SD Weekly Metals & Markets 4/13/13: Vampire Squid Kicking Arse As MOPE Fiesta Runs Wild
Thank goodness for a day of rest — and a weekend, if you’re so lucky! After a week like this, some precious metals investors might consider driving a car into a tree more relaxing than watching the mainstream media explain market machinations and how gold is now officially in a bear market.
Providing our antidote to mainstream MOPE, we bring you this week’s SD Metals & Markets discussion, including:
- Paper Metals Market Madness: Silver Breaks $26 And Gold Dives Below $1500- is a wash-out capitulation crash to $22 and $1400 imminent?
- Vampire Squid Must Eat: The Bankster Set-up Before Cyprus Forks Over Gold
Tribute To Bill Murphy, Chris Powell And GATA: American heroes in the most classic sense of the term
Launch the radio program by clicking the YouTube play button and enjoy the supplemental write-up. Let’s get to it!
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Paper Metals Market Madness: Silver Breaks $26 And Gold Dives Below $1500
The big story tonight is the epic raid Friday in the paper metals markets, as over 500 tons of paper gold were dumped on the market triggering sell-stops and capitulation in gold and silver, as gold broke below $1500 to $1485, and silver broke below significant long term support at $26 to as low as $25.72.
It was truly an epic sell-off, bringing back memories of the May 2011 silver collapse.
There was really no follow-through to this morning’s small rally, no conviction buying in the paper markets of any sort. We breached the low of $26.02 for the entire 2 year correction early this afternoon and with the 50 cent sell off at the end of the access session to close the week at $25.85, there is significant risk of a gap down overnight Sunday and early Monday, with the next major support in the $22 area. I’d give the odds at least 50/50 of a final gap-down spike low with silver dropping potentially as low as $22 and gold now potentially testing $1400 early next week.
That being said, silver was down almost $2, nearly 7%, and gold was down $85 today, nearly 6%, its largest single day decline since the February 29th 2012 Leap Day Massacre when LTRO2 was announced in Europe.
Gold hasn’t trading in the upper $1400’s since summer of 2011. Professionals are buying into this weakness, and when you look at the fundamentals with Japan going nuclear on QE just last week, the whole Cyprus bail-in contagion going global: 6% and 7% weakness in gold and silver are being responded to professional with accumulation. China has also been a massive buyer.
That being said, the potential for a capitulation spike low is now very real, so while today’s weakness must be responded to professionally with accumulation, it might be prudent to save a bit of dry powder for the event of a final capitulation overnight Sunday and into Monday.
Just as was seen in the massive sell-offs in 2008 and May of 2011, premiums are skyrocketing for physical metal (APMEX Buy-back price for 90% is now a whopping $3 OVER SPOT!), and even if the paper price trades down to $22 and $1400 early next week, it wouldn’t surprise us at all to see price for physical metal not dip much below $1600 and $30.
We set an all-time sales record today at SDBullion- I think we burned through nearly 10,000 ounces of silver. Our suppliers wouldn’t even answer the phones. One of our suppliers informed us they had already sold thousands of ounces of gold and hundreds of thousands of ounces of silver… before noon!
The demand for physical is simply enormous, and will result in widening spreads and premiums between paper and physical metal.
This movie is getting old. It would be one thing if the Western banksters were actually tossing some scraps around as they rape and pillage future generations — the somewhat hidden outcome of the dumping of debt obligations on nations to “fix” the insolvency the bankers created in the first place. But these thieves have absolutely no honor. Policy makers in Washington DC and Western Europe are no better. Talk about a bought and paid for lot. If money and perks aren’t enough for these createns, blackmail “control files” serve as backstop.
Let’s unpack the latest statements from Goldman Sachs’ alumnus and current European Central Bank head Super Thief Mario Draghi. Alan — babble them into indifference — Greenspan could learn a thing or two from Mario about lying.
Asked about a letter he wrote to Cyprus President Nicos Anastasiades, Draghi said the letter is “very, very clear.” He said the government must abide by the central bank’s handling of the gold stock, since it is independent from political control under European rules.
“The independence of central banks in the euro area is enshrined in the treaty,” Draghi said. “The ECB will look at developments in Cyprus from this angle.”
