Tuesday, January 26, 2010

It's Vigilante Time

Gold put in a rather stunning performance today in the face of numerous roadblocks: options expiration on the February CRIMEX Gold contract, a well bid US Dollar, and a "successful" US Treasury auction. Gold closed on the CRIMEX this afternoon up $14 off it's low of the day, a rather significant reversal.

Silver on the other hand was once again beaten with an ugly stick. It never ceases to amaze me the ease with which the CRIMEX crooks can have their way with Silver. And these exchanges are used for "price discovery"? For how much longer can this ever so obvious crime be allowed to continue unchecked by our watchful [wink-wink] regulators at the CFTC?

Perhaps the market itself will put an end to these villains cocky behaviour with a little vigilante regulation of it's own. Perhaps a building supply deficit will stop this crime in it's tracks. The Day Of Reckoning may be fast approaching.

From Harvey Organ's - The Daily Gold
Wednesday night is the last day for options on a gold contract. All standing option holders will receive a February contract,

Generally, the majority of option holders that stand , take delivery. Also option holders are generally more sophisticated than regular holders of contracts.

On Wednesday night, the Feb contract goes off the board. However you can still trade until Thursday night.

On Friday morning everyone gets to see everyone else hand. The long holders must deposit the full dollars of gold purchase.

If they have bought 1 futures contract say at 1100.00 usa then they would need to have on deposit at their brokers 1100 usa x 100 oz (one standard contract)
or 110,000 usa.

The seller receives notice of the buyers intentions. Thus this day is referred to as first day notice.

Deliveries commence on the first day of the month. A few years ago 95% of the commodity contracts like silver and gold were hit on the first of the month. The reason is simple. Why would the seller continue to pay storage and insurance fees for the entire month if he could unload the contract at the first of the month?

Lately however, most of the contracts are stopped at the end of the month due to scarcity of metals.

Once the seller obtains the sufficient quantity of metal to satisfy a buyer, the broker is notified by fax and the amount of purchase is subtracted from the buyers commodity

The buyer gets a proper delivery bar with a weight to 3 decimal places and a bar number and the locale where the bar originated.The actual delivery can take a few days or it can take months. However, a delivery slip must be issued by the last day of the month which signifies location of a bar or bars of gold to be delivered!

I hope this will give you a simplistic view of the ongoings in the comex gold. The open interest for the front month February remains very high with 171788 standing. As I pointed out to you, Thursday is the last day that one can trade a February contract.

The comex supposedly has 1.8 million oz of gold "ready for sale". This is what is referred to as dealer inventory (or registered inventory). This represents 18,000 contracts.

If we see on Friday morning, say 30,000 contracts standing, the comex will be desparately trying to obtain the necessary gold to cover these contracts.

I have recently suggested that a determined group of Precious Metal buyers may be holding their contracts tight fisted awaiting the opportunity to pounce of the CRIMEX goons with a little raid of their own. Lying in wait to take delivery when they know the CRIMEX goons have no chance to wiggle free of a delivery default. It is no secret that the CRIMEX warehouses do not possess the Gold and Silver to back the open interest in these metals as they went to expiration this week. Now word comes that the LBMA warehouse is basically empty, the Gold is all gone:

From Jim Willie, CB via The Midas Report (http://www.lemetropolecafe.com/)

During the trend decline or the counter rally for the USDollar, a constant event persists. The London metal inventory is being totally depleted of gold bullion. Fast approaching is the event of GAME OVER for London, a condition that has already reached critical level according to a key reliable source of information with London connections and direct experience there. The paper gold market and the physical gold bullion market have finally separated in a practical manner, meaning actual gold has almost no role anymore in London paper contract settlement.

