07 April 2016 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price edged lower in Far East and in morning trading in London on their Wednesday—and at, or shortly after the noon London silver fix, ‘da boyz’ and their algos showed up and peeled about 8 bucks off the price, with the low tick of the day coming about thirty minutes after the COMEX open. From there it rallied a few dollars until 11:30 a.m. EDT—and then the price took off to the upside with some conviction. The not-for-profit sellers shows showed up about twenty minutes later—and not only capped the rally, but also drove the price back to its 11:30 a.m. starting price. From there it chopped sideways into the close of electronic trading.
The high and low tick were recorded as $1,233.80 and $1,217.20 in the June contract.
Gold finished the Wednesday session in New York at $1,222.30 spot, down $8.90 from Tuesday’s close. Net volume was just under 124,500 contracts.
The silver price path was a choppier version of what happened in gold. The smallish price spike that occurred just before the 10 a.m. in London got sold down—and ‘da boyz’ continued with the selling pressure at the silver fix and, like gold, they set the low price of the day [back below $15 spot] about thirty minutes after the COMEX open. The 11:30 to 11:50 a.m. price spike in silver got dealt with by JPMorgan et al in the same way they dealt with the spike in gold—and after that, silver chopped sideways into the 5:00 p.m. close of electronic trading.
The high and low ticks in silver were reported by the CME Group as $15.195 and $14.915 in the May contract.
Silver finished the day at $15.065 spot, down 7.5 cents from Tuesday. Net volume was about average at a hair over 33,000 contracts.
Platinum’s price action yesterday was a mini version of what happened in gold and silver, with the engineered low tick coming about 8:50 a.m., which was the same time as the other precious metals—and the tiny price spike just before noon in New York got cut off at the knees before it could get back to unchanged. From there it gold sold down until 1 p.m.—also like gold and silver—and then chopped sideways into the close. Platinum finished the Wednesday session at $944. spot, down 7 bucks from Wednesday.
Palladium, like platinum, spent most of the day in Far East and early Zurich trading session on Wednesday in positive territory, but was sold off like gold, silver and platinum starting at, or just after, the noon silver fix in London. The $535 low tick was placed at 1 p.m. in New York—and it recovered a small handful of dollars during after-hours trading. Palladium was closed in New York yesterday at $539 spot, down 4 dollars from Tuesday.
The dollar index closed in rally mode late on Tuesday afternoon in New York at 94.62—and continued to head higher once trading began at 6 p.m. EDT. The 95.08 high price tick came minutes before 12:30 p.m. in London on their Wednesday afternoon—and it immediately rolled over and headed south, with the 94.24 low coming at noon in New York. It chopped higher from there, closing at 94.50—down 12 basis points on the day.
You should carefully note, if you haven’t already, that the price capping antics in all four precious metals began at the exact instant that the dollar index topped out in London and began heading south. It was obvious that the powers-that-be were not going to allow the precious metal prices to reflect the huge 84 basis point drop in the U.S. dollar index—even resorting to ruthlessly capping the 11:30 to 11:50 a.m. EDT price rallies that erupted in the four precious metals during that time period.
And here’s the 6-month U.S. dollar index chart—and as you can see, the index has been closed within spitting distance of the 94.50 mark for the last five trading days in a row—and it will be interesting to see what happens from here. But it’s a certainty that the dollar index is being just as actively managed as precious metal prices.
The gold stocks opened down—and chopped higher in a fairly broad trading range for most of the day. They not only closed slightly in positive territory, they also closed on their high ticks, as the HUI finished the Wednesday session up a tiny 0.28 percent. But considering the price action of the underlying metal, this close is amazing—and we’ve had a few of those lately.
The silver equities opened down a hair, but quickly fell to their respective lows at 10 a.m. in New York trading. But by 11:20 a.m. EDT, they were back in the black—and they chopped sideways for the rest of the day, finishing almost on their high ticks. Nick Laird’s Intraday Silver Sentiment Index closed higher by 0.79 percent.