Speaking alongside Draghi, Dutch Finance Minister Jeroen Dijsselbloem said selling gold “has always been an option put forward by the Cypriot authorities.”
“But as mentioned in the program documentation, this is a decision to be made independently by the Cypriot central bank,” he said. “And it’s not any demand from the troika or the eurogroup.”
The full Bloomberg story is linked within the original SilverDoctors.com article.
Any notion that the Cypriot Central Bank having independence from anything is farcical. If a robber walks into your house and sticks a gun to your head, perhaps Dutch Finance Minister Jeroen Dijsselbloem would arrogantly suggest, “Giving the robber your money has always been an option put forward by other hold-up victims.”
We need to go back in time to understand how the game (arguably, a scam) is played:
First, Cypriot banksters make bad loans, for which traditional capitalist system remedies such as placing banks into receivership are not called upon to honestly fix the mess. Next, the situation becomes a crisis as credit to the Cypriot banking system dries up, a perfectly natural and expected reaction by even rational and non-corrupt bankers who are unwilling to lend further to bad creditors.
Hang in here, dear reader. It’s about to get interesting.
What does Draghi and his Brussels Brethren do next? Why, of course, tell the Cypriot government they can turn to the oh-so-independent Cypriot central bank to issue special loans to insolvent Cypriot banks under a program called Emergency Liquidity Assistance (ELA). That has been going on long before the Cypriot crisis was worldwide news. The ECB authorizes this direct ELA lending by the Cypriot national bank, which includes more permissive collateral requirements to grease the injection of liquidity — because no real banker not backstopped by taxpayers socializing losses would make such risky loans to already hobbled creditors without permissive collateral requirements! Result? A weak and failing Cypriot financial system is turned into a liquidity crack dependent, flat on it’s back and at the total mercy of subsequent demands from the ECB.
The end game is now set-up. Draghi gets to slither around in his calm, technocratic demeanor, claiming that the Cypriot central bank has independence while the ECB and the Brussels Brethren demand that the Cypriot central bank sell its gold to cover the ELA credit issued to supposedly fix the insolvent banking system. It’s not just gold the banksters are after, by the way. Cypriot gold is just the icing on the cake. The bankster bad loan losses above and beyond the value of the gold are entirely socialized on the backs of the citizens of Cyprus, which enables Brussels to exert greater political control over Cyprus, a supposedly sovereign nation.
Meanwhile, not one in ten thousand media professionals have the intellectual curiosity to investigate this chain reaction setup. Even those journalists that do understand usually dare not speak truth to power lest they find themselves facing friction from their employers, who may very well be owned outright by financial sector interests (e.g., Bloomberg, and another fine example, CNBC, and it’s 49% owner, GE, which also happens to own shadow banking system titan GE Capital, etc.).
Mainstream Media that isn’t directly owned by the financial sector must deal with other challenges because they either have dependence on financial sector advertising directly, or are simply aligned with general corporate interests. The average man on the street has no hope of learning the truth without spending considerable time seeking out alternative resources like SilverDoctors.com and the observations of financial market professionals like myself — people that have exited the belly of the beast in disgust and are willing to describe the machinations of that beast’s incessant, criminal appetite because our paychecks are not beholden to the beast.
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Apparently, cartel actions have become so obvious that an increasing number of money managers feel compelled to speak up. The latest: well known money manager and former candidate for US Senate Peter Schiff. During a CNBC interview, Mr. Schiff has finally declared that gold might be manipulated in service of the Fed:
“I think goldman wants to knock the price down either because they want to buy more cheaper for themselves, or maybe they’re trying to help out their friends out at the Federal Reserve. They have a pretty cozy relationship. The Federal Reserve does not want the price of gold to go up because it invalidates everything that they’re doing. So, they might be manipulating the market for that reason.” – Peter Schiff
It took you long enough, but Mr. Schiff we welcome you to “planet reality.” Or, as Bill Murphy would say, “Welcome to planet GATA” (versus “planet Wall Street”).
For well over a decade, Bill Murphy, Chris Powell and GATA have tirelessly collected documentation proving the existence of the gold cartel, detailing how and why they act. Detractors usually focus on Bill Murphy’s tendency towards exasperation in the face of the mainstream media’s general refusal to investigate this ongoing activity. In truth, Bill Murphy has not been tilting at windmills. The cartel is real and Murphy’s righteous indignation — combined with a huge dose of Irish tenacity — has served him well as GATA’s leader.
