it is early in the day when I am typing these comments. Refer to the chart of the Euro that I posted yesterday. It has fallen through that chart support as of this morning and barring a late session turnaround, looks like it will try to test the 1.35 region. The election might have some impact on the currency so traders will more than likely be content to even up some positions ahead of the weekend as well. If the Euro does lose the 1.35 region, it would push the Dollar through overhead chart resistance near 80.70 basis the USDX. That could work to pressure gold so we will want to continue watching this very closely. Id the Dollar were to push past the 81.50 region, I do not think gold is going to be able to maintain its footing above $1280. Again, we will simply have to wait and see what happens as we move into next week.

The GIAMATT crowd is pointing to a story in the Financial Times noting that the UK's Financial Conduct Authority cited Barclays had failed to "adequately manage conflicts of interest between itself and its customers as well as systems and controls failing, in relation to the gold fixing" between 2004 and 2013. The main focus however was on an event that took place on June 28, 2012. Barclays' trader was attempting to avoid a payment of some $3.9 million to a customer under an option. According to an email that the trader, by the name of Plunkett had sent to some of his fellow workers, he was attempting to create a "mini puke" the next day. That was understood to mean forcing the price lower ahead of the fix.

It is "Hallelujah" Time over there with them. "See - we were right all along - this is proof positive that every single big move lower in gold is the result of evil, nefarious forces suppressing the price of gold on behalf of the government". So what does the story show us? Simple - a big bank has been fined for knocking the price of gold lower in order to prevent having to make a payment to a customer. Indeed, this is most certainly a corrupt thing. Anytime the regulators can catch this sort of thing occurring and attempt to put a stop to it we should all be pleased. I have had more than my fair share of dealing with bizarre price swings in markets - just yesterday I was pointing out to a reporter at Reuters some suspicious activity in the hog market - but is this the same as saying that the price of gold is being CONSTANTLY manipulated by these big banks in order to do the bidding of the government? Not hardly. It seems as if it was much more mundane than that - as noted above, the trader was trying to avoid paying a customer $3.9 million.

It is interesting to note that the price of gold closed on the Comex that day in question at $1550.40. Three days later it closed at $1621.80. As a matter of fact, the price of gold worked steadily higher from that point running all the way to $1798 in October 2012. June 28 was the bottom in the gold price for the next TEN months! If the trader was attempting to knock the price of gold lower at the behest of the feds, he sure as hell did a lousy job of it didn't he? That low in price, near $1550 was not even seen again until April the following year. On April 12, 2013, gold then entered its current bear market.

What we can certainly bring away from the FT story is that Barclays' trader was attempting to keep the price of gold from moving higher  to a certain level until the option expired, and apparently succeeded in so doing. But did he suppress the price of gold at the behest of the government? Hardly! As said, he sure as hell mucked it up if we was trying to drive the price sharply lower!

Here is the actual price chart of gold for that time period. See for yourself.

Here is the point in all this - too many in the GIAMATT crowd lose credibility when extrapolating from one thing to another. It is the result of sloppy analysis in my view. As just noted, the very day on which the trader in question was singled out as having worked to produce a "mini plunge", marked the bottom in a market that then proceeded to rally $250 in the next 13-14 weeks. And this is proof positive that the feds are behind the gold suppression scheme? My goodness, if I were the feds looking for an entity to suppress the price in gold and just witnessed one of my "cohorts" somehow managing to induce a $250 RISE in the price, I think I would be looking for someone more effective!

Look, prices in our modern futures markets are slammed lower and jammed higher with increasing regularity these days. It is the new normal. Pick a market, any market, and watch it closely over the course of the next few weeks, and you will see it. Might I suggest soybeans or coffee? I just this week threw up a chart of the soybean market showing you the wild swings on an hourly chart to demonstrate how volatile the price swings have become. With computers now doing the bulk of the trading, all it takes to move a market is an order large enough to trigger them into buying or selling, depending on which direction the one pushing the market is wanting to take it.

One more thing and I am done with this. I have written more times than I care to remember at this point about the wild-eyed, breathless, sensationalized, much publicized, announcements and proclamations from our "new market wizards" detailing with excruciating exactness practically every sharp move lower in the gold price which they have dubbed as "flash crashes". They have made the conclusion that every sharp fall in the price of gold that results from any large series of sell orders, is proof that the feds ( government ) are working to suppress the price of gold. This shallow analysis is easily refuted as I have mentioned above by watching the price action of other commodity futures markets. But beyond that, the real problem with this "analysis" is that it has a flawed thesis at its foundation.

Those of you who understand anything about building know that if your foundation is flawed, the structure built upon it is shaky. You may have the finest quality of construction upon that foundation, but if is unstable, nothing is going to support that building when the foundation comes under stress.

The foundation behind the "flash crash" theory  is that every sharp move lower in gold is the work of nefarious evil-doers suppressing the price of the metal in order to do the bidding of the government, which, if we are to believe the GIAMATT crowd, is obsessed with a rising gold price under any circumstance. But where is it written that whereas other markets can rise and fall, only gold MUST CONSTANTLY MOVE UPWARDS AND ONWARDS? What magic is it about the yellow metal that it alone, out of all the various markets on this planet, MUST MOVE HIGHER? Their entire postulate relies on an assumption that is absurd - namely - that gold must constantly move only in one direction - up! If it does not, then that in itself is evidence enough that the price is manipulated by the powers that be; so goes their thesis.

But that begs the question: " what are the circumstances required for gold to be in a bull market"? If you answer that, then the shaky foundation upon which the GIAMATT crowd's entire thesis becomes apparent.

