Manipulated Markets Prospects: Gold, U.S. Dollar, Bonds, Equities & Interest Rates
Stock-Markets / Financial Markets 2013 Oct 19, 2013 - 12:16 PM GMTBy: DeepCaster_LLC
“Bank deposits are not safe which used to be safe. Money in Treasury bills is not 100 percent safe and there is inflation in the system and you would hardly get any interest.
“Bonds are not very safe anymore because eventually interest rates will go up Equities in the U.S. are relatively expensive by any valuation matrix you may use.
(The federal government is) “essentially wasting money left, right and center: Republicans on the military and the Democrats on buying votes with transfer payments and entitlements. The best you can hope for is that you have diversified your portfolio of different assets and they don’t all collapse at the same time.”
“Marc Faber: Pray All Asset Classes Don’t Collapse at the Same Time,”
John Morgan, moneynews.com, 10/15/2013
Dr. Marc Faber is the author of the Gloom, Boom and Doom report
The “Behavior” of the Price of Gold, the Ultimate Safe Haven, might seem strange lately as it had not risen despite the lead up to the recent U.S. Debt Ceiling and Budget Crises. Apparently stranger still, after the Debt Ceiling Crisis was apparently (but see below) resolved, the Gold Price shot up. Understanding why this Paper Price performance is not strange is the key to understanding the prospective performance of many markets.
Indeed, understanding the likely course and timing of these developments – a primary Focus of Deepcaster’s Alerts – is essential to Profit and Protection in the next few weeks and very few months.
“The Double Jolt of two anticipated Pro-Inflationary Developments – a “No Tapering Now” Decision by The Fed and a Debt Ceiling Raise should have been the Catalyst to launch the Gold Price, and especially the Silver Price, up, we remarked a few days ago.
But we noted “The Cartel (Note 1) will be Working Hard to Suppress (Precious Metals) Prices and Convince Investors that the Equities launch up demonstrates Economic health, and thus Gold and Silver are not needed as Safe Havens.” Remember that a Continuation of The Cartel’s Power and Wealth-generation Capacity depends on their being able to Continue suppressing Precious Metal prices.
And so The Cartel did indeed pull out all the stops to take down Gold last Friday, October 11, and succeeded. But then, the day after the apparent Crisis Resolution, The Gold Price shot up again. What gives?
First, lest any Reader have any doubt that The Cartel suppresses prices we Invite you to read the following most interesting and cogent reports courtesy of JBGJ.
“An interesting perspective on Friday’s (October 11 – Ed.) raid is Seeking Alpha’s Weekly COMEX Gold Inventories: Huge Friday Sell Order Equivalent To 70% Of Gold Registered For Delivery
“Friday's (10/11/13) huge drop in gold was essentially due to one tremendously large market sell order, which was an attempt to sell 5,000 gold futures (500,000 gold ounces or about $650 million dollars) at market price and was so large it tripped the stop logic for the exchange and caused gold to stop trading for about ten seconds. We aren't going to get into the motives behind this trade other than saying no seller trying to get a fair price for their gold would sell in such a way, so it looks to be an attempt to ignite negative momentum - which it didn't seem to do.
“But what we want to point investor attention to is that the size of this trade compared to the size of COMEX gold registered inventories, was tremendous. In fact, it represents almost 70% of gold registered for delivery and would be almost impossible to actually fill if entities asked for delivery.
“Oh! and investors shouldn't forget that this was all done in less than one minute - essentially all of the COMEX gold eligible for delivery was sold by one trader in less than one minute. If that doesn't raise an investor's eyebrows, then they really don't understand or are the ones making that sell order.”
“India starving for gold- China too? Gartman starts selling”,
John Brimelow, JBGJ, LLC, 10/14/2013
“The blatancy of the gold manipulation has escalated to what could only be described as taunting the CFTC to do anything about it. Today takes the cake (and that says a LOT considering how many cakes the cartel have taken) for in-your-face manipulation. After Goldman screams "sell", and on a Friday that statistically already has 7 standard deviation selling odds going in we watch this:
“8:42 AM: 367 Dec. contracts traded
“8:43 AM: 7,993 Dec. contracts traded
“8:44 AM: 4,860 Dec. contracts traded
“8:45 AM: 4,050 Dec. contracts traded
“While all was sublime elsewhere, and the dollar comatose, 16,903 December contracts were sold in just 3 minutes. This takedown amounted to over 2 MILLION ounces, or 62 TONS. You have to let that soak in for a few seconds to grasp the audacity. Somebody just dumped over 20 tons a minute, or one ton every 3 SECONDS.”
