Really, what's going on with gold?

The gold price, hovering around $1400 an ounce can only signify one of two possibilities.

A) this is all part of cynical games and manipulations by the banking cartel and should simply be ignored by long term investors.

B) This is an early warning sign of a horrible and crippling deflation of which the banks and the Fed are well aware. 

If case A) do nothing,  Ignore it.

If case B) this gold action can only mean that the money closest to the money creation (the Fed and the Banks) are front running the collapse by shorting commodities while pumping the paper stock market up to bubble highs before they short that to oblivion too. 

In this case everything will collapse.  Meanwhile the Central Banks will fight the collapse with more and more paper, all the while knowing they will fail. 

At some point paper will collapse and we will experience a horrible depression with civil unrest and food and water and energy shortages.  Gold and silver and probably vodka and bottled water and bullets will become cash-like commodities.

Possibility C) - that the global economy is healing is a sad joke belied by five years of 0 percent global interest rates, five years of Sub 2 percent global growth, and a massive ratcheting up of already unsustainable debt levels.

So let's hope for A) - this is all some sort of cynical manipulation.

Because it it's B) well, you get the idea...

Oh My God! What a shock!

Fed Debate Moves From Tapering to Extending Bond Buying

By Steve Matthews & Jeff Kearns - Apr 25, 2013 12:00 AM ET

Debate among Federal Reserve policy makers is shifting away from the timing of a reduction in bond buying to the need to extend record stimulus as inflation cools and 11.7 million Americans remain jobless.
At their meeting last month, several members of the Federal Open Market Committee advocated slowing purchases and stopping them by year-end. Since then, seven have voiced support for maintaining the current pace, including five who vote on the policy making panel: Governor Daniel Tarullo, New York Fed President William C. Dudley, James Bullard of St. Louis, Chicago’s Charles Evans and Boston’s Eric Rosengren.

U.S. Mint Runs Out of Smallest American Eagle Gold Coin

By Debarati Roy - Apr 24, 2013 5:02 AM ET

The U.S. Mint ran out of its smallest American Eagle gold coin after demand surged following the biggest drop in futures in three decades.
Sales of the coins weighing a 10th of an ounce were suspended after demand more than doubled in 2013 from a year earlier, the Mint said yesterday in a statement. Total sales of American Eagles in April have almost tripled from a month earlier, according to its website.

 

American Eagle Gold Bullion Coins, shown here in 1 oz., 1/2 oz., 1/4 oz., and 1/10 oz. sizes, are some of the world's leading gold bullion investment coins. Photographer: Zack Seckler/Bloomberg

 

An employee arranges gold necklaces in a display inside the Hua Seng Heng Gold Shop in the Chinatown area of Bangkok on April 18, 2013. Photographer: Dario Pignatelli/Bloomberg

  

Shoppers from India to China and Japan joined consumers in the U.S. and Australia in the rush to buy jewelry and coins after futures slumped 13 percent in two days through April 15. Indian buyers flocked to stores and banks for ornaments, coins and bars as purchases from the Perth Mint in Australia doubled and retail sales across China tripled.
“This week has been very busy for us,” Michael Kramer, the president of New York-based MTB Inc., a dealer authorized to purchase coins directly from the Mint. “We do not yet anticipate suspension” of heavier coins, he said. The Mint also sells 22-karat American Eagles of 1 ounce, half an ounce and a quarter of an ounce.
“The 1-ounce gold bullion coins are the most popular,” Michael White, a Mint spokesman, said in the e-mail.
A rush by Indian consumers for bracelets and coins is prompting jewelers to offer premiums on imports as traders and banks run out of stockpiles, a trade group said yesterday. Jewelers in big cities are paying as much as 800 rupees ($14.73) per 10 grams (0.02 pounds) while retailers in some remote areas are paying about 1,200 rupees per 10 grams as a premium, according to Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation.

