PM Daily Market Commentary - 6/9/2015

davefairtex
By davefairtex on Wed, Jun 10, 2015 - 1:09am

Gold rose +2.50 to 1177.70 on light volume while silver fell -0.02 to 15.91 on moderately heavy volume.  Gold and silver both tried rallying, but the rally failed, gold printing an inverted hammer while silver did even worse, printing a gravestone doji.  Dollar was off slightly today and that should have been at least somewhat supportive, so currency can't be blamed for PM weakness today: there just aren't enough buyers at the moment.

I never like seeing the inverted hammer candle when gold by all rights should be rallying.  After a three week correction, with gold in the 1100s, buyers should start appearing now.  The fact that they aren't suggests we probably get another leg down in the near future, with a test of the 1140 lows.  This kind of weak performance just encourages the shorts to jump in to see if they can make some quick money.

Miners had a bad day, with GDX off -1.26% on light volume, while GDXJ fell -0.98% on light volume as well.  After a brief rally in the morning, once gold's rally largely failed, miners gently sold off all day long.

Part of the problem in the senior miners might have come from Newmont, one of the larger gold mining companies, which bought a mine today from another large miner and funded the purchase by selling more shares in a secondary offering.  The market punished NEM for the purchase, which sold off hard, dropping -5.44% on very heavy volume.  Prior to this sale, NEM's chart looked pretty good, having executed a bullish golden cross several months back.  NEM is actually profitable even with gold hovering around $1200, which tells me the management of the company is doing something right.

When a secondary offering happens, the underwriting firm (Citibank, in this case) agrees to buy the shares and hand the money to the company, selling some of the new shares to its clients and retaining some for sale in the open market.  Typically the underwriter buys the shares at a discount to market price, plus they get a fee for doing the deal.

The problematic part is all the new shares in the hands of the underwriter.  Traders know there will be pressure for Citi to sell these shares in the months to come, which will tend to make it more difficult for the stock to rise in the near future.  Instant reaction: sell!  Well not always - if the stock is in a buying frenzy, the new supply will be absorbed without much of a fuss, but as we know the mining shares haven't seen a buying frenzy for 5 years.

The buck fell -0.15 [-0.16%], a relative day of rest.  Buck remains in a medium term downtrend, below its 50 MA.

After breaking below 80, the Yen has managed to climb back up above the breakdown point which is a positive sign for JPY, especially compared to the massive selling that might have happened on the breakdown.

SPX (US equities) made new lows in the morning, rallied in the afternoon, only to fall back to flat by the close.  The indecision resulted in a doji candle print, which might mark a reversal.  SPX closed up +0.87 to 2080.15.   VIX dropped -0.82 to 14.47.  The drop in the VIX suggests that the low for SPX is in.  The low for the day was 4 points above the 2068 previous low, which is a positive sign for SPX.

Bond ETF TLT just can't catch a break - it sold off again today, making new lows and closing down -0.79%.  Nobody wants long bonds right now.  TLT is off 18% from the high marked on the day of Syriza's election victory in Greece.  That's why I say a lot of this is Greek flight-to-safety related; price action lines up with important dates in the whole Greek drama.

The CRB (commodity index) rocketed higher today, up +1.52%, shooting back above its 50 MA.  This bullish move suggests commodities have chosen a direction - up.

WTIC (west texas crude) led commodities higher, up a big +2.34 [+4.02%] closing at 60.60.  Brent also staged a big rally, up +2.37 to 65.08 and just barely breaking above the downtrend line.  Trading was quite bullish for most of the day.  After market close in NY, the American Petroleum Institute released numbers that said oil in storage dropped -6.7 million barrels, instead of the expected -1.6 million barrel drop.  (The official government numbers are released by the EIA tomorrow at 10:30).  The API report caused oil to spike up even more.

While gold and silver are often correlated with oil and the other commodities, at this moment commodities are strengthening while gold and silver remain quite weak.  What's going on?  The $GOLD:$CRB chart fits the whole "Greek default trade" profile.  Gold/CRB looks roughly similar to the TLT chart, spiking in late January with Syriza's election, and then underperforming the other commodities as the fear of an immediate Syriza-led revolution against the Troika slowly bled off.