Here is a chart of the US Dollar compared to the price of Gold. Most of you know that I have dubbed the yellow metal, "The Anti-Dollar". The two markets tend to move INVERSELY to one another. Again, I wish to repeat -the correlation is not exact but it is pretty close. GENERALLY SPEAKING, gold tends to move lower as the Dollar moves higher and moves higher as the Dollar moves lower. By the way, if the relationship were an exact one, we would hardly ever see much change in the price of gold in terms of other foreign currencies. That being said, look at the chart below:

The Dollar is the green line; gold is the yellow line. You can clearly see the inverse relation existing among the two. There was a brief period noted in the rectangle back in 2010 during which both markets moved higher alongside of each other. That is the exception. Note how back in 2009 as QE ramped up, the Dollar began to sink as traders interpreted it as being currency debauchment which would usher in a round of inflation. Gold responded by moving higher as the Dollar sank lower. Then we saw a period in which the Dollar rallied ( I believe this was the interval when QE I was winding down and QE 2 had not yet begun) back in 2010. As the Dollar then sank after QE2 was underway, it collapsed all the way down to critical support near 73. It was looking incredibly shaky.

What did gold do? Answer - it shot sharply higher as expected and notched an all time high in the process. But what then happened in the summer of 2012 ( by the way, the time period noted above in the article about Barclays)?  Traders and investors both began to notice that the Bond Buying programs of the Fed were not producing the inflationary wave that many had come to expect. They noticed that Velocity of Money was actually falling and that the price of many tangibles ( the commodity sector as a whole ) was moving lower, not higher. In other words, inflation was falling, not rising. Guess what? Gold fell alongside the rest of the commodity complex as the US Dollar proceeded to strengthen. Traders began to suspect that the liquidity being supplied by the Fed was not making it into the broader economy. Such was the case.

Now look at the chart from the peak in the gold price and notice how it has moved gradually lower as the Dollar has moved gradually higher. Since late last year (2013) both markets have been range bound. What can you deduce from this? Answer - the Dollar has stabilized and so has gold. There is nothing sinister about any of this. It is merely a market biding time.

So here is the big question which no one in the GIAMATT crowd will HONESTLY deal with - why should the price of gold be soaring when the Dollar is no longer moving lower?

If you want to regale us with story after story about how the US Dollar is being discarded in trade and how it is going to be abandoned and crash lower, Fine. Then the gold price will rise. But at least be honest enough to note the price charts and observe the FACT, not theory, that the Dollar is not currently sinking. It has moved from off the 73 level to nearly 85 at one point. Why would you people expect gold to keep soaring? It has lost one of the primary drivers required for a SUSTAINED bull market - namely a falling US Dollar.

Here is my contention for the umpteenth time to these cultists - the feds did indeed attempt to slow the rise in the price of gold during the time in which the US Dollar was sinking and especially when it was threatening to crash through chart support. However, ever since gold entered its bear market when it fell through the $1530 level and could not recover that, they have not been interfering in the gold market. They have no reason to interfere because the US Dollar is no longer as weak as it once was.

Please note that I have called gold as being in a BEAR MARKET. There is a reason for so doing. Experienced traders know that a market can be pushed AGAINST its main trend with some temporary success but that any attempt to actually REVERSE a trend driven by fundamental factors will never succeed. This is the reason that while the feds resisted the rise in the price of gold during its bull market phase, they could never reverse the trend. The fundamentals were all on the side of being long the gold market. A sinking Dollar, rising commodity prices, falling interest rates, soaring government debt and generally currency unrest, all favored the long side of gold. The feds could not stop the inexorable rise as long as those factors were in place. Guess what - most of those factors are no longer in place. This is the reason, that until earlier this year, gold was in a bear market leg lower. The trend was lower because the fundamentals shifted. Now it has no clear trend but is moving sideways.

I am on record here as stating that IF ANYTHING, at this point in time,  the Fed is more concerned about a FALLING GOLD PRICE than they are about a rising gold price. I actually think that the Fed is more concerned about the lack of inflation than they are concerned about anything else. Why do I say this? Because you just have to listen to them to hear most of their various governors say this! The past week witnessed several of them all talking about the lack of inflation and how it concerns them.

The Fed fears deflation because they believe they have little control over it in the sense that they have much more direct control over inflation. They can easily hike rates and put the kibosh on any overheating economy in a real hurry but, as we have all learned over the last 5 1/2 years, attempting to pull an economy back from a deflationary spiral is much more challenging.

I have maintained for some time now that the big moves lower ( flash crashes as the cult members call them ) AS WELL AS THE SHARP SPIKES HIGHER, since gold entered its bear market, are being caused by hedge funds or HFT's. They are not evidence of an attempt orchestrated by the government to artificially drive the price of gold lower. These big players jam markets up and down and will continue to do so. They are interested in one thing and that is not obtaining the best possible fill price for their executed trades. (only us dinosaurs of a trader are concerned about that). They are only interested in getting in or getting out before the next guy does and pushing the market in the direction in which they are positioned so as to obtain the maximum amount of price movement in their favor as possible. Be it a Barclay's, be it a hedge fund, be it a large local trader, it does not matter. The goal is the same - either induce or start the MOMENTUM of the market in the direction they favor. The reason - our modern futures markets are not much concerned in the short term about fundamentals anymore -they are all about momentum.

A couple of other things before wrapping this up - I have to marvel at the temerity of those who can, with a straight face, point to the falling reported gold holdings in GLD as being BULLISH. Yes, you read that correctly! Never mind that FACT, ( once again facts are of no consequence to these folks ) that during the rise in the price of gold over the course of its former bull market, the holdings in this giant ETF consistently rose right along with the price. Western investment demand for the metal was strong, solid and sustained. Maybe we should follow their illogic and note that the once-rising gold holdings in GLD was BEARISH! Can you not see the utter absurdity and why so many in the gold community have no credibility whatsoever. "HEADS - I WIN;  TAILS - You LOSE". Nothing ever matters to them, nothing. Whatever it is, it must be bullishly construed for gold.

In closing this post, which has already consumed way too much of my time ( I apologize if I repeated myself anywhere in this post as I am trying to watch price quotes simultaneously to typing this) I will leave you with this.

