by Andy Hoffman, Miles Franklin:
This weekend couldn’t come soon enough – as since Shinzo Abe proposed a $100 billion “helicopter money” scheme two weeks ago (after $10 trillion of similar QE programs miserably failed), Precious Metals have been under maddening (even for me), unrelenting pressure, every second of every day.
As I wrote yesterday, it can be argued that such action was influenced by the yen/dollar exchange rate’s (government-orchestrated) rise. And yes, such algorithms do exist, to try to influence HFT trading activity. However, such correlations are spurious at best, when any type of longer-term period is considered. To wit, when the Precious Metal bull market commenced in August 1999, gold was $253/oz, silver $5/oz, and the yen/dollar exchange rate 115:1. Today, the yen exchange rate is 106:1, just 8% “stronger” than 1999 – yet gold is $1,322/oz, or 422% higher; and silver $19.60/oz, or 312% higher. And this, despite the Bank of Japan maniacally trying to destroy the Yen, and every major Western Central bank trying to destroy gold and silver.
Regarding the Yen, they’ve already done so in real terms; and shortly, will do so in nominal terms as well. As for Precious Metals, not only have the Cartel failed miserably given gold and silvers’ price rises to this point, but they will soon have a “religious experience” – as the objects they so viciously seek to destroy, wind up destroying them. And by the way, given that the news behind the (modest) yen/dollar rise was that the Japanese government intends to destroy the world’s third largest currency, in “whatever it takes” fashion, being “fearful” of further yen declines becomes that much more ridiculous.
No, the real reason PMs declined – and conversely, stocks have been goosed in historic fashion, amidst the most violently bearish headlines imaginable, and egregiously high valuations – is because the Cartel is in deep trouble, due to the massive COMEX short positions that threaten to blow it to Kingdom Come on any given day. Which was validated again late yesterday (Friday), when it was revealed that the Cartel – er, “commercials” – yet again, dramatically increased their record short silver position as of Tuesday afternoon’s close. Which explains why it so viciously attacked silver Wednesday, and were so terrified by Thursday’s “unexpected” rebound, to nearly the key round number of $20/oz; in turn, causing them to go berserk yesterday to try and push it back down.
To wit, they increased their already record naked short position by another 6,335 contracts, to 106,225 – like gold two weeks back, forcing me to lower the scale of charts I have been keeping for 17 years now. My friends, this is what a Cartel on the ropes looks like; and why, with prices refusing to co-operate with their best laid plans, they are inevitably going to be blown out of the water.
To that end, let’s put the modest price declines in perspective, by considering the news of the past 48 hours alone. Take a gander at the below laundry list of “horrible headlines,” and tell me if you feel “worried” about Precious Metal prices; much less, the yen/dollar exchange rate.
Plunging oil prices, amidst an explosion of global gasoline inventories, in eerily similar seasonal fashion to last year’s June to February plunge from $63/bbl to $26/bbl. Only this time, inventories are a lot higher, demand is falling, and the decline started not from $63, but $51.
Free falling Euro and British Pound exchange rates, with the Pound down 2% yesterday alone, and the Euro plunging to its initial post-BrExit spike low level. Particularly worrisome is the Euro – the world’s second most widely-used currency – which sliced through the key 1.1/dollar level like a hot knife through butter; enroute to the 13-year low of 1.05 it hit a year ago; and eventually, the all-time low of 0.82 from 2001, shortly after it started trading.
Renewed declines in “commodity currencies” the world round, as the “oil PPT”-orchestrated rise in the CRB index appears to have triple-topped – portending much lower, global-economy killing, debt-destroying prices ahead.
Despite criminal “non-GAAP” accounting, early 2Q corporate earnings results have been abysmal.
The U.S. Treasury yield curve flattened to its lowest level since late 2007, just before the “Great Recession” hit the world like a Japan-style tsunami
Nigel Farage, the leader of the UK Independent Party who, more than anyone, was responsible for the BrExit campaign, announced the commencement of a “European referendum tour.” Which frankly, won’t be necessary, as at least a half dozen other nations, including France, Italy, and the Netherlands, are all but guaranteed to follow in the UK’s footsteps.
Another major Islamic terrorist attack (after Friday’s close); this time, in Munich Germany, where an Iranian German killed ten people in a shopping mall.
This week’s upcoming Fed (Wednesday) and Bank of Japan (Friday) meetings, in which the former will again fail to raise rates, and the latter may well announce its helicopter money plans. This, coincident with the August COMEX options expiration. Which, as usual, has caused the Cartel to be particularly vigilant in its price-suppressing operations.
And then there’s that “pink elephant” in the room that everyone is ignoring; i.e., the upcoming, historic election, in which the most anti-establishment candidate in U.S. history, Donald Trump, will likely win. For one, you can bet the uncommonly blatant stock support – and interest rate and Precious Metal price suppression – has as much to do with holding things together in front of the election, given that Hillary Clinton’s chances of winning (and Janet Yellen’s of being re-appointed) will go from slim to none if financial market control is lost. More importantly, the result of either Trump or Clinton being elected will be violently bullish for Precious Metals – which I assure you, will NOT be stopped from taking out their all-time highs; and not just in dollars, but every irreversibly imploding fiat toilet paper.
Not that it really matters who wins, in the big picture. As America’s finances, just like the entire worlds’, are so ugly, the only possible outcome is a massive, long-lasting Depression; and major debt defaults – some nominally, and some via hyperinflation. However, if Clinton wins, the process will probably be slightly longer, as markets – if they don’t “sell the news” and start plunging immediately – will likely see such an outcome, rightly so, as a continuation of the status quo, which has been destroying the monetary system at a slow but steady rate.
Conversely, if Trump wins – which I anticipate – Wall Street will likely be “shocked and awed,” in realizing the uncertainty he brings to the table, amidst historically overvalued markets, will likely cause equity, high-yield bond, and sovereign bond yields to plunge – and conversely, Precious Metals to surge. After all, Trump’s platform includes the repeal of the very trade deals – like NAFTA and the TPP – that have supported corporate earnings growth for two decades. Not to mention, re-instating Glass-Steagall. Which, if enacted, would all but destroy the “TBTF” banks. Plus, negotiating far more cantankerously with China – America’s biggest creditor, and geopolitical rival; and even Western Europe, per his threat to shut out any NATO members that don’t “pay their fair share.” This, whilst promising to dramatically ramp up military and infrastructure spending, as he simultaneously seeks the largest tax cut in generations. LOL, this, from a man who violently attacked the current Administration’s massive deficits!
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