Hong Kong, Japan

Overseas purchases may jump 36 percent to 305 metric tons in the three months ending June from 225 tons a year earlier, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said last week. Imports may climb as much as 20 percent this month from year earlier, he said.
Volumes of gold products sold jumped 150 percent in Hong Kong and Macau during the April 13 weekend compared with the weekend before, according to Dennis Lau, director of sales operations at Chow Sang Sang Holdings International Ltd. (116), last week. Retail sales tripled across China on April 15-16, the China Gold Association reported.
Japanese consumers are poised to become net buyers of gold for the first time in eight years as the yen’s decline and looming inflation drive them to seek refuge in bullion, according to Standard Bank Plc.

ACTING MAN ON GOLD:

Our financial system, based as it is on high and rising leverage, low and falling rates, borrowing short to lend long, and financial engineering, has become very brittle.

Inflation, understood in this light, can pump up asset prices for a while, and then cause a violent crash. Inflation directly undermines the stability of the system.  It has nothing to do with consumer prices.  Though, at times, consumer prices can rise as a result of inflation.

There is a much more important dynamic than consumer inflation that we should consider for its role in the formation of the gold price.

Let’s use Cyprus as a microcosm. Prior to March 15, the average Cypriot thought of gold as an inflation hedge. He may have felt that since prices weren’t rising that much, despite unconventional monetary policy, it was not worth holding. Today, he is regretting not having bought gold. Why? Because Cypriot banks defaulted, and gold is as good as ever.

Again: I emphasize that the reason to own gold has nothing to do with consumer prices. The problem with the system is that every financial asset, except gold, is the liability of another party. Every one of them is leveraging up in a desperate attempt to chase yield and keep mismatching the duration of their funding to their assets, and their assets consist increasingly of counterfeit credit. The probability of default is rising. Gold is the only way to avoid risking default and total losses.

So who is pushing down the price of gold?

 You are!

Everyone who thinks of his wealth in dollars, whose balance sheet uses the dollar as numeraire, and especially, everyone who borrows dollars to fund gold purchases is contributing to the unsustainable spikes up and vicious crashes down that characterize the current market for gold. And I have one other unpleasant thing to tell you:

Volatility will rise, as the financial system gets closer to the terminal phase!
If you think that $250 down in a week is painful, you can look forward to $250 up or down in a day. Not necessarily this year, but it’s coming.

Once most of the speculators are flushed, then other buyers can begin to push up the price with their more steady—and unleveraged—accumulation. Patient, and relentless, these people think of their wealth in terms of gold.  (THINK CHINA, INDIA, SOUTHEAST ASIA)  They are the driver towards permanent backwardation, as they are not motivated to sell by higher prices.

Gold is dead. Long live Gold.

What amazing power the Masters of the Universe at Goldman Sachs and the US Fed do possess.  In two short day they managed to destroy a vital thriving source of human wealth and well being that has survived for well over 5000 years of recorded human history.

And they did it simply by dousing it in reams and reams of paper.

When Perseus killed the Gorgon he had to capture a winged horse, and procure a cape of darkness, a sword with a diamond edge and a polished shield.  He also had to travel to the ends of the earth and trick secrets from the Dark Ladies and then slay the Fierce Medusa through a combination of bravery, force and cunning - at the peril of his life.

All the Fed and Goldman Sachs had to do was to award themselves 100,000 paper gold contracts and dump them on the Comex all at once. It cost them nothing in risk or exertion - And presto - 5000 years of Human History extinguished.

Is there anything those super Heroes can't accomplish?

Nothing, really.

That is if you believe everything being written about gold and the US economy.

Who needs gold, when the world economy has magically healed?

How?

By the Fed creating reams of paper - through no exertion or risk or cunning - just by waving its might arm and saying it is so.  While cohorts at Goldman Sachs and JP Morgan use the free paper to enrich themselves in the risk markets - without risk, without, exertion, and without cunning.  Simply by dint of their superior position as Creators of the Paper.

But then if you look at the chart above: it sure looks like Gold is thriving.  Hmmm.  The chart must be wrong.

And if you look at the bellwether rate on the 10 year note at 1.6 percent - for the last 5 years - and if you look at the accumulating debt in the system growing ever greater as you read this - it sure looks like the economy is dying. 