Bottom line: no catalyst for gold and silver right now.  We have to wait for those buyers to show up.  When they do, we'll be able to see it in the charts - rallies won't fail the way they are failing now.  However until that happens, momentum remains to the downside.

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9 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
gold buyers

A few minutes after midnight EDT, buyers appeared for gold and silver, and have bid gold steadily higher as time passed.  At the same time, the dollar started selling off.  I'm not sure what caused it all, but gold is now up +10.60 and silver up +0.20, and the buck is off about -0.40.

If we close at these levels, gold and silver will both put in a swing low.

Also, oil has continued moving up: +1.29 to 61.44.

Jim H's picture
Jim H
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Joined: Jun 8 2009
Posts: 2379
naked short contract sellers.....

Dave,  It is no longer clear that price is going up because there are (more) buyers, or rather because the bullion banks have decided to step aside and stop creating contracts into any waves of buying.  The bullion banks can (and often do) overwhelm any waves of buying with equal or larger waves of (naked short) contract selling, thus muting any price signal that might be expected from Gold positive events.

My picture of how the market works is this:  There are (almost) always buyers, sometimes more, and sometimes less.  The BB's can (almost) always induce the price rise by simply NOT creating new contracts... hence buyers must bid up the price in order to induce existing contract holders to sell.  Otherwise, when the BB's want price to go down, they simply overwhelm whatever the native buying pressure is with new contracts.  

The slow motion end of the paper markets, and the inevitable re-pricing of Gold is coming.. I would invite anyone interested in doing their own due diligence regarding this trend to read the following articles;

  http://seekingalpha.com/article/3247676-did-comex-just-receive-a-physica...

http://jessescrossroadscafe.blogspot.com/2015/06/the-global-monetary-phe...

Finally, I would encourage anyone who wants to do their own due diligence on the nature of the operation of the Gold and Silver markets to pay Craig Hemke $10/month to get access to his daily writings.  Watching how these markets operate on a daily, weekly, monthly basis is critical if you really want to understand the criminal nature of the enterprise that is Silver and Gold (and Pt and Pd) price discovery.  Don't believe what I tell you, or what Dave tells you about these markets... figure it out yourself.  Time is running short.  

Here is a sample from Monday,

    

Another Criminal Bank Participation Report

I like that title. Why call this the BPR when you can, instead, be more accurate and call it the CBPR...The Criminal Bank Participation Report.

Before we begin, the usual background:

  • The CFTC's Bank Participation Report is issued monthly from a survey taken at the Comex close on the first Tuesday of every month. The report summarizes the combined positions of the four largest U.S. banks (primarily JPM, MorganStanley, Citi, Goldman but occasionally others) and the twenty largest non-U.S. banks (Scotia, HSBC, DeutscheBank, UBS, Barclays and others).
  • These reports might be utter nonsense and complete falsifications, designed to mislead you and get you leaning the wrong way. Just last year, JPMorgan was fined by the CFTC for "repeatedly submitting inaccurate reports relating to the required reporting of positions". See here: http://www.cftc.gov/PressRoom/PressReleases/pr6968-14

I will leave it up to you, dear reader, to assign or withhold legitimacy to/from the data. My job is simply to report to you on what the data shows...and, once again, it's sickening.

...the Bullion Bank fingerprints are now so obvious that it seems they hardly care if anyone notices anymore. The Banks apply heavy, naked shorts to any rally and they then use the price weakness that inevitably follows their capping to cover their tracks. And what has happened over the past four weeks? Just more of the same. Another "wash cycle" and full price suppression move by The Bullion Banks. Why are they so desperate to cap at these levels? Please go back and review the first link above entitled "How They Did It" for your explanation. For today, let's just concentrate on this latest travesty and blatant price suppression/manipulation.

Recall, first, the price action over the past month. In case you've forgotten, below is a visual aid:

As you can see, for the CBPR period, price was almost completely unchanged. However, during the month, price actually spiked by nearly $40 or 3.5% to a high of $1232.80 on May 18. After being effectively capped near the 200-day moving average and $1225, it has been nearly straight down since.