“What is the Objective?,” John Brimelow
JBGJ, LLC , 10/13/2013
It is unfortunately all too clear that The Cartel still has the Power to suppress Precious Metals prices. And the private for-profit Fed-led Cartel has both Profit and Strategic Motivations. Indeed, the title of a recent article has it nailed – “Gold Market Sunk to keep Bond Market Afloat.” Consider these excerpts
“Historically, government shut downs have been associated with negative financial news….
“Negative financial news has historically been a time when gold and silver prices rise due to uncertainty. Gold and silver have long been safe havens against financial calamity including falling currency values, falling bond prices and even rising interest rates, as gold and silver store wealth against borrowing costs….
“The current government shutdown comes during a time period when American debt has never been higher. The Obama administration beginning in 2008 has added more debt to the Federal balance sheet than all other Presidents, from George Washington to George H. W. Bush combined, a staggering $4.2 Trillion dollars.
“The issue of debt is not about total dollar amount, but about interest payments which must either be taxed in existence or borrowed into existence….
“The terms of the Federal Reserve Act (1913) … specified interest payments were to be made only in gold and after the gold was gone, the United States declared bankruptcy. Bankruptcy was declared on the carefully chosen date of March 9, 1933. (interesting numerology 3-9-33 or 333-333 ==666! ) After 1933, all property and all potential income of all persons born thereafter was hypothecated to the non Federal no Reserve private banking cartel but this another story.
“Interest payments are the primary benefit of banker pretended debt script, except, when the game’s gone too long. In the end, it’s interest payments which finally cause the destruction of debt script, as interest rates rise exponentially until no amount of script can satisfy the demands for more interest.
“A primary concern of banker debt script managers is interest rates; keeping rates as low as possible is of the highest priority, especially when total debt ‘crosses the Rubicon’ where interest payments on debt already created, significantly affect future interest payments as previous payments are borrowed into existence. The United States Federal Reserve has crossed the Rubicon and rising interest rates will signal the coming end of the FRN private debt based script.
“Over the past several years, it has been noted that gold and silver and platinum and palladium have exhibited price behaviors consistent with being managed prices. Prices of gold and silver, especially, have been manipulated, both to keep the purchasing power of the dollar from falling quickly and to keep prices of US bond products high, resulting in unnaturally low and stable interest rates….
“Rising Interest rates are a sign banker pretend debt script exists in far greater quantities than products to purchase in a market. …
“However, when a banker pretends debt script is being borrowed into existence to meet the demands of pure spending, with no connection to products in the market, bankers and co-conspirators must manipulate interest rates lower to prevent catastrophic rises in interest payments. …
“Gold and silver prices are being deliberately and criminally destroyed by bankers hoping to keep the financial system alive a little longer as the wealth of the economy is transferred to bankers in the form of interest payments….
“Lowering prices of gold and silver is equivalent to boosting the value of the dollar and simultaneously strengthening face value of government debt. … Destroying the price of gold and silver to maintain purchasing power of the dollar moves money from investments in gold and silver to government debt which rises in value relative to gold and silver.
“…Metal prices were frantically slammed to slow the rise in interest rates on approximately June 17, 2013.
“Slamming the price of gold helped slowed the rate of increase in the 10 year yield temporarily, preventing an interest rate crisis. Note again, after October 1st, interest rates stopped falling and started climbing, and, again, a gold smack down in prices was engineered beginning in the second week.
“The price of gold and silver are being pushed lower at great cost. In order to engineer the sell down, naked short selling and flash trading are being used, both of which are causing the depletion of physical gold and silver, …
“In the very near future, the physical shortage of gold and silver will lead to default in the commodities market exchanges (comex and other metals exchanges) creating a crisis in metals delivery and, for a short time, making gold and silver unavailable at any price.