The absence of gold in London requires extraordinary tactics to settle contracts and to obtain gold bullion. Intimidation and bribes accompany gold delivery demands. They have almost zero gold, its supply having been drained in high volumes since early December, a process currently in acceleration. The opportunity to convert fiat money into precious metal weight is closing, at least at prices considered reasonable. The London gold banker said, "There is going on a lot more than meets the eye. The physical system is actually consolidating bigtime and is organizing itself with lightning speed, totally hidden from pretty much anyone, even the so-called insiders. The paper precious metal market and the physical precious metal market have defacto disconnected. The paper and physical gold markets currently operate in parallel universes. The outflow of physical metal from bank vaults is happening at a mind bending pace."

The true gold price might very soon become unknown, an extremely positive development. Gold market disruption leads to chaos, followed by much greater clarity. Like a bankruptcy process, the event is sudden but the cleanup takes weeks as dust settles. Right now, we see strong attempts using naked gold short contracts at the London metals exchange (LBMA) and the COMEX in the United States to drive down the gold price. It is all illegal and permitted. Margin calls have hit, forcing further selling of paper contracts. Before long, no gold metal will be available until clarity and prosecutions begin.

How Long Before the Demand for Physical Gold Blows Through the Paper Supply?
by Dave in Denver, The Golden Truth
For at least the last 15 years, the price of gold has been set by the highly manipulated paper markets in New York and London. As physical supply becomes scarce at current price levels, we are transitioning into a market in which the real price is defined by the price level at which a large seller of physical is willing to sell to a large buyer. India's 200 ton purchase from the IMF established the low end of this range at $1049. As of now, the IMF is the only entity that visibly has a big chunk of gold for sale. And we know both India and China have expressed interest in acquiring all of the IMF gold, not just the announced 403 tons for sale. Assuming the IMF - in the spirit of maximizing sales proceeds - isn't waiting to see if the price goes lower before it sells more, it's safe to assume the rest of the IMF gold for sale won't change hands until the price of gold is at least as high as the recent all-time high of $1220, otherwise it would have sold the rest around that level to either China or India. If the information from Jim Willie's insider source in London is accurate, it is reasonable to assume that we will see a much higher trading range for the price of gold in the near future, as the market will have to adjust to a higher price level as a mechanism of price discovery in order to "discover" the price at which a large seller is willing to sell.

Could the rumblings of a Gold default in either or both the LBMA and CRIMEX be fuelling Gold's stubborn refusal to go down just because the CRIMEX says to? Are these default rumours behind the strength of the determined buyers that have stifled the CRIMEX goons ceaseless efforts to shake gold from the tight fisted money mangers? The clock is ticking, time will tell. Action come the end of the week could be frightening.

Every day now there are ridiculous headlines and stories that follow them proclaiming a recovery in the US economy is underway. Today we came across this piece of fiction on Yahoo Finance after the markets closed:

Poised for recovery, economy is lurching forward
A long way to go, but unmistakable signs of life for economy in confidence, housing results

Unmistakable signs of life for economy? These wizards of the written word could polish a turd...I swear.

The "spin" is never ending and changes by the hour. For instance, yesterday we got the December Existing Home Sales report. The first headline and report on this "news" was at 11AM and was decidedly negative:

December Home Sales Plunge Nearly 17 Percent- AP
Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, plunging far deeper than expected after lawmakers gave buyers extended time to use a tax credit.

By 3PM the "tone" of the story changed and was given a decidely more positive slant:

Home sales rose in '09 as prices plunged 12 pct. -AP
Sales of previously occupied homes rose in 2009 for the first time in four years, despite a December slump that was due to a tax credit that led many buyers to complete sales earlier.

From the largest drop in 40 years to the first rise in four years... in just four hours. It's disgusting! And then they blame the fall in December on a tax credit that was "supposed" to expire in November. Geeze, damn those tax credits!

"Expect Gold To Gain More Than 30% This Year"
By John Embry

This brief essay by Mr. Embry is a must read. It is a succinct summation of the past eight weeks of the Gold market and why he believes Gold's recent reaction is nothing to worry about, and everything to embrace. He nails it...

1 comment:

  1. I'm really curious where gold will be in a few weeks from now when this mess here begins: Of Mortgage Brokers, ARMs, Attrition and Marathons