We know from the Commitment of Traders Report, published by the criminally-complicit CFTC on May 22, that the "Gold Commercials" were active in capping that $40 rally. The report, linked here (http://news.goldseek.com/COT/1432323507.php) shows these "commercials" added a record 50,754 naked short contracts in just one week (between May 12 and May 19) in their effort to cap and contain price below $1225. That's the paper equivalent of over 5MM ounces of gold or about 158 metric tonnes...more than the total holdings of Thailand and about 5% of total annual global mine supply.

Until last Friday, we didn't know how much of this criminal manipulation could be laid at the feet of The Banks trading desks and how much could be assigned instead to their hedge funds and offshore shell accounts. Well, here you go. Back on May 5, and again with price at $1194, here's how the CBPR looked:

5/5/15                                 GROSS LONG               GROSS SHORT                  TOTAL NET

U.S. Banks                                 6,966                                   29,851                                   -22,885

non-U.S. Banks                        29,748                                 63,682                                   -33,934

TOTAL                                                                                                                                   -56,819

And now, one month later, with price having round-tripped $40 and closing back at $1194, here's your current CBPR:

6/2/15                                  GROSS LONG               GROSS SHORT                  TOTAL NET

U.S. Banks                                  8,246                                   45,090                                  -36,844

non-U.S. Banks                         30,194                                  78,300                                  -48,106

TOTAL                                                                                                                                    -84,950

So, there you have it. While price was rallying, The Bullion Banks were desperately issuing and selling naked paper gold contracts in their attempts to cap and contain price. Even after undoubtedly using the price weakness on the way back down to cover some of these ill begotten contracts, The Banks still show an increase in their NET SHORT position of over 28,000 contracts...ALL WHILE PRICE RALLIED, WAS CAPPED, AND THEn CLOSED UNCHANGED.

WHAT FURTHER PROOF DO YOU NEED TO SEE THE BANKS' NEFARIOUS INTENT?

Of course, the standard Cartel Shills and Apologists will argue that these altruistic Banks are just performing a public service. They're "making an orderly market" and simply "providing needed services" for miners wishing to "hedge and forward sell future production".

At $1200, which miners suddenly decided to sell forward 160 metric tonnes of future production at $1200/ounce? And don't give me this garbage about "making a market". No other "markets" in the world operate this way...where extra paper supply is created from thin air whenever paper demand materializes.

But that's what we have to deal with as long as paper gold and silver trading is allowed to set "price". The Criminal Bullion Banks, aided by the criminally-complicit CFTC and supported by the central banks and BIS, will continue to actively and severely manage, manipulate and suppress precious metal prices until the simply no longer can. When and how this moment arrives remains a mystery. Perhaps a renewed financial crisis. Maybe the Chinese announce a new gold-backed trading system. Maybe someday, the leveraged and rehypothecated London system simply collapses.

I don't know what it will take to finally crush and destroy this current, fraudulent system. I just know that the day is coming...and not a moment too soon.

TF

www.tfmetalsreport.com/freetrial

Finally, please do realize, although I don't tend to beat on it too much anymore, that the truth about how the banks manipulate PM prices is widely recognized outside of the Davefairtex corner of PP.com.  There are quite a number of ex-Wall street folks... not fringe bloggers but folks who cut their teeth INSIDE the machine, who are now writing about this blatant manipulation.  They include;

Dave Kranzler

http://investmentresearchdynamics.com/

Bill Holter

Now writing with Jim Sinclair;   http://www.jsmineset.com/

Andy Hoffman

http://blog.milesfranklin.com/

Ed Steer

http://www.edsteergoldandsilver.com/sample/

Rob Kirby

http://www.kirbyanalytics.com/

A must listen IMO - more detail than I have ever heard him explain before on how interest rate swaps are used to drive bond buying (more tail wagging dog stuff):   http://sgtreport.com/2015/06/priceless-precious-metal-rob-kirby/

There are more names.. but you get the picture  : )

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
charts of bank participation

JimH-

Once again your comments forced me to do a lot of work.  This time, I had to dredge around in the internet archives (http://www.archive.org, a.k.a "The Wayback Machine") to find old copies of the CFTC's Bank Participation Reports dating back to 2008.  CFTC only keeps the last 2.5 years, for some unknown reason.  CFTC also enjoys changing formats, "just because."