But that couldn't be.  After all the Stock Market is at an all time high. 

So things must be good.

In his article at Sharps Pixley, Gold Crushed by 400 Tonnes of $20 billion of Selling on COMEX, former gold trader at NM Rothschilds & Sons and Credit Suisse, Ross Norman, describes how the ambush was carried out:

The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract (see below) in what proved to be only an opening shot. The selling took gold to the technically very important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level... the line in the sand.

Two hours later the initial selling, rumoured to have been routed through Merrill Lynch's floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading.
This was clearly not a case of disappointed longs leaving the market - it had the hallmarks of a concerted 'short sale', which by driving prices sharply lower in a display of 'shock & awe' - would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called 'stopped-out' in market parlance - probably hidden the unimpeachable (?) $1540 level.

The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production - too much for the market to readily absorb, especially with sentiment weak following gold's non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data. The assault to the short side was essentially saying "you are long... and wrong".
Futures trading is performed on a margined basis - that is to say you have to stump up about 5% of the actual cost of the gold itself making futures trades a highly geared 'opportunity' of about 20:1 - easy profit and also loss! Futures trading is not a product for widows and orphans. The CME's 10% reduction in the required gold margins in November 2012 from $9133/contract to just $7425/contract made the market more accessible to those wishing both to go long or as it transpired, to go short.
Soon after we saw the first serious assault to the downside in Dec 2012, followed by further bouts in January 2013 - modest in size compared to the recent shorting but effective - it laid the ground for what was to follow. One fund in particular, based in Stamford Connecticut, was identified as the previous shorter of gold and has a history of being caught on the wrong side of the law on a few occasions. As badies go - they fit the bill nicely.

This is the modern gold confiscation

Andy Maguire's latest: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/15_Maguire_-_155_Tons_Of_Paper_Gold_Sold_In_Just_One_Hour%21.html

There's been much speculation about a modern gold confiscation.  They can't do it now like they did in 1933 because it's a global market place.

But they can do what they're doing now: drive the price so low that all small private citizen gold holders sell out.  Meanwhile the bullion banks and central banks are buying physical with both fists as they crash the paper price.

It's very tough right now, but don't be sucker.

As soon as they've "confiscated" everyone's gold, they'll reprice the metal, just as they did in 1933.

Please read the link above.

GOLD DIVE: What do you think?

With gold plunging to "bear market" lows, how you react is a product of how you think.

1)

A. Do you think the global economy is healing under the brilliant leadership of a tiny group of Central Bankers who, in their infinite wisdom are guiding the grotesquely over leveraged 60 trillion dollar world economy into safety and prosperity?

B. Do you think that this small unelected socialist committee, tasked with creating hundreds of trillions of dollars to give to the small socialist banking committees running the worlds banking conglomerates, are somehow saving the world's Free Market Capitalist System?

C. Do you believe Free Market Capitlalism and World Banking Socialism are able to flourish together and create a new Global Hybrid Prosperity?

D. Do you think this Unprecendented Experiment in prosperity through Global Central Planing is in the process of creating more jobs, more universal wealth, more spending, more profits for all?

E. Then sell all your gold.  Buy paper money put it into the riskiest derivative assets and structured products and ride the markets to infiniti. You're bound to end up very very rich.

OR

2)

A) Do you think that The Socialist Global Banking Cartel has no idea how (and no inclination to) save global Free Market Capitlism.  They're only desperate wish is to preserve the current wealth/power structure for as long as possible.

B) DO you think their attempt to control and manipulate every market in the attempt to create the perception of a global Wealth Effect is only able to to create short term bubbles that will eventually pop and give way to a terrible crashes?

C) Do you think that printing money to give to the banks to gamble and manipulate the risk markets only creates ever more dangerous bubbles that will leave the markets in tatters when they bust?

D)  Do you read QE INFINITI and Perpetual ZERO INTEREST RATES as Lif Support for a dying global economy.

E) Do you read desperate Socialist Remedies as fundementally incompatible with any idea of Free Market Capitalism?