The CME Daily Delivery Report for Day 5 of the April delivery month in gold showed 41 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Friday. International F.C. Stone issued all 41 gold contracts—and JPMorgan stopped 12 and 11 contracts for their own account—and their client account—respectively.
And of the 48 platinum contracts issued by ADM, JPMorgan stopped 25 for its clients—and 21 contracts for itself. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest in April dropped by 182 contracts, leaving 3,719 still open. In Monday’s Daily Delivery Report there were 142 gold contracts issued for delivery today, so JPMorgan let another 182-142=40 gold short/issuers off the hook because they had no metal to deliver. Silver o.i. in April was unchanged at 76 contracts.
There was a fairly decent deposit into GLD yesterday, as an authorized participant added 133,800 troy ounces. And as of 6:32 p.m. EDT yesterday evening, there were no reported changes in SLV.
The U.S. Mint had a sales report yesterday. They sold 4,000 troy ounces of gold eagles—1,500 one-ounce 24K gold buffaloes—and 355,500 silver eagles.
Once again there wasn’t a lot of movement in gold over at the COMEX-approved depositories on Tuesday. Nothing was reported received—and 1 kilobar was shipped out of Manfra, Tordella & Brookes, Inc.—along with 291 kilobars/9,355.650 troy ounces shipped out of Canada’s Scotiabank. The link to that activity, in troy ounces, is here.
In silver, there was 583,750 troy ounces received—and 1,011 troy ounces [one good delivery bar] shipped out. With the exception of about 5,000 troy ounces, the bulk of the silver received ended up in Scotiabank’s vault. The link to that activity is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, they reported receiving 688 kilobars—and shipped out 2,837 of them. All of the action was at Brink’s, Inc.—and the link to that, in troy ounces, is here.
India’s official gold and silver imports for January are now available—and Nick Laird has added them to the two charts below.
I have a very decent number of stories for you again today—and there should be a couple that you’ll find worth reading.
CRITICAL READS
U.S. Trade Deficit Rises to a Six-Month High of $47.1 Billion
America’s trade deficit widened in February to a six-month high as an increase in imports exceeded a more modest pickup in shipments overseas.
The gap increased 2.6 percent to $47.1 billion from a revised $45.9 billion in January, the Commerce Department reported Tuesday. The median forecast in a Bloomberg survey called for a $46.2 billion February shortfall.
The gain in exports was just the first in five months and highlights the squeeze on American manufacturers from a stronger dollar that’s made U.S.-made goods less attractive in a weaker global marketplace. A third straight increase in the deficit indicates trade will weigh on first-quarter growth.
This Bloomberg story was posted on their website at 6:30 a.m. MDT on Tuesday morning—and it’s the first of four stories in today’s column that I found in yesterday’s edition of the King Report. Another link to this article is here.
The Coming Default Wave Is Shaping Up to Be Among Most Painful
When the next corporate default wave comes, it could hurt investors more than they expect.
Losses on bonds from defaulted companies are likely to be higher than in previous cycles, because U.S. issuers have more debt relative to their assets, according to Bank of America Corp. strategists. Those high levels of borrowings mean that if a company liquidates, the proceeds have to cover more liabilities.
“We’ve had more corporate debt than ever, and more leverage than ever, which increases the potential for greater pain,” said Edwin Tai, a senior portfolio manager for distressed investments at Newfleet Asset Management.
Loss rates have already been rising. The potential for them to climb further may mean that in general junk bonds are not compensating investors enough for the risk they are taking, said Michael Contopoulos, high yield credit strategist at Bank of America Merrill Lynch. The average yield on a U.S. junk bond is now around 8.45 percent, according to Bank of America Merrill Lynch indexes, about the mean of the last 10 years.
This Bloomberg news item put in an appearance on their Internet site at 5:25 p.m. Denver time yesterday afternoon—and I thank Roy Stephens for sharing it with us. Another link to this story is here.