So, what did I find?

gold-nonbank-shorts = COT Commercial Shorts - BPR US & NonUS Shorts

gold-bank-shorts = BPR US & NonUS Shorts

gold-bank-longs = BPR US & NonUS Longs

Chart tells me the bank net short position actually declined during the 2009-2011 bull move.  And it wasn't until late 2012 when the banks really decided to load up short.  Then they covered all the way down, and went long right at the lows.  After the bounce they sold their longs, and re-established their short positions back up to slightly below the 2009-2001 period.

If the evil banks were trying to keep a lid on gold, why on earth did they go long after the crash?   Why did they cover short?  After all, the short-covering operation actually helped to stop the decline, as did their going long?

And if they were trying to keep a lid on gold during the great bull move, how come their short position didn't steadily increase during that time?  Instead, their net short position actually declined during the bull move.

And of course, during a downtrend (we are in a downtrend, after all), it makes sense to keep shorting the rallies, until the downtrend ends.  That's what any trading firm would do.  But if they were "unfairly" capping the price of gold, they'd need to continue adding to their short positions, in order to "soak up" all those longs that wanted to buy at such low low prices.

Any charts/calculations you'd like me to perform with my new data?

I can send you the chart, you can download it and mark it up, post it, and then complain about how wrong I am in my interpretation.  :-)

If you have a mac, download the "skitch" app.  Its free.

If any of your Big Gold Names have provided you a historical chart that shows the BPR data in context, perhaps you could post that too.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
You are looking at weekly data "fixes" Dave....

You are charting weekly "fix" data... by only reporting weekly, the banks are able to, to some degree, cover their tracks.  The tracks are the things that happen in periods of seconds, or minutes, whereby the banks use their ability to create contracts to sway algos into puking longs... then as the puking occurs, they cover some amount of their tracks by buying back longs and extinguishing shorts.  Of course they make money in the process... why wouldn't you if you had such ability to control short term movements in the market, while simultaneously undertaking the bigger job of manipulating and suppressing the only forms of money that they cannot print. 

Dave, in case you have not noticed;

*  The dollar is continuing to be edged out of more and more global trade by the Yuan

*  Central banks continue to be net buyers of Gold (see Jesse's link above)

*  China and India are buying up all the world's available, newly mined Gold, which means all the Gold being bought by Germans, and Vietnamese, and Americans, and American's living in Thailand, and everybody else, is being puked up by someone, or some entity, somewhere.  How is this deficit being fed?

*  GLD continues to puke Gold... PHYS has puked some Gold... Comex has puked Gold and is at lows... lots of visible puking.  FED custody account puking. 

*  More and more countries, and entities (Texas!) are asking to have their Gold back (repatriating).  Trust is waning.

*  We are in a huge and ever building bubble of paper debt and printed money ponzi stock valuations (How do explain the divergence between Dow Transports and broader Dow if you don't see signs of recession?) - PM's are the anti-bubble at this point... should be invested in on this point alone.    

All this... and the price goes nowhere.  Amazing stuff, really.  The question is why?  I know, I know.. the inflation that guru's predicted has never come... sure.. that's it.  Stocks are inflated, Bonds are inflated.. some Real estate markets are inflated... and I see Gresham's law writ large in the movement of Gold from West to East.  You just need to know where to look (and on what timescale to look).. that's all.   

 

    

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
story doesn't make sense

JimH-

You tell a great story of how the shorts can control the markets completely, rain or shine, regardless of how many buyers there are out there.  If true, why on earth did gold ever rise above $300/oz?  How come central bankers can't use these magical techniques to simply set prices of everything?  Why on earth did they buy all those treasury bonds?  Why not simply use "naked paper buying techniques" in the bond market too?

Your story doesn't hold together, unless the buyers are relatively lackluster, and can be easily spooked out of their positions by aggressive shorts.  That's also what happens in a downtrend.

Why are we in a downtrend?  Well, let's see...

Here's what the Food Price Index looks like: http://www.fao.org/worldfoodsituation/foodpricesindex/en/

The headline reads:

The FAO Food Price Index falls to its lowest value since September 2009

Yeah, so, no inflation.  Western buyers bought into gold as everything else rose in price.  Once everything FELL in price, western buyers sold gold.  Prices have continued falling.

No inflation = no interest in gold, not in the west anyway.