F) Then use this dive in gold as a god send.  Wait till it bottoms, then back up the truck.  Because when this Frankenstein's Experiment in Money Printing ends, the only currency with value will be gold.

The Fed's 2 bullets:

Gee, let's try to see what the Fed will do about its money printing programs:

A) They will keep printing money and giving it to the banks, as long as the real economy remains weak. 

How long is that?  As long as the banks keep diverting all the printed money into gambling in the risk markets. 

How long is that?  As long as the Fed keeps printing money and giving to the banks.

B) They will announce every month, and every day through various intermediaries, as necessary, that they are going to slow their money printing sometime soon, because the economy is healing.

This way the market prices in perpetually both a healing economy and infinite money printing.

Pretty clever.  Nobody can possibly see through that brilliant and complex strategy - because nobody wants to. 

So, what could possibly disrupt this type of brilliant management of the economy?

Nothing, right?  Everything is bound to go just right when a very small committee plans and manages a 13 trillion dollar economy.  After all, they're really smart over there.  Nothing can possibly go wrong.

So party down, follow the Fed and keep gambling.... Everyone's a winner....

This has happened before...

John Law was way ahead of his European contemporaries in developing new theories on banking, involving the issue of paper money alongside the gold and silver coins which were the monetary systems of his epoch.
Law, a Scot,  eventually rose to become the Minister of Finance in France, appointed by the Regent Duc d’ Orléans, governing on behalf of the dauphin, later Louis XV, who inherited the throne as a young child.

Law was Founder and President of the Royal Bank and the Mississippi Company. The Bank issued paper money which was in competition with gold and silver coin.  The paper money was backed by paper shares in the Mississipi Company and all this paper wealth fueled a tremendous stock market speculaltive blow off lasting over three years.  Then the bubble burst... and therein lies the tale:

1. In Dec. 1719 the share price of the Mississippi Company, which had risen in a bubble from 150 to 10,000 Livres descended to 7,500.
   
2. Law declared a dividend for shareholders of Livres 200 per share and the price recovered to 9,000.
   
3. Future markets developed at 15,000 Livres, but Law refused credit to finance futures, whereupon the price fell. He then revoked his credit ban and the price recovered.
   
4. Company sales offices were opened in Paris to try and curb “unregulated” sales and control the market.
   
5. ”Primes”, equivalent to today’s options, were launched with leverage of 10 to 1.
   
6. Investors sold shares in order to buy Primes, crashing the share price from 10,000 to 7,000 Livres.
   
7. Physical silver and gold were draining from the bank’s coffers as investors, anticipating an end to the bubble, sold shares and cashed out into physical.
   
8. By the end of 1720, some 500 million Livres in silver and gold had been taken out of the country to London and elsewhere.
   
9. Inflation in France escalated and the price of land rose 400% in some areas. The price of staples rose with bread up 500% from 1 to 5 sous within a year.
   
10. Law, although a free marketeer by philosophy, decided the time had come for swift and devastating intervention.

	Law passed an edict banning the export of silver and gold coins and bullion.
	The public turned to buying diamonds, gems and jewels, in order to escape paper (Livres and shares).
	The purchase and wearing of diamonds, pearls, and other jewels was then prohibited.
	The investors turned to buying silver and gold dishes, plates, and other similar objects.
	A ban was imposed on the production and sale of all silver and gold items except religious ones.
Painting of Philippe d'Orléans as Regent of France; he stands with his mistress Marie-Thérèse de Parabère who poses as Minerva, goddess of Wisdom	The prices of crosses and chalices soared, until their use was also banned.
	Law announced the Royal Bank was being taken over by the Mississippi Company at 9,000 Livres per share and closed down the company sales offices.
	The share price collapsed from 9,500 to 7,800 Livres.

• On Feb 27th measures for 'hoarders.'
  
• Informers were rewarded for any hoarding information, which included the right for the government’s agents to search any private property for silver and gold.
  
• Some 2 weeks later Law reversed his decision, re-opened the company sales offices and supported the sales price at 9,000 Livres. There was a rush to sell shares for paper Livres.
  