Time to stop dancing with equities on a live volcano — Ambrose Evans-Pritchard
Be very careful. The U.S. economic expansion is long in the tooth and starting to hit the time-honoured constraints that mark the last phase of the business cycle.
Wall Street equities are more stretched by a host of measures than they were at the peak of sub-prime bubble just before the Lehman crisis. All it will take to bring the S&P 500 index back to earth is a catalyst, and that is exactly what is coming into view on the macro-economic horizon.
This does not mean we are on the cusp of recession or racing headlong towards some imminent reckoning, but we are probably in the final innings of this epic asset boom.
Didier Saint-Georges, from fund manager Carmignac, says the “massive and indiscriminate equity market rally” since February’s panic-lows is a false dawn driven by short-covering, telling us little about the world’s deformed economic, financial, and political landscape.
This must read commentary by AE-P turned up on the telegraph.co.uk Internet site at 6:36 BST on their Wednesday evening, which was 1:36 p.m. in New York—EDT plus 5 hours. I found it this morning’s edition of the King Report—and another link to this article is here.
The Fed “Is a God That Has Failed” — George Gilder
Why does Wall Street keep recovering after recessions but the economy seemingly never does?
The reason, as I document in my book, “The Scandal of Money: Why Wall Street Recovers but the Economy Never Does” is that Washington and the Federal Reserve together have created a closed loop economy where the Fed creates money for the government and the S&P 500—and Main Street is left out.
The Fed decides what money is worth and who receives it and how much. The Fed prices it at zero interest rates, allegedly to stimulate economic growth. But whenever something is free, it’s distributed by queue, and only the privileged, connected people in the front of the line get any, not the innovators who create growth and opportunity for Main Street. Trump voters are wrong if they blame Mexico and China, but they are right about one big thing: The economy is rigged against them.
The Fed takeover of the economy has turned Main Street into Mean Street; it has gelded Silicon Valley, reducing our most creative entrepreneurs to climate cranks obsequiously petitioning in Washington.
This commentary by Gilder appeared on David Stockman’s website yesterday sometime—and it’s certainly worth reading. Another link to this opinion piece is here. It’s the second article in a row from Roy Stephens.
Trump Unbound — David Stockman
Even by The Donald’s standards his 95-minute long interview with The Washington Post was remarkable. He let loose so many stray shots as to leave the establishment press clucking in a chorus of disbelief. It undoubtedly started with the stink bomb he lobbied at the ” all is awesome” meme about the U.S. economy and stock market:
Donald Trump said in an interview that economic conditions are so perilous that the country is headed for a “very massive recession” and that “it’s a terrible time right now” to invest in the stock market, embracing a distinctly gloomy view of the economy that counters mainstream economic forecasts.
The New York billionaire dismissed concern that his comments — which are exceedingly unusual, if not unprecedented, for a major party front-runner — could potentially affect financial markets.
Now there’s an irony. Presumably the last paragraph was written by Bob Woodward who was once the bête noir of the Washington/Wall Street establishment. But like nearly everyone else in the Imperial City he has been drinking the Cool-Aid for so many decades that he was apparently shocked by Trump’s unfiltered bit of truth-telling about an economy that is failing 90% of the American public.
This rather brief commentary showed up on David’s website on Monday—and that makes it three in a row for Roy Stephens. Another link to this story is here.
How the U.S. became one of the world’s biggest tax havens
The single-story brick building at 1209 North Orange Street in downtown Wilmington, Delaware, looks bland and innocuous. But the building, home to the Corporation Trust Company, has an intriguing claim to fame. In the last few years, it has served as the registered address for more than 250,000 businesses, giving companies around the world access to Delaware’s business-friendly laws.