You are right, however.  Shorts are completely in control of this market.  This will happen until buyers have something to motivate them - something other than bottom-fishing, attempting to pick the low.

You choose to focus your analysis on Asia, which is only 1/3 of the global market.  Sure, its going gangbusters over there.  1/3 of the market is doing fantastic.  Its the other 2/3 that sucks.  Guess what?  Gold languishes as a result.  You can say the Central Bankers ate your Gold Rally...but the mechanisms you cite just aren't believeable.  If the magic mechanisms work without regard to supply and demand, why don't the manipulative central bankers use them for literally everything - including the bond market?  Which, just so you know, is practically in free-fall right now.

Gold will rally once the western gold buyers come back, and not before.

Here's one more: FPO total food index vs COMEX gold.  Gosh.  Pretty close correlation.  Not perfect (gold underperformed FPO in 2008) but ... oh never mind.  You'll never look at evidence like this.  Its all manipulation, all the time.  Unless gold goes up, of course.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
I forgot that Gold is a commodity!

Dang.. that's my problem.  That's why I just don't understand. 

From Ed Steer;

As I said last month at this time—along with the odd Wall Street investment house, these are “da boyz’—the sellers of last resort—and you can call them what you like.  Until they decide, or are instructed to stand back, the prices of all four precious metals are going nowhere—supply and demand fundamentals be damned!

As Jim Rickards so correctly put it, the price management scheme is now so obvious, they should be embarrassed about it.

http://www.edsteergoldandsilver.com/sample/

 

Arthur Robey's picture
Arthur Robey
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Joined: Feb 4 2010
Posts: 3936
Betting the Farm.

This is all too clever for me. I just see that there is no change in the downward slope of the ten year curve for either gold or silver.

To my simple mind all value is relative. The charts show the PM/$ ratio. And at the moment it looks as though the market is favouring the dollar. But what Is this dollar thingy? Discussion with the first wife last night concluded that it was a method of distributing the products of Civilization. So why is it so popular? My opinion is that Johnny Citizen is heavily dependent on the dollar for his daily crust.

And until that fact changes gold and silver are industrial metals, their value wholly dependent on supply and demand.

I have bet the farm that I am wrong and that the price of a 3 bedroom house has always been 16 kg. Silver.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
BTW

I agree with you whole heartedly Arthur, you said,

their value wholly dependent on supply and demand.

That is how Gold and Silver should be valued.  Today, they are priced based on supply and demand yes, but of paper futures contracts, not the real metal.  That is my point... to show that, A.  This is, and B.  This is exactly how the manipulation works.  The true value of these metals is hard to discern, but I for one believe it to be much higher than the paper price today.  Time will tell.   

Also BTW, I do recognize my list of names argument as a variant of the MarkBahner gambit, which is why I would never use it as a stand alone point in my arguments meant to validate the reality of suppressive market manipulation.          

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
supply & demand

JimH-

That is how Gold and Silver should be valued.  Today, they are priced based on supply and demand yes, but of paper futures contracts, not the real metal.  That is my point... to show that, A.  This is, and B.  This is exactly how the manipulation works.  The true value of these metals is hard to discern, but I for one believe it to be much higher than the paper price today.  Time will tell.   

You do realize that there is a linkage between the price of gold and silver futures contracts and the actual metal.  If physical demand at these low prices truly did outrun physical supply, then we would see premiums.  We don't see premiums, therefore, there is no actual shortage.

I completely believe in the west-to-east gold movement.  Stuff is going from where it isn't wanted, to where it is wanted.  This is proof positive to me that the west just doesn't care.  It tells me that 1/3 of the world is really interested in buying gold, and the other 2/3 are not.  Can China and India swamp the rest of the world?  Apparently the answer is no.  Once the west is interested once again, price will take off.

As Jim Rickards so correctly put it, the price management scheme is now so obvious, they should be embarrassed about it.

Congratulations!  You've just combined Rickard's proof by assertion with your own appeal to authority.

I will say this.  The one place where the BPR evidence shows that there might have been a successful interventionary-type move is in the latter half of 2012.  Short position rose 100k contracts in 2 months right alongside price.  I could see how feeding that many contracts into the market would have served to stop the upside momentum of the 2012 rally, and the deflation case wasn't a slam dunk at that point.

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