I suppose it was that trader at Barclays that caused all those big Western based money managers and institutional funds to sell their gold holdings and take the money and put it into equities where they made some spectacular gains by not fighting the Fed. I suppose it was also that same Barclays trader that caused the shareholders of the mining shares to dump them all and buy into different sectors that were performing so strongly. I suppose it was that same trader at Barclays that induced so many index and hedge funds that were once hugely long the overall commodity sector to jettison corn, wheat, beans, copper, sugar, coffee etc, beginning back in 2011 and 2012. And lastly, I suppose it was that same trader at Barclays that was behind the decision by some of these major banks to sell their commodity warehouses and look for buyers of their commodity trading sections. How amazingly astonishing that the traders working for these banks can do all this! Yes indeed, such a air-tight, logically unassailable case that no one who has a normal functioning brain would dare dispute it.

Those of you who have taken the time to read this... you can make up your own minds. Believe what you want. The goal of a trader/investor is to make money from wise choices. I learned a long time ago, the hard way, not to argue with the price charts. Consoling yourself about why an investment class you have become married to is not performing is not a substitute for profits. Remember that. Follow the markets and the charts if you want to succeed and try to glean the sentiment of market participants. That is what drives money flows and ultimately price. Go with it and succeed; fight against it, complain about it, blame others and fail. It really is that simple.

Here is a chart of the HUI as it stands at this hour. Maybe it will stage a late session rebound. Anything can happen ahead of the closing bell but for now, the index is moving closer to losing chart support. Let us hope not for those who are still holding large positions in the sector.

By the way, a brief chart for you grain guys....

KC Wheat has fallen over $1.00 bushel this month as rains in that key growing area are convincing traders that the worst damage for the crop is behind us. Also, US wheat prices remain high on a global basis. The market is probing to see what price level uncovers demand. As a consumer, this kind of wheat, which goes into making bread, one always desires lower prices. Farmers who have a crop in decent shape are still making money at these prices however which is a good thing.

For my readers here in the US - have a great Memorial Day weekend with family and loved ones. Remember those fallen warriors who paid such a terrible price for your liberty. They have earned our respect, admiration and gratitude. It is especially galling to see the pathetic spectacle occurring at the VA during this time frame - a time in which we pause to remember our soldiers while many of them are dying from neglect and outright fraud.


  1. Dan -
    I went a little more in depth on the Barclays story - I think you'll be AMAZED at the inevitable UNAVOIDABLE conclusions:


    1. Kid - very nicely done!

      Thanks for a good read!

      Enjoy the weekend.

  2. you can borrow my lawn tractor for the entire weekend Dan. there's going to be lots of bugs buzzing around, so i want to make sure you are able to get outside and enjoy your holiday!


    1. Peckerwood;

      that is some fogger! I suspect you are right about the bugs....

      have a great weekend.

    2. Dan, Hubert, Concord, Taylor, Preditor1976 and KidDynamite, you all have a good weekend, and remember to tell all the cherries that show up here from time to time, that basically, they, deep down inside want to lose; sparks

    3. Dear Steve Tarnish,
      Glad to see you're consistently smug. Hard to be humble when you're so great, right?
      By the way, I replied to your reply to me on a previous comment list in case your smugness wants to get in the last word, something I surmise is important to feeding your inflated sense of self-worth.
      I only pray that I never indulge in your level of Narcissism. But it's an ailment that seems to be infectious among the self-righteous regulars here, so now I take my posting leave to avoid contracting the disgusting malady.
      Feel free to kick me on my way out the door, I'd expect no less from such as you.

  3. Here are a few thoughts from someone on the 'other side' (though less so since reading more here).
    1. This is one trader that was caught. You've said that this price action is exclusively big players moving in and out of big positions. Contracts close all the time where a few dollars can mean millions.
    2. The fact that this can happen destroys investor confidence. I suggested that minor programming changes could move a hedge fund out of a commodity with less loss to the clients, and you said they don't care about the losses. They just enter the entire lot as a single transaction, a billion dollars or more, a single trade? Really? l saw the hog chart you posted, but couldn't read the numbers to get an idea of % swings. Is this happening all day in hogs, where hedge funds are just dumping everything all at once? How much are they moving the market, and how large are these trades, dollar-wise?
    3. The other side would say that gold isn't falling because of fundamentals because they look at it as a monetary metal. If the base expands, so should the price of gold. Just as your dollar/gold chart shows, until QE. A consistently expanding money supply took gold to 1900, but relentless global QE since that high has it now at $1300. From a monetarist perspective it makes no sense. We're arguing that $1300 is a joke considering the monetary base worldwide. And I don't think the CBs are worried about deflation in gold. The likelihood is that they didn't control it on the way up too much because they didn't feel like they had to. It was low enough to prevent a dollar panic, and the world's not ready to look to gold as money yet, so it's just another commodity, right? Why not let the price run? Clearly the market could care less about the monetary base.

    So the debate really comes down to: what is gold? If it's money, the monetarists will be right in the end. If it's only a commodity (if there is another reliable money (there isn't, at least not multi-generationally)) then the traders will continue to be right about it. For now, you're right Dan to treat it as a commodity since everyone except stackers is doing so. You're also a friend to gold since you recognize the weakness of fiat and encourage people to own it as insurance. But in general RE manipulation and the 'rightness' of the gold price, me thinks thou dost.....
    And a bit of realism is warranted: Unless you think the world looks like politicians like to paint it, where everyone is looking out for the best interstes of everyone, then you should expect _anything_ to be as manipulated as it can possibly be by those with money and power. If they are not controling and dominating it, its because they can't. They can control interest rates, the value of money, tax rates, behavior, (insert about ten thousand other important things here). I think it is naive to think they would care about gold but not manipulate it. It's not manipulated now? Then they don't care about the price. They made money in it by manipulating it the last ten years, but now that the price change has occurred, they'll PASS on that cash (as they are often known to do (not)) and just let the market work its magic to the benefit of everyone.

    I guess I'm not as swayed by your arguments as I thought. Market approach? Perfect. Small fish, big pond, can't control market so chart it. Perfect.
    Defense of those with power and money? A mixture of wishful thinking and probably projection (you personally might manipulate a market if it was really a matter of national concern, but would never do it for profit). These folks have repeatedly proven to be both above the law and the architects of the law. If manipulating any market, up or down, benefits them, they have been, are, and will be doing it, ad infinitum, full stop.