• Law decided to fade out silver and gold coin by reducing their value to zero over several months - turning to a total paper monetary system.
  
• Law had gone one step too far and his political support started to collapse.
  
• A huge crime wave developed simultaneously as losses led to penury, hardship and hunger.
  
• By May 1720 some 2.6 billion Livres banknotes had been printed.
  
• Law decided to reduce the price of the shares from 9,000 to 5,000 Livres.
  
• The value of Livre banknotes would also be reduced by 50%.
  
• After 3 days of riots, Law resigned, and Orleans restored the value of the shares and banknotes to their previous levels.
  
• A few days later the limits of owning gold and silver were lifted, but nobody had any left.
  
• Only 2% of the money still circulating was in silver and gold.
  
• Coins were rationed and vast public bonfires of paper shares and Livres bank notes were organized by the government to try and restore faith in paper, by demonstrating to the public that they were reducing the quantity in circulation, which needless to say did not work.
  
• On the foreign exchange market a pound sterling rose from 39 Livres to 92 Livres in 6 months.
  
• Finally vast quantities of copper coins were minted to replace the lack of coins in circulation.
  
• Banks however opened only sporadically and to huge queues of people trying to exchange paper for gold and silver.
  

Law went into exile and his fortunes ebbed and flowed for the rest of his life.

The parallels with today’s global fiat monetary system, now blowing off into a tremendous bubble top in stocks fueled by a furious printing of paper just as the French Market did going into Dec of 1719.  

The aftermath may provide a template as to how events might play out in the next couple of years.
The intention is to allow the readers to draw their own conclusions as to how they might or might not save themselves from a similar potential collapse in fiat paper monetary system.
One can, of course, imagine that many of Law’s measures would not be acceptable in the 21st century, but a global monetary system collapse may well lead to surprises?

Trust in Gold Not Bernanke as U.S. States Promote Bullion

By Amanda J. Crawford - Bloomberg  Apr 8, 2013 12:01 AM ET

Mistrust in the Federal Reserve and concern that U.S. dollars may become worthless are fueling a push in more than a dozen states to recognize gold and silver coins as legal tender.

Lawmakers in Arizona are poised to follow Utah, which authorized bullion for currency in 2011. Similar bills are advancing in Kansas, South Carolina and other states.

Enlarge image

In Utah, officials haven’t yet figured out how to accept gold and silver for tax payments -- though some residents have asked to pay that way. Photographer: Simon Dawson/Bloomberg

Enlarge image

U.S. Federal Reserve Chairman Ben Bernanke has pushed interest rates to near zero since the 18-month recession that began December 2007. Photographer: Andrew Harrer/Bloomberg

Enlarge image

The Utah Precious Metals Association, established after passage of the 2011 law to advocate for the use of gold and silver coins, has established a pilot program in which members can make deposits that are held in gold and access money using a bill pay service. Photographer: Victor J. Blue/Bloomberg

The Tea Party-backed measures are mostly symbolic -- you still can’t pay for groceries with gold in Utah. They reflect lingering dollar concerns, amplified by the Fed’s unconventional moves in recent years to stabilize the economy, said Loren Gatch, who teaches politics at the University of Central Oklahoma.

“The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing,” said Gatch, who studies alternative currencies at the Edmond, Oklahoma-based school. “There is a fear that the government, or Bernanke in particular and the Federal Reserve, is pursuing a policy that will lead to the collapse of the dollar. That’s what is behind it.”

Here's another neat one:

The more the Fed prints/borrows (QE) the greater the debt/liquidity and the greater the illusion that a self-sustained recovery is right around the corner.

But there is still 0 money velocity in the US economy.  The chart above explains why.

If real inflation were counted into the GDP deflator we'd have been in a recession for over 5 years.  That's a depression.

But the stock market's at an all time high.  How can that be?

All that debt/liquidity donated to the banking system has to go somewhere.

The Fed hopes that if the market is high people will feel rich and spend.

That's the whole plan.

Do you feel rich?

The chart above figures inflation the same way it was figured in 1980, before Reagan, Clinton, Bush reconfigured inflation numbers to mask an obvious effect of the explosion of credit/debt creation which has become the foundation of GDP for the last 30 years.