Bill Murphy is an American hero in the most classic sense of the term. GATA is taking up the fight of the underdog, the average citizen unaware how distortions in the capital markets injure the economy and the lives of millions. Consequences of the cartel’s actions transcend manipulation of precious metals markets. Consider the Fed and US Treasury’s management of the bond market. Few media professionals find it odd that management of the bond market and the price of money (interest rates) is open public policy and ok to talk about. But talk about the management of the price of gold, which indirectly has a massive impact on interest rates and confidence required to support the exchange value of the US dollar, is strictly verboten.
Truth be told, in order for the Fed’s public policy of control of the bond market to work, fund managers, traders and other market participants MUST know about it. That’s the jawboning propaganda mechanics behind so-called “financial repression.” The whole point is to make market actors think, “don’t fight the Fed” while pretending interest rates can stay low, reflating the housing market while banks take part of the liquidity they receive from the Fed in exchange for the crap mortgage back securities banks hold. The so-called liquidity then flows into the stock market and beyond. Neat trick. All the while, the common man and generations after him get stuck with the tax bill to pay off all that added debt while banksters socialize their losses.
With scams this large, is it any wonder there’s a propaganda war against truth telling organizations like GATA?
Yes, there have been times when Bill Murphy makes market calls that fail. All rational analysts, traders and investors understand being wrong from time to time is normal. Yes, there have been times when Bill Murphy’s righteous indignation has led him to call a given day’s gold trading action cartel-driven when it probably wasn’t (although, the past year has witnessed an unusually high level of cartel activity). So what? When it comes to the big picture, GATA’s amassed documentation speaks for itself. GATA, Chris Powell — and certainly — Bill Murphy have integrity and guts. Rather than criticizing them, market participants should be opening their checkbooks and writing a tax deductible donation to GATA. Market participants should also get off their duff and actually read all the documentation freely available at GATA.org.
Perhaps Peter Schiff has finally done just that. Who’s next? Pretend cartel denier but otherwise brilliant James Grant of Grants Interest Rate Observer? Heck, it’s my opinion that even the otherwise non-dogmatic Rick Rule hasn’t even bothered to take a week, roll-up his sleeves, and carefully examine the GATA document treasure trove. How could I make such a seemingly preposterous statement about Eric Sprott’s right hand man? For starters, Rule makes no secret he’s a bit skeptical about at least the level of manipulation in the precious metals market. He describes himself as skeptical about the ability for conspiracies and agendas to be able to be hidden for extended periods of time. During a recent radio interview with Al Korelin, Rule noted how no matter what manipulation efforts he saw during his days in the Vancouver investment community, truth eventually came to light.
Mr. Rule, the world of Vancouver resource finance amounts to a backwater when compared to the massive geostrategic imperatives necessary to maintain the dollar as the world reserve currency — with all the benefits that accrue to the nation burdened with such an exorbitant privilege.
Don’t get me wrong. I deeply respect Rick Rule. His intellect is at genius level, and his abilities as an investor are legendary. I’m in my mid 40s. When I grow up I hope to have at least half his wisdom and mastery over as many fields as Mr. Rule. Nevertheless, someone has got to call him out because resting on assumptions and dogmatic logic about what markets should and should not do just isn’t good enough for someone as good as Mr. Rule. Mr. Rule didn’t make billions as a slave to normalcy bias, and it’s time he joins GATA’s apparent latest (albeit not credited) convert, Peter Schiff.
An ancient Chinese proverb comes to mind: “The beginning of wisdom is to call things by their proper names.”
Thank you, Bill Murphy, Chris Powell and all the people that have helped make GATA what it is today. There will come a day when you are seen for what you are: true American heros.
Independent buy-side analyst
PS: Chris Powell runs a free email news alert service at GATA. To sign-up, click here. Bill Murphy’s subscription newsletter, MIDAS, offers a 2 week trial. Sign-up by clicking here. We highly recommend checking both out.
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See you all next week. Enjoy the weekend and a well deserved break!