  4. Brilliant post, Dan. You are spot on.

    So a guy at Barclay's got busted. Big F'ing Deal. Did the gold chart pop? Drop? Everything is in the chart, and nothing happened.

    Time for the manipulation crybabies to get a life.

    It's not a matter of being a "denier". It's a matter of realizing that there are a LOT of moving parts out there, they are all in the chart, and you need to trade the reality. Or go bust. Your choice.

  5. well the problem I have with your reasoning is that usd has fallen 7% since June last year , yet gold lost 20 % … my view is that the correlation would be as valid with gold trading at 1500 , 400 dollars from the old time high … not 750 … thats a 350 dollars difference … they way the usd has performed in the last two years , gold should have been trading around 1400 to 1600 …. not 1200 to 1400 … any way waste of time at this point to keep on banging the same wall

  6. that knock down on April last year has serious flaws , and one day I am sure will come to light what really happened , as you well know , there are a few very pissed off people because of what happened , some of them very powerful people , who surely know by now what happened that day … it will come out the same as this crook at barclays was exposed … one thing about gold bugs , they are consistent … you can live within the beast , and profit from it , but you can not justify it … anyway … like I say different opinions is what makes a market … or at least thats the way it used to be … over and out … good week end everyone

  7. the USD compared to what? a basket of (basket case) currencies? keep banging your head.

    Euro (EUR), 57.6% weight
    Japanese yen (JPY) 13.6% weight
    Pound sterling (GBP), 11.9% weight
    Canadian dollar (CAD), 9.1% weight
    Swedish krona (SEK), 4.2% weight
    Swiss franc (CHF) 3.6% w

  8. look anon, i'm not trying to be a smart ass. the problem with these numbers is that there is no benchmark anymore. in a profound way, i am conceding a point. but things will continue as they have been right up to the point that they don't.

    have a great weekend all. i now have to go torch some wood based cooking fuel, and go long on some hog.

  9. Oh come now Dan, your not buying the story "It only affected one trader" are you?

    We all know where there is one Rat caught there are many others and other reasons too for doing these things.

  10. Also we all see the Fed talking heads crawl out of the woodwork every time the Dow falls a few hundred points talking continued easy money.

    So its more than obvious by now the Fed wants the Dow up or to stay up.

    Higher Gold says to the public things are not ok, so its not a stretch to say they might Gold lower to sell a recovery.

    Was it not Volker who said gold is his enemy once?

  11. from post " A sinking Dollar, rising commodity prices, falling interest rates, soaring government debt and generally currency unrest, all favored the long side of gold. The feds could not stop the inexorable rise as long as those factors were in place. Guess what - most of those factors are no longer in place. "

    Now I'm really confused??? 10 yr.yeild dropping, dollar, yen and euro debasement with QE or swaps, Food stuffs rising in price,gas, insurance etc , seems like all that still in place to me.

  12. Gold is probably going nowhere until the Fed reverses the QE taper. Same as the Dow has gone nowhere since the taper was announced 5 months ago.

    The Fed talking heads just try to talk the Dow and S&P up with their we are going to keep rates at 0% talk.

    Once the herd figures out the recovery is QE forever they might actually move to hard assets. The herd is always the last to figure it out.

    The whole recovery is cheap money, there is nothing self sustaining going on here. The Fed knows this but is not going to say it. They want the herd to stay in stocks and paper or the system fails.

  13. Another solid post Dan, thanks for the effort once again.

    The GIAMATT/evil banker blogs out there seem to share a similar trait in that they're mostly egocentric in their beliefs or attitudes and how they express them. Smarter-than-thou/take-it-or-leave-it condescension is their style.

    Their almost inexhaustible ability/preoccupation with their own internal world of unproveable assertions coupled with their own opinions or interests is seen as being the most important or valid topic for them to discuss as often as possible.
    To them, self-relevant information is seen to be more important in shaping one’s judgments than are thoughts about others and other-relevant information.
    Egocentric people are unable to fully understand or to cope with other people's opinions and the fact that reality can be different from what they are ready to accept. Other people's differing opinions are seen as a personal slight that usually elicits mockery or angry, sarcastic antagonism towards those who hold a different or alternative viewpoint.

    They simply can't be bothered or distracted by other peoples misguided viewpoints if it threatens their "message".

    It appears there's no shortage of sites or authors in the PM blogosphere that fit that M.O.
    Good luck Dan in trying to reach some folks out there who are starting to realize that some of the messages and messsengers out there are a bit unbalanced in their sometimes extreme viewpoints.

    Unfortunately for some they'll continue to ignore the obvious warning signs but at some point down the road they'll recognize and realize what they've bought into was ultimately a huge waste of personal time and energy over some shiny metal and a fear of evil bankers or some weird revulsion to paper financial instruments of all sorts...even if they use them on a daily basis themselves.

    Everyone have a great weekend and be safe!

    1. Revulsion to paper _is_ weird! The world isn't totally enslaved to it or anything. What a bunch pf weirdos to worry about a financial system where the core of it - the money - is a matter of speculation and fixing as to its cost.
      Where can anything go from there except into a universe of speculation? The financial industry no longer exists to provide liquidity and price signals to facilitate ownership of assets. It's now largely about skimming and betting; most transactions are just bets, you own a claim on a prediction. What would we do, anyway, if all of the enormous brainpower currently figuring out how to scam a dollar doing something that adds zero value to the world suddenly decided to make something? But nah. What we have now is working brilliantly, all systems are go, and we have the paper in hand to make good on the paper promises we've made to pay millions of people paper trillions. Well, we don't have it but we'll print it or tax it. Forget it. Proceed with the universal papering over of everything!

  14. Keep drinking the Kool-aid Darkpurple.

    If you believe Dow at 16000 is real and not artificially engineered then they have a bridge to sell you too.

    Markets everywhere are more artificial than ever. There is no free markets any more. Everything is artificially distorted to sell a recovery.