During his 2008 presidential campaign, Barack Obama criticized Caribbean tax havens. He mentioned one building in the Cayman Islands that is the registered home of more than 12,000 U.S.-based corporations, saying, “That’s either the biggest building in the world or the biggest tax scam on record.” But as the example of 1209 North Orange Street demonstrates, the same activity is going on in President Obama’s backyard.
But one of the least recognized facts about the global offshore tax haven industry is that much of it, in fact, is not offshore. Indeed, some critics of the offshore industry say the U.S. is now becoming one of the world’s largest “offshore” financial destinations.
“We often say that the U.S. is one of the easiest places to set up so-called anonymous shell companies,” says Mark Hays, a senior advisor with Global Witness, an NGO that advocates for financial transparency.
This news item showed up on The Washington Post website on Tuesday sometime—and I thank Bill Moomau for bringing it to our attention. Another link to this article is here.
Uncle Shmuel points fingers (aka “Panama Papers”) — The Saker
The so-called “Panama Papers” which are presented by the world’s corporate media as some kind of super-mega-uber-Wikileaks are simply the latest U.S. strategic PSYOP.
So now we know how Putin hid a billion dollars. Or do we? Where is the evidence that Putin hid anything at all? Nowhere. But who cares about any such niceties as the presumption of evidence or even fair reporting?! 2016 will be an election year, and the Russian 5th column needs all the help it can get. And Uncle Shmuel is only happy to provide it, of course.
To use a KGB expression the CIA’s “ears are clearly sticking out” in this strategic PSYOP who point is very obvious: to jump on the Wikileaks bandwagon and create a little “imperial wikileaks” in the hope to be taken as seriously as the real thing.
It is hard to say who exactly in the USA is behind that. As far as I know the Pentagon’s strategy PSYOP are normally directed at military conflict areas. A good guess might that this could be the work of the Political Action Group (PAG) division inside the CIA’s Directorate of Operations (DO). But my gut feeling tells me that there is a special and still secret agency in the U.S. government in charge of large-scale “covert propaganda” operations. But, at the end of the day, this really does not matter: the U.S. government’s fingerprints are all over these pseudo-leaks and that is what matters.
Some might wonder if those documents are true and, if yes, how the CIA, or some OGA, could have come across these very “sensitive” files? Simple.
This must read commentary appeared on thesaker.is Internet site yesterday—and I thank ‘aurora’ for sending it along. Another link to this article is here.
German Economy, Once Europe’s Leader, Now Looks Like Laggard
China is cutting back on mining machinery as its economy slips. The United Arab Emirates and other Middle Eastern countries are no longer awash in oil money, putting luxury car brands at risk. Russia, still facing Western sanctions, cannot buy as much high-tech energy equipment.
The downshift in the emerging markets is leaving Germany vulnerable — and, by extension, Europe.
As many businesses in the region struggled just to tread water in recent years, German companies prospered by selling the goods and technology that emerging countries needed to become more modern economies. As they did, Germany’s strength served as a counterweight to the economic malaise, financial turmoil and Greek debt drama that dragged down many European countries.
Now, Germany, which accounts for the largest share of the European economy, is looking like the laggard. Compared with the economies of other countries in the region, Germany’s has been more deeply tethered to emerging markets. And the political climate is only adding to the uncertainty, as Germany deals with a wave of migrants and a potential exit of Britain from the European Union.
This New York Times article, filed from Frankfurt, was posted on their Internet site on Tuesday—and I found it in yesterday’s edition of the King Report. Another link to this news item is here.
ECB policy is at limit of its mandate, say German conservatives
The European Central Bank is operating at the limit of its mandate to deliver price stability with its policy of negative interest rates, finance policy officials from Germany’s conservative bloc said on Tuesday.
“With its zero interest rate policy, and negative rates for some bank deposits, the European Central Bank is operating at the margins of its mandate for delivering price stability,” the officials said in a statement.
“We call for a reliable monetary policy from the ECB,” added the state and federal finance officials from the Christian Democrats (CDU), Chancellor Angela Merkel’s party, and their Bavarian allies, the Christian Social Union (CSU).