“At the same time when gold and silver prices rise exponentially and the metals exchanges default, bond prices will fall like a rock triggering financial system destroying interests rates.
“The only protection bond holders and dollar holders have is to sell both before interest rates begin to rise. …
“Buying gold and, preferably, silver and other safe assets is the only hope to save your wealth….”
“Gold Market Sunk to Keep Bond Market Afloat,”
Jack Mullen, goldseek.com, 10/14/2013
In addition, it is most important to note that it is becoming ever more difficult for The Cartel to sustain Takedowns, as the October 17, Gold Price launch up again demonstrates.
Recall that on the Monday (10/14) after the Friday 10/11 Takedown, Gold popped right back up again, also.
And the intensifying demand for Physical (which we have documented on various occasions) makes it ever more difficult for them to sustain any Takedown. Clearly Timing is Critical, which is why Deepcaster’s Alerts give particular attention to Timing Signals.
But as the weeks, and days, pass, the likelihood of a Sustainable Great Precious Metals Launch up beginning soon, increases, mainly because of increasing demand for physical.
For example, increasing shortages of Physical are reflected in India’s “de facto ban on Gold Imports” resulting in “premiums above $100 per ounce” (JBGJ).
Jim Rickards has the Most Important Timing Signal (and there are several) Nailed
“James Rickards: Central bank manipulation of gold markets can and will last until physical shortages become so acute that banks and exchanges can no longer deliver on futures and forward contacts when requested by customers. At that point, contracts will be terminated and exchanges will order that trading be conducted "for liquidation only" which means that futures customers can close out or rollover contacts, but they cannot receive physical delivery of gold.”
“Interview of James Rickards About Central Bank Manipulation of Gold and Silver Markets,” goldbroker. Com, 10/15/2013
James G. Rickards is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street.
Increasing Upward Pressure on Precious Metals Prices will continue because fundamentally, it is highly unlikely the Fed will begin to Taper in October or December. The Hot Fiat Printed Money (indirectly created via QE as explained below) must continue to flow in order to support Equities Prices.
The Money “Printing” via QE to which we refer is Indirect, but Real nonetheless. QE works by The Fed’s swapping Treasury Securities on Commercial Banks balance sheets for extra reserves, thus lowering borrowing costs. QE thus artificially boosts corporate earnings, thus allowing more spending – a de facto Money “printing” nonetheless. Indeed, fully 60% of American corporations’ Operating Earnings since 2009 result from lowered borrowing costs according to a study by S. Pomboy presented at the recent Big Picture Conference.
Though the underlying economy is not recovering, Corporate Earnings are, in the Aggregate, moderately positive and so long as QE keeps flowing that will keep their stock prices pumped up for a few weeks or a very few months more.
Thus it is not surprising that, Technically, we are “due” one more massive “Blow Off Top” Equities Rally. Among the Technicals supporting this view we note the cumulative NYSE Advance/Decline Line has formed an Ascending Bullish Triangle which portends “Rally” for a while more.
And Interventionally. The Cartel and other Powers-that-be have everything to gain by supporting another Rally via QE. Withdraw QE and interest rates would spike up dramatically, crashing the Markets.
Of course, that Rally and Ongoing QE will set the scene for Hyperinflation and a $US and Equities Crash some week soon. Thus Deepcaster pay particular attention to Timing in forecasting anticipated Mega-Moves resulting from this Scenario.
Regarding the prospects for Gold and Silver Prices, consider Jim Rickards further comments
“FDR: Do you anticipate an overnight ending of the manipulation or a progressive process ?
“JR: Both. The process will proceed slowly at first, then gain momentum, then reach a panic buying stage where the termination of deliveries under futures and forward contacts will be announced very suddenly. At that point, physical gold will be scarce and interested parties will not be able to acquire it in small quantities at any price.
“FDR: Is the gold/silver paper spot price still relevant to value physical gold and silver ?