    1. Where did I mention the Dow or any of my belief system???
      You're assuming much.

      Some folks can't or won't read what is actually written and they stop at a certain point and automatically fill in the blanks with a contrarian assumption.

      Regarding the Dow or S&P and how "real" the level is....tell the PM people possibly underwater since $1900 or $48 how unreal their "losses" are currently (but not forever).
      Then tell a dow/s&p investor how unreal his paper profits are after they've taken full advantage of a Fed induced mini melt-up that's allowed them to pad their bank account or real estate portfolio.

      Does "the system" kind of suck? You bet!

      However, it is the system were stuck with and the one the vast majority of the planet engages in. Will it last?
      I have no idea, but I'm certainly not hoping for a systemic meltdown in order for gold to skyrocket and for some to be proven "right."

      That's twisted thinking and akin to hoping for a car wreck to total your older vehicle so you can get full and fair book value for it.

      I'm not implying that's what you think. It does seem though that's what many of the doomers/egocentrics out there are basically messaging.
      The end is near, prepare for it.

      Certain types of people have been incessantly proclaiming that for literally centuries about some type of injustice or fear of things out of their control.
      This whole "paper" hatred or fear is similar in that regard imho.

  15. Methinks Dan does protest too much regarding manipulation.

    It's his blog, he doesn't believe manipulation is that big a deal, so why drone on at such length to try to re-educate those who see manipulation everywhere? Day after day after day, Dan uses his electronic pulpit to preach to, and attempt to convert, the infidels, or at least to discredit those whom he perceives to be their leaders.

    Again, why bother?

    Why is this so important to Dan? He's got his regular acolytes, one of whom pompously patronized me in response to my first posting on this site. Dan won't convert the hardcore manipulation types, no matter how many sermons he delivers on their stupidity. He will, though, draw gratuitous bravos from his sycophants.

    I'm sure some of those will leap to hurl ad hominem attacks at me for this post. So be it. As a long-time lurker on this site, who enjoyed Dan's counterbalancing contributions to the Kingworldnews hypefest before Dan took his leave, I don't get Dan's Messianic zeal in pursuing this agenda.

    Maybe I've missed it, but I haven't seen Dan or his views attacked regularly on other blogs as he attacks the likes of Eric King and Turd, although he refrains from naming them. Why has it become Dan's mission to discredit those who believe differently?

    In a touch of sweet irony, Dan has threatened to ban those whose posts he finds offensive or combative, noting it is his blog. On this front, Dan is taking a page from .... Turd Ferguson. Welcome to that guy's club, Dan. Maybe you have more in common than you thought with a man whose likeness adorns a silver round.

    1. Dan gets Bravo! Bravo! Bravo from me. If you cannot see that what Dan says is logical and totally objective. He does not write his articles because it is of importance to him, but to help us look with clear eyes at the charts and to trade what we see and not what we hope to see! Simple as that

    2. Dan is objective, which is fundamental. And he wants to see his readers be that way as well, because it will detach them emotionally from their investments. He sees in giamatt types a raw emotion that he knows is dangerous to trading success.
      He also paints them with a very broad brush. It is one thing to believe that every downward move is manipulation. It's another to think that the price is ridiculous compared to other asset classes, and to acknowledge that there is manipulation, it is almost certainly ongoing regardless of the direction of the market because doing it is profitable, and that doing it paints a bad chart that _normal investor sentiment alone_ would not paint. We're also bothered by the fact that what is arguably the world's most powerful institution, the Fed, is _legally sanctioned_ to protect the dollar via gold manipulation. That is what we know is legal. If the average trader or investor had been asked 5 years ago if Libor was fixed to benefit certain parties, most would have laughed.

      One can be upset that the world is being forced to gag on inflating fiat money and all of the insults above that go along with it, and still be objective about the likely price movement in the metal based on chart action. Perhaps that is where Dan would like to see his readers. Because I'm not seeing any concrete answers to the above except, 'it's happening or not, just be objective about the market'. One can concede ongoing manipulation and still encourage people to still see value in the charts, in spite of the manipulation.

    3. Dan is trying to help YOU poor saps who are misled daily by fraudsters and charlatans selling lies... that's all - it's not rocket science. You could just say "thank you" and be on your way...

      sadly, it takes a while for people to learn/realize/understand. That's how confirmation bias works. There are several people commenting on this very thread that used to fight me tooth and nail when I pointed out that their Charlatans were full of crap and feeding them lies... But these weren't opinions - they were facts...

    4. I have yet to see anyone cast doubt on Dan's motives. He clearly writes in earnest.
      This is simply an argument about the gold market, which is a main topic on this site. The truth is somewhere in between the extremes.
      I think Dan has established (for anyone paying attention at all) that even if manipulation exists, it doesn't remove the need to objectively study the market.
      The issue of past and ongoing manipulation may not be directly related to daily trading, but it is relevant to the nature of the system and our place in it. And it's of interest because we're interested in gold. And Dan keeps bringing it up in his posts. I mean, he answers people's arguments (usually) well, but then the next day when he sits down to write about the market, there's another page about how there's no manipulation occurring now. I bet if Dan stopped mentioning it you'd see the volume of discussion on it drop to next to nothing. People will still post comments about manipulation, but Dan is considering posting comprehensive statements on irritating and/or important topics that he can refer people to.
      When he does it will simplify his life and it will also improve the experience of his readers. Then if he wants to take address the manipulation crowd, he doesn't have to write a page about it when he's doing his market reports. In time, all his readers can know all of his arguments on the subject. If someone responds with something covered in the piece, he can just say, 'that's addressed in the piece, please look again." It will be like magic.

  16. Dan has some very solid points on most topics, but to believe any of these markets are free markets any more when the Fed openly manipulates the bond markets and Libor was proven manipulated. The Dow looks to be manipulated with QE as well. Just look at a chart of QE vs Dow or S&P 500 sometime.

    Its very hard to say oh but the gold market is not manipulated like these other markets have been proven to be.