The above three paragraphs are all there is to this brief Reuters article that showed up on their website at 4:20 p.m. IST [India Standard Time] on Tuesday. It’s the second news item in a row that I found in yesterday’s edition of the King Report.
Yen Surges to Strongest Since 2014 as Intervention Risk Weighed
The yen climbed to the strongest level in 1 1/2 years against the dollar, threatening to undermine the Bank of Japan’s push for inflation, a key part of efforts to revive the world’s third-biggest economy.
The currency briefly breached 110 per dollar in New York trading, which for some strategists is a key level that heightens the risk of Japanese market intervention. Earlier, Japanese Chief Cabinet Secretary Yoshihide Suga said the government is keeping an eye on foreign-exchange movements. BOJ Governor Haruhiko Kuroda said he’ll keep monitoring currency markets and reiterated the potential for more interest-rate cuts. The yen’s 9 percent surge this year makes it the best-performing Group-of-10 currency.
The yen’s valuation suggests the rally has further to go, said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. It’s still cheaper than its five-year average of about 99 yen per dollar.
“The yen is still cheap despite sharp gains this year,” Hardman said.
This is another Bloomberg story that I found in yesterday’s edition of the King Report. This one was posted on their Internet site at 9:54 p.m. on Monday evening Denver time. Another link to this article is here.
Japan is Fast Approaching the Quantitative Limits of Quantitative Easing
The Bank of Japan is running out of government bonds to buy.
The central bank’s would-be counterparties have become increasingly unwilling to sell the debt that monetary policymakers have pledged to buy, and the most recently issued 30-year Japanese bond didn’t record a single trade during a session last week as existing owners opted to hoard their holdings.
The central bank in the land of the rising
prices
sun has set a target of 80 trillion yen ($733 billion) in government bond purchases per year in its continued attempts to slay deflation, an amount that’s more than double the pace of new bond issuance planned by the Ministry of Finance and about 16 percent of gross domestic product.
But safe assets like government debt aren’t just attractive to central banks looking to force investors into riskier asset classes and push down the cost of borrowing or to pensioners looking for a reliable source of income—they’re also in high demand by financial institutions for use as collateral.
That’s because where there is a dearth of safe assets, there is also an incentive and tendency for them to be manufactured; that is, improperly labeled as such. Past results certainly haven’t been pretty.
This very interesting, but not surprising Bloomberg news item put in an appearance on their Internet site at 10:34 p.m. Denver time last night—and it’s the second story I found in this morning’s edition of the King Report. Another link to this news item is here.
Perth Mint Silver Coins Have Second Highest Monthly Demand
The Perth Mint’s sales of silver coins and especially Silver Kangaroos surged again in March and saw the second highest levels of silver coin demand on record as silver buyers in the western world continue to accumulate silver at what they believe to be depressed silver prices.
Silver stackers continued to accumulate silver coins and bars and the new silver nugget or kangaroo coins (1 oz and 5 oz) saw very high levels of demand.
To keep up with very robust global demand, The Perth Mint has produced 7.5 million Australian Kangaroo 1oz silver bullion coins since it was released less than 8 months ago.
This is a all wonderful news, but the question still remains. Who are the buyers—as retail silver bullion demand is still stinking up the place. This short article was posted on the goldcore.com Internet site yesterday. Another link to this article is here.
World’s Top 20 gold mining nations 2015 — Lawrie Williams
The U.K.’s two premier gold mining consultancies, Metals Focus and GFMS both came out last week with their latest analyses of what has been happening in gold supply and demand in 2015.
While the two reports differ a little in their findings and conclusions, they broadly paint a similar picture on global gold supply (up slightly in 2015 and plateauing or turning down slightly this year as major new mining projects initiated when gold prices were higher, have moved into full production and are thus no longer in the new production pipeline.