It is also still excludes EDUCATION and HEALTH CARE which would bring real inflation upwards of 15 % by most estimates.

With this type of real inflation rate and the Fed Funds rate at 0 - real rates are negative by about 15%

With the US total current debt market levels at 350 % of GDP - not including unfunded pensions, transfer programs which brings the number into the 100 trillions - ask yourself this:

How can the Fed (and the ECB and the BOJ and CBC) ever normalize rates?

How can they ever allow rates to rise at all?

That means QE INFINITY until the markets collapse.  (QE means printing money which means creating ever more debt)

and/or until the vast middle class goes completely bankrupt.

And then the markets collapse.

What's the end game?  How do you protect yourself?

How long can gold consolidate under these conditions?

The Recovery: Fantasy vs Reality

 PUNDIT'S FANTASY:

Payrolls in U.S. Probably Increased in March as Demand Picked Up

By Alex Kowalski - Bloomberg. Apr 5, 2013 12:00 AM ET

Payrolls probably increased in March and the U.S. jobless rate held at a four-year low as demand improved at the start of the year, economists said before a report today.
Employers hired a net 190,000 workers last month after taking on 236,000 in February, according to the median forecast of 87 economists surveyed by Bloomberg. The jobless rate held at 7.7 percent, the lowest since December 2008, the survey indicated. Separate data may show the trade deficit was little changed in February.

Gains in hiring on the heels of a stronger housing market, a pickup in consumer spending and more corporate investment will help bolster the economy as federal budget cuts take hold.

“What you see is remarkable stability in job growth,” said John Ryding, chief economist and co-founder of RDQ Economics in New York. “We are in an OK place in terms of the pace at which we’re growing.” 

THE REALITY OF THE NUMBERS:

Job Gains Slow as Unemployment Rate Falls to Four-Year Low

By Alex Kowalski - Blomberg, Apr 5, 2013 8:46 AM ET

 

Employers hired fewer workers than forecast in March and a slump in the size of the labor force pushed the jobless rate down to a four-year low, indicating the U.S. job market is struggling to make bigger strides.

Payrolls grew by 88,000 workers, the smallest gain in nine months and less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 February increase, Labor Department data showed today in Washington. The median forecast of 87 economists called for a 190,000 gain. The jobless rate fell to 7.6 percent from 7.7 percent.

Participation Rate

The labor force participation rate fell to 63.3 percent, the lowest since May 1979.

FED IN CONTROL - HOORAY?

The Fed is in tight fisted control of the bond market and the stock market.

The Fed has put a convincing floor under the housing market.

The Fed - in collusion with the press - have fostered a pervasive conviction that the economy is healing - and that nothing really distressing could ever happen as They will always be there to bail out any large distressed institution (bank or insurance company) whose demise would be endanger the financial markets.

The only downside to this is that only those closest to the FED (Banks, insurance companies and the largest Corporations and  Hedge Funds) can thrive.

Sure, there will be huge winners in the "information-technology" sectors.  Sure, executives at the top of huge corporate structures will thrive.  Sure, successful small businesses will pop up and then go under.  And this all creates a patina of capitalist activity.

But 60 percent of the workforce is unemployed, underemployed or part of the working poor, and that number will continue to grow.  Another 30 percent of the workforce is the working-like-hell just to pay their bills and keep up a middle class veneer.  And those poor middle class families with kids are all sinking quickly into the lower middle class/working poor, as education and health care costs sap the lion's share of the family budget.

And the Fed itself is at the mercy of CREDIT CREATION - DEBT CREATION.  The FED can and does create ever more fantastic sums of Credit./Debt.  The Government is doing its part.

But 70 percent of our economy is dependent on CONSUMER CONSUMPTION.

CONSUMER CONSUMPTION IS ENTIRELY DEPENDENT ON CONSUMER DEBT.

The one thing the FED can not do is force consumers to borrow.

SO: How does the consumer keep piling up debt as their incomes and lifetstyles sink en masse?

Riddle me that, Batman.