    I am not saying gold would go to $2000 tomorrow if the manipulation stopped but the idea seems to be more to scare people out of gold with big selloffs out of nowhere in the middle of the night. Dan has posted these overnight charts in the past saying these are not sellers taking profits. They are trying to take the price down.

    1. terry7;

      You are still missing my point. The big thing about those who see gold manipulation in every big move lower in gold is that they assert it is the bullion banks doing this at the behest of the Fed to discredit gold.

      Why is it so hard to reach through your mental block in this when I say that the Fed might actually want a higher gold price? they are terrified of deflation, not inflation.

      The Dollar is no longer falling, etc. etc.

      When I talk about hedge funds or other assorted large traders moving prices around to favor their positioning, that is a form of manipulation if they are big enough to influence the direction of price for the short term. I see this all the time to be honest and am forced to deal with it almost daily it seems these days.

      But that is NOT what the Gold manipulation groups are all about - it is about the big bad bullion banks, the gold cartel, the evildoers,. etc who are knocking gold down for the government to artificially suppress it.

      Can you not see that what I am saying and what they continue to advocate are two entirely different things?

      Hedge funds control trading in the commodity markets. If they are buying in size, the price is going to rise no matter what the bullion banks might or might not be doing. If they are selling, the price is going to fall.

      It is the same in every commodity futures market out there. It is that simple.

      I am hoping that this finally registers with you and some others because honestly I do not know how many times I have to repeat the same thing until some can get it.

      Specs drive markets Terry. remember that

    2. Wiki

      "The U.S. Exchange Stabilization Fund was established at the Treasury Department by a provision in the Gold Reserve Act of January 31, 1934. 31 U.S.C. § 5117. It was intended as a response to Britain's Exchange Equalisation Account.[2] The fund began operations in April 1934, financed by $2 billion of the $2.8 billion paper profit the government realized from raising the price of gold to $35 an ounce from $20.67. The act authorized the ESF to use its capital to deal in gold and foreign exchange to stabilize the exchange value of the dollar. The ESF as originally designed was part of the executive branch not subject to legislative oversight.
      "A change in the law, in 1970, allows the Secretary of the Treasury, with the approval of the President, to use money in the ESF to "deal in gold, foreign exchange, and other instruments of credit and securities."

      Legal sanction, with apparently little or no oversight, but they don't do it. (does the plunge protection team exist, and if so what are they buying?) Power uses power. It's more likely that they do it _beyond_ what those granting/creating the power anticipated. That is the nature of these things. We're never regaled with tales about how those in power had access to power that they eschewed.

      I've noted, Dan, that at least on the last two nights, when you've argued this issue at length and claimed to be sick of it, on both occasions you brought it up in your original post and did so in a way that would be sure to provoke a response. Perhaps you're slightly masochistic :) or you secretly want to be convinced that when you do well in the markets, you're to be doubly congratulated because you're swimming in foul waters and still prospering.

    3. Gregory;

      Do me a favor and please send me an address to which I can remit my psychological analysis fee for your services. I had no idea that I had these masochistic tendencies. Goodness, I wish I had known this some years ago; it would have saved me from some trouble.

      This is tongue in cheek humor. Thanks for a good chuckle.

      Why do I take time to write this stuff? The answer is because I love truth and hate falsehood. I hate watching good, decent people being taken advantage of by those who make money off of them instead of in the markets. Many people in the gold bug community regularly rail against what they regard as "our corrupt system". point taken - I too see much corruption. As a matter of fact I have to daily deal with markets that are run all over the place by computers and less than ethical people. But I consider this corruption as a two -way street in the sense that some of the very ones who seem ready to burn down the system regularly feature goof-ball theories, almost week after week, why gold is going to soar to the stratosphere any day now. They have been doing that for nearly three years and anyone who acted on these falsehoods has lost a tremendous amount of money. Some of these people are too old to have any chance of ever recovering from these devastating losses. I consider those who constantly spout this stuff, in the face of an obviously bearish chart pattern, as also being part of the systemic corruption. What do they care that their rotten advice and theories have impoverished many, many followers? They make their money off of revenue generated by the number of clicks coming to their websites so they have a vested interest in generating the most controversy, feeding the panic, promoting system-wide failure, etc,. all induced to keep the faithful coming back and back and back, over and over again, to their websites so that they can make even more money. Others are like hucksters or flim flam artist with constant predictions where they "command" the market to go to such and such price, sometime "this year". These people are corrupt in my view Gregory because no matter whether their useless predictions come true or not, they have made their money from those who paid large sums of money for their rag of a newsletter. That angers me and I do not apologize for being angry when good people are getting swindled.

      Have a great holiday weekend.

    4. I agree, and I think that your desire to protect people from fraud is laudable. And you have certainly saved people money over the last few years by encouraging them to think twice about this gold market.
      You have a good weekend too. I know you are one of the good guys. (You can send my fee to UKIP.)

  17. Thanks Dan I do see your point that hedge funds can move the markets huge one way or the other. If hedge funds piled into gold then sure they could overrun any downside manipulation attempts.

    I am more saying none of these markets look to be free anymore.

    It looks to be about selling a recovery now in all markets.

    I recall you posting once, that the public takes one look over at the Dow at all time highs and thinks all must be fine.

    I recall your gold chart showing gold selling off at 3am for no good reason. Your comment was this sell off was for no reason other than to take the price down. It was not about profit taking.

    It seems this is the game being played. Influence markets in the direction that best sells a recovery.

    I agree that the herd/hedge funds can overrun any manipulation in any of the markets upside or downside. :)

  18. the Gold market IS, HAS, and will CONTINUE, to be manipulated by the MoneyChangers until the remaining 2% of the debt coupon dollars value is erased...to argue otherwise in the face of abundant official Fed and banker controlled government documentation is - insane.

    1. Kaiser;

      Say it LOUD enough, OFTEN enough, and it must be true. Flawless, unassailable logic. I give up - and admit, you are correct. You have convinced me and I now will sit at your feet and become your disciple.

      I much welcome your "insane" label.

      It would seem we have a different definition of the word however.