China remains comfortably the world’s largest producer although interestingly its 2015 output showed a small fall after a decade or more of continuous production growth. Its No.1 position is not threatened with a big output gap to the No.2 and No.3 miners – Australia and Russia – which are battling for second place in the gold production hierarchy. Interestingly if Russia does succeed in overtaking Australia as the world’s No. 2 then the top two global central bank buyers of gold would also be the top two gold producers. Make of that what you will.
This brief commentary, along with an excellent table of numbers, was posted on the Sharps Pixley website yesterday—and it’s certainly worth a minute or so of your time. Another link to Lawrie’s commentary is here.
Does ANY central bank hold the physical gold it says it does? — Lawrie Williams
Most gold analysts tend to disbelieve Chinese figures for its central bank gold holdings. China has a track record of holding physical gold in other accounts than those it reports monthly to the IMF – and then from time to time moving some of this gold into the reporting account – the last such occasion being in July last year when its reported reserves rose from 1,054 tonnes overnight to 1,658 tonnes – a rise of 57%.
Since then China has been reporting official gold reserve purchases monthly – but again no-one outside the Chinese government system knows whether this is an accurate representation of what China is buying on the open market, or perhaps just a part of it, or whether the country has a further enormous stash of physical gold lodged in other non-reported accounts, or perhaps even in the vaults of the state-owned commercial banks, which are believed to hold perhaps as much as 2,000 tonnes of the yellow metal.
But at least China has been partly honest in telling the world that it has been somewhat economical with the truth over its real gold reserve levels in the past – and may still well be holding much more than it officially admits. But what about other nations and their gold holdings? Do we have any real reason to believe they are what they say they are? Many central banks are known to have entered into gold swaps with commercial entities which allows them to retain the accounting fiction that they still possess this physical gold, yet it is actually held elsewhere and may not be returnable in a tight supply situation. The latest such central bank to do so is almost certainly that of Venezuela, officially the world’s 16 largest holder of gold, which has exported over 48 tonnes of gold to Switzerland over the past few months, yet still apparently reports an unchanged central bank gold holding of 361 tonnes to the IMF.
This commentary by Lawrie put in an appearance on his lawrieongold.com Internet site yesterday—and it’s another gold related story I found on the Sharps Pixley website as well. It’s worth reading. Another link to this article is here.
The PHOTOS and the FUNNIES
These are male and female western capercaillie, the largest member of the grouse family—and the male is about turkey size—and even though the photo doesn’t show it, the female is a much smaller bird, about half the size of the male.
The WRAP
I am reminded of a line from two great movies, The Shawshank Redemption and Cool Hand Luke – “It’s your world, Boss,” in which the prisoner fully recognizes his position. JPMorgan is certainly the boss of the silver market and it’s important to know that at all times, what’s good for JPM is all that matters in silver. It’s also important to know that sharply higher silver prices will be to JPMorgan’s advantage in the relative near future. It’s absolutely crazy (and illegal) for a single bank to dominate a single market, like JPMorgan dominates silver, but that is water under the bridge at this point. The boss of the silver world stands to make an obscene profit when silver explodes and that’s all that matters.
The biggest wild card, particularly in silver, is the intentions of Boss Morgan, as this is truly their world. Among the many possibilities is included the chance for a double cross of historical proportions. Should JPMorgan buy back COMEX short positions at an accelerated rate—and to the point where it felt it had covered enough (considering its massive physical long position), the probability of a complete technical fund selling climax would go out the window—and anyone short silver at that point, commercial or technical fund, could be in a world of hurt. There is no doubt that silver will never look back in price once JPMorgan so decides, the only doubt is exactly when that will be. From the looks of many indications, it appears fairly soon. — Silver analyst Ted Butler: 02 April 2016
It was yet another day when the powers-that-be were quietly at battle stations—and it began the moment that the dollar index topped out in London during their lunch hour—and ended with the crushing of the price rallies in all four precious metals that began around 11:30 a.m. EDT—as the 84 basis point decline in the U.S. dollar index got halted by ‘gentle hands’ in New York at noon.