“JR: It is relevant in the sense that it is still possible to acquire gold and silver at prices significantly below the implied non-deflationary price under a gold standard. This is a type of arbitrage that will be available until the world returns to a gold standard or until countries use executive orders to abolish gold trading.
“FDR: What direct consequences would a free gold/silver market have on people worldwide -- not investors, people in general ?
“JR: We have a free gold/silver market today. Anyone can buy or sell as much gold or silver as they like at market prices and exchange it freely with willing counterparties. To the extent that central banks act to depress the price of gold or silver, this acts like a gift to those interested in purchasing it at an artificially low price. If the world returned to a gold standard, the price of gold would be boring and the trading uninteresting because it would be fixed in terms of a currency and interchangeable with the currency.” (emphasis added)
Ibid.
In sum, regarding Various Markets Performance in the next few weeks and very few months, consider John Williams Excellent Analysis at Shadowstats.com
“Chances of the current federal government addressing the long-term sovereign-solvency issues of the United States are nonexistent, reflecting the agreement reached October 16th, to re-open the federal government into early-2014. In that negotiation process, the debt-ceiling leverage, which had been in place as an aid to those pushing for meaningful fiscal reform, also was suspended through February 7, 2014, but it will be reinstated thereafter. Details can be found in Section 1002 (a) “Default Protection Act of 2013,” on page 9 of H. R. 2775. A copy of the Act can be downloaded from this site: http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.2775: .
“The Devil Is in the Details. While the debt ceiling remains in play, going forward, the process for handling it through February 7th has been changed. Instead of the Congress having to approve an increase in the debt ceiling, where withholding such approval had been used as negotiation leverage, for the present, the President simply announces that he is waiving the debt ceiling. If Congress objects, it has to pass legislation to reject the President’s waiver. The President can veto that legislation, where a veto override would require a two-thirds majority of both the House and the Senate. Neither the passage of an override of the waiver in both Houses, nor an override of a veto of such enacted legislation, is possible in the current political environment.
“This process expires on February 7th, when a new debt ceiling will be put in place. The new concept introduced for getting around the debt ceiling, however, as noted by one subscriber, sets an extraordinarily dangerous precedent as to gutting the political leverage provided at present to those who seriously are looking to address the government’s extreme fiscal imbalances.
“Separately, at such time as a new debt ceiling would constrain Treasury borrowings in February, consider that the Treasury, has just regained the re-funding needed to replenish its cushion to operate with extraordinary measures for a period of several months.
“Can Kicking. October 16th saw what has become almost a ceremonial kicking of the can down the road. There is no reason for the global financial markets to believe that the latest actions will be any less detrimental to U.S. financial stability or any less without meaning than the multiple similar experiences of recent years. This time, though, there is a good chance that the “What, Me Worry?” crowd in Washington finally has kicked the can off a cliff [no offense intended here for Alfred E. Neuman].
“Market Reactions. As we go to press early-afternoon (October 17th) New York time, initial reaction has been for dollar selling and gold buying. Despite whatever games the President’s Working Group on the Markets is playing, and beyond initial market volatilities, those general trends should accelerate, as the rest of the world weighs in on the ever-expanding U.S. fiscal debacle and on the intensifying dysfunctional nature of the United States government. Having run out of patience, global markets increasingly fear deteriorating U.S. sovereign solvency prospects and rapidly increasing odds of heavy U.S. dollar debasement.”
“Fiscal Crisis—Dollar Debasement,” Commentary 565,
John Williams, Shadowstats.com, 10/18/2013
Williams’ Analysis is not just “whistling Dixie” but spot-on. The $US 75 basis point Crash (as we write) on October 17, the Day after the Debt Ceiling was obliterated is a Harbinger. We can expect increasing U.S. Debt and continuing QE going forward.
But severe consequences are impending. The Credit Rating Agency Dagong of the USA’s most powerful Creditor, China, recently downgraded the USA’s Debt Rating from A to A-. And China continues to enter into bilateral currency swap deals with other countries (thus bypassing the $US and further jeopardizing its status as the World’s Reserve Currency), the most recent being with the European Central Bank!! Stay closely tuned for Protection and Profit.
Best regards,
www.deepcaster.com
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