      Insanity - doing the same thing over and over again and expecting different results.

      Have a pleasant weekend.

    2. This comment has been removed by the author.

  19. On June 3, 1975, Fed Chairman Arthur Burns, sent a "Memorandum For The President" to Gerald Ford, which among others CC:ed Secretary of State Henry Kissinger and future Fed Chairman Alan Greenspan, discussing gold, and specifically its fair value, a topic whose prominence, despite former president Nixon's actions, had only managed to grow in the four short years since the abandonment of the gold standard in 1971. In a nutshell Burns' entire argument revolves around the equivalency of gold and money, and furthermore points out that if the Fed does not control this core relationship, it would "easily frustrate our efforts to control world liquidity" but also "dangerously prejudge the shape of the future monetary system."

    Furthermore, the memo goes on to highlight the extensive level of gold price manipulation by central banks even after the gold standard has been formally abolished. The problem with accounting for gold at fair market value: the risk of massive liquidity creation, which in those long-gone days of 1975 "could result in the addition of up to $150 billion to the nominal value of countries' reserves." One only wonders what would happen today if gold was allowed to attain its fair price status. And the threat, according to Burns: "liquidity creation of such extraordinary magnitude would seriously endanger, perhaps even frustrate, out efforts and those of other prudent nations to get inflation under reasonable control." Aside from the gratuitous observation that even 34 years ago it was painfully obvious how "massive" liquidity could and would result in runaway inflation and the Fed actually cared about this potential danger, what highlights the hypocrisy of the Fed is that when it comes to drowning the world in excess pieces of paper, only the United States should have the right to do so.

    Lastly, the memo presents a useful snapshot into the cloak-and-dagger, and highly nebulous world of CB negotiations and gold price manipulation:

  20. "I have a secret understanding in writing with the Bundesbank that Germany will not buy gold, either from the market or from another government, at a price above the official price."

    Volcker's 1974 "PetroGold" concerns...

    First, here is what the S intentions vis-a-vis gold truly are when stripped away of all rhetoric:

    U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].

    In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.

    Specifically, this is among the top secret paragraphs said on a cold night in March 1968:

    If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years."

  21. "So to those who continue to say that “gold doesn’t matter” because it hasn’t been used as an official asset in the monetary system for decades, I say give me a break. In fact, the reality of gold having been largely demonetized makes it an even greater threat going forward if the U.S. does not have all the gold it claims to, and other nations have more than they admit to.

    Thanks to In Gold We Trust for bringing this to my attention. Choice excerpts are provided below, and breaks in the conversation are denoted with an “…” Enjoy."

    Secondly, Mr. Secretary, it does present an opportunity though—and we should try to negotiate for this—to move towards a demonetization of gold, to begin to get gold moving out of the system.

    Secretary Kissinger: But how do you do that?

    Mr. Enders: Well, there are several ways. One way is we could say to them that they would accept this kind of arrangement, provided that the gold were channelled out through an international agency—either in the IMF or a special pool—and sold into the market, so there would be gradual increases.

    Secretary Kissinger: But the French would never go for this.

    Mr. Enders: We can have a counter-proposal. There’s a further proposal—and that is that the IMF begin selling its gold—which is now 7 billion—to the world market, and we should try to negotiate that. That would begin the demonetization of gold.

    Secretary Kissinger: Why are we so eager to get gold out of the system?

    Mr. Enders: We were eager to get it out of the system—get started—because it’s a typical balancing of either forward or back. If this proposal goes back, it will go back into the centerpiece system.

    Secretary Kissinger: But why is it against our interests? I understand the argument that it’s against our interest that the Europeans take a unilateral decision contrary to our policy. Why is it against our interest to have gold in the system?

    Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings—about 11 billion—a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control..

  22. Mr. Enders: Yes. But in order for them to do it anyway, they would have to be in violation of important articles of the IMF. So this would not be a total departure. (Laughter.) But there would be reluctance on the part of some Europeans to do this. We could also make it less interesting for them by beginning to sell our own gold in the market, and this would put pressure on them.

    Mr. Maw: Why wouldn’t that fit if we start to sell our own gold at a price?

    Secretary Kissinger: But how the hell could this happen without our knowing about it ahead of time?

    Mr. Hartman: We’ve had consultations on it ahead of time. Several of them have come to ask us to express our views. And I think the reason they’re coming now to ask about it is because they know we have a generally negative view.

    Mr. Enders: So I think we should try to break it, I think, as a first position—unless they’re willing to assign some form of demonetizing arrangement.

    Secretary Kissinger: But, first of all, that’s impossible for the French.

    Mr. Enders: Well, it’s impossible for the French under the Pompidou Government. Would it be necessarily under a future French Government? We should test that.

    Secretary Kissinger: If they have gold to settle current accounts, we’ll be faced, sooner or later, with the same proposition again. Then others will be asked to join this settlement thing.

    Isn’t this what they’re doing?

    Mr. Enders: It seems to me, Mr. Secretary, that we should try—not rule out, a priori, a demonetizing scenario, because we can both gain by this. That liberates gold at a higher price. We have gold, and some of the Europeans have gold. Our interests join theirs. This would be helpful; and it would also, on the other hand, gradually remove this dominant position that the Europeans have had in economic terms.

    Mr. Rush: Well, I think probably I do. The question is: Suppose they go ahead on their own anyway. What then?

    Secretary Kissinger: We’ll bust them.

    Mr. Enders: I think we should look very hard then, Ken, at very substantial sales of gold—U.S. gold on the market—to raid the gold market once and for all.

    Mr. Rush: I’m not sure we could do it.

    Secretary Kissinger: If they go ahead on their own against our position on something that we consider central to our interests, we’ve got to show them that that they can’t get away with it. Hopefully, we should have the right position. But we just cannot let them get away with these unilateral steps all the time.

    Full transcript here.

    1. it aint personal Dan...strictly in the spirit of Truth and enlightenment..