For the second time this week, the precious metals equities have closed up, when their underlying metals have closed lower—and I’m wondering out loud once again why that’s the case—and who the equity buyers are. What do they know, that we don’t?
Here are the 6-month charts for all four precious metals—and as you can see, the current prices for gold, platinum and palladium can’t get closed much closer to their respective 50-day moving averages then they are now.
This is all very unusual—but it’s too soon to say whether the stage is being set for something. It’s also possible that this writer is looking for black bears in dark rooms that aren’t there. We’ll find out which it is soon enough I would think.
And as I type this paragraph, the London open is less than ten minutes away—and I note that gold chopped higher until it ran into a price ceiling at 1 p.m. HKT on their Thursday afternoon. Gold is up 6 bucks at the moment. Silver has traded in a similar manner—and is currently up 8 cents the ounce. Platinum has traded the same way—and is up 4 dollars as of this writing—and palladium isn’t doing much, but is up 2 bucks.
Net HFT gold volume is already a very chunky 37,000 contracts—and that number in silver is 5,650 contracts. The dollar index chopped more or less sideways until noon HKT—and then dropped like a rock—and is currently trading at the 94.08 mark. ‘Gentle hands’ saved it from falling below 94.000—but it’s still down 42 basis points as London opens.
Like yesterday around 12:30 p.m. in London, the powers-that-be are obviously at battle stations once again, as they keep a lid on precious metal prices as the dollar index takes another header for the second day in a row.
I bought Jim Rickards new book “The New Case For Gold” on Tuesday at a local book store—and finished reading it yesterday afternoon before I started work on today’s column.
As you know, it’s been my opinion over the years—along with others—that a rise in the gold price would signal inflation and drag us out of the deflationary spiral that the world’s central banks now face. Jim is of the same mind—and this is what he had to say about it in on pages 86 and 87 of his latest tome:
In a period of extreme deflation today, the [U.S.] government could unilaterally take the price of gold to $3,000 or $4,000 an ounce, or even higher—not to reward gold investors, although it would—but to cause generalized one-time hyperinflation. In a world of $4,000 gold, all of sudden oil is $400 a barrel, silver is $100 an ounce—and gas is $7 a gallon at the pump. Price increases of such a size would change inflationary expectations and break the back of deflation.
This is exactly what the United States did in 1933, and what the United Kingdom did in 1931 when both countries devalued their currencies against gold. In 1933, the U.S. government forced the price of gold from $20.67 per ounce to $35.00 per ounce. It wasn’t a case of the market taking gold higher; the market was in the grip of deflation at the time. It was the government taking gold higher in order to cause inflation. The reason the government did that in 1933 was not because it wanted gold to go up; it wanted everything else to go up. It wanted to increase the price of cotton, oil, steel, wheat, and other commodities. By cheapening the dollar against gold, it cause inflation in order to end deflation.
Will that happen again in 2016? Because as I’ve said before on many occasions over the years, the world’s central banks are all out of aces—and the gold card is the only one in the deck that hasn’t been played as of yet.
So we wait some more.
And as I post today’s missive on the website at 4:05 a.m. EDT, I see that the gold price continues to chop around—and is currently up 7 dollars the ounce. Silver is up 7 cents, platinum is only up 2 dollars now—and palladium is now down 3 bucks the ounce.
Net HFT gold volume is now a bit over 42,000 contracts—and that number in silver is now up to 7,400—so JPMorgan et al have thrown a tonne of paper gold and silver at their respective prices in order to make them behave. The dollar index is screaming higher—and is now down only 3 basis points.
As for what might happen for the rest of the day, I haven’t a clue. But if the last twenty-four hours of trading are any indication, precious metal prices aren’t going to be allowed to go anywhere but sideways, or down. And, as usual, I’d love to be spectacularly wrong about that.
See you here tomorrow.
Ed
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