  23. "The reaction of the Fed and other central banks to the sharp rally in gold prices triggered by announcement of the so-called "Washington Agreement on Gold" in September 1999, as described by Edward A. J. George, Governor of the Bank of England and a director of the BIS, to Nicholas J. Morrell, then Chief Executive of Lonmin Plc, a principal shareholder in Ashanti Goldfields Ltd. (paragraph 55):

    "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 U.S. Fed was very active in getting the gold price down. So was the U.K."


  24. Why would the Fed care about a rising POG now? I agree with Dan that the Fed would likely prefer a slow gradual rise in the POG as it would at least give the appearance of price inflation. I would think TPTB would be more concerned with a collapse of the paper gold market (failure to deliver) than a rising POG. The longer gold stays priced at or below production costs the more likely this failure is to occur.

  25. Not really sure what all that means Zhang. For my part I am not one of the GIAMATT crowd. I do agree that if by "stacking" you mean placing a portion of your personal excess production (savings) in real physical gold at these ridiculously low prices is a good idea. Not as an investment or a trade simply as a place to store value.

    I think the existence of a paper commodity style market for gold has systemically undervalued gold. Whether it was 1900 or 1300, grossly undervalued. Commodity futures markets serve a function for commodities that are consumed like copper, wheat, oil, etc. The specs permit people with no interest in the commodity to act as a middleman between the producers and the end users of said commodity. They help protect both parties from unexpected supply and demand shocks. Why would there ever be a supply shock in gold when most of the gold ever mined is just sitting somewhere. Based on current stock flow there is a 60+ year supply overhang. If the paper gold market did not exist the only thing that would determine gold flow would be the price. Then gold would function as a wealth reserve only which is where it's utility lies.

    1. This comment has been removed by the author.

    2. Gene, I am absolutely fascinated by your comment; everything is perfectly logical and rational, right up to the point where you suggest systematic undervaluation. All of the other attributes you mention could be entirely true, yet the market systematically OVERvalued. In truth, neither the utility value of Gold nor the existence of overground supply tells us anything about the equilibrium price at any given moment, much less does it tell us anything about price dynamics or momentum

      Think this through for a moment; if the above-Ground supply of Gold is increasing at 2% or so a year, then the marginal value of every ounce must surely tend to decrease by a similar amount year on year. OK, granted, there is some industrial consumption, and the number of potential investors in Gold increases each year (though demographically skewed in favour of the 99% who can't afford to invest in precious metals). All-in-all, therefore, there is nothing in the supply-demand dynamic which indicates that this "store of value" should rise in price, rather than fall, stay put or range-trade due to essentially short-term factors.

      To assert as you do that the very existence of a paper commodity style market since 1974 acts to suppress the price cannot explain the near-exponential increase in Gold (whether expressed in USD or commodities such as Food) over the following 40 years - http://1.bp.blogspot.com/-vRasaIZrKvE/TcHMnP_js3I/AAAAAAAABKg/NA0hhIE0Uxo/s1600/long+term+gold.gif and certainly not the periods 1978 -80 & 2009 - 11. Those movements were clearly associated with economic events and investor sentiment - not the fact that it was "paper" they were trading rather than physical. Is this Gold v Food chart really evidence of price suppression over the period 1998 - 2012, or is it perhaps that you believe farm productivity more than doubled over that period (but is falling back now)? http://pricedingold.com/charts/Food-1990.png

      I share you opinion of the long-term attractiveness of physical gold, and I am as long as a very long thing, but the suggestion that Gold prices are manipulated

      a. For non-commercial reasons

      b. As part of some Government scheme

      c. Unusually, when compared to other markets

      d. Only ever to the downside and

      e. Secretly, deviously or systematically

      then I am afraid you are woefully misguided. Gold flow may or may not be determined by price (although on recent evidence the relationship is negatively correlated), but price is clearly not determined by flow, simply because Gold does not "flow" anywhere - it is always there. We recently saw significant selling pressure in Shanghai due to the unwind of a sequence of carry trades related to collateralised lending transactions, I can walk in to a bullion dealers in Shenzhen tomorrow and buy any quantity of gold I can afford to pay for, and there are as many pawn shops in Singapore as there are in London. The Gold may have changed location, but it is still as available as it ever was, and its price has not suddenly gapped up since the Asians took ownership of the metal. But that would be because of the systematic manipulation and undervaluation, I suppose?

      If you are determined to see manipulation, then I am sure you will find it. My question is "So what?". Are you hoping that there will magically be no manipulation tomorrow, or are you just hoping they will manipulate it in your direction for a change?

    3. Hi PostcolonialBrit,

      We are in agreement concerning gold price manipulation. While it may exist to a small degree I think it is irrelevant. If anything I think monetary officials would prefer a rising POG to at least give the appearance of inflationary forces.

      My point is very simple. The current gold market could care less whether gold is held by people like me as a means to store my wealth. I think the paper gold market participants care only about momentum and being on the right side of the trade in order to make more dollars. They have no interest in the underlying asset or what it's utility is. My view is that in this sense the current gold market is not functioning properly. (Although I am thrilled to be able to buy physical gold at these fire sale prices). Gold is traded like a commodity but it is not utilized like one. The fact that goldish paper can be created to supply the market with "gold" means that more supply (how many paper claims on gold exist for every ounce of real gold?) would IMO suppress the price of gold. BTW I don't even think this is intentional it is just the nature of the current paper gold market. I have no way to prove it but I think that in light of currency debasement that if gold was traded as a physical wealth reserve asset absent of the leveraged paper markets it would require much higher prices to move. What could be more valuable than a savings vehicle outside of the fiat system to preserve wealth?

      BTW the paper gold market is unlike any other commodity market.

  26. Can we say here Dan that you are in the opposite opinion of Jim Sinclair ?
    Do you think that Jim Sinclair is in the category of those that seem to neglect the obvious and that possibly he is just hanging on to past glory when it comes to predictions ? I have also noticed that Sinclair is abstaining from making any predictions on gold as was done in the past and more than ever citing geopolitical scenarios from the latest events, now being Ukraine and Russia while we see the tensions easing and gold plummet $25.00


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