It looks like the CME has “changed” their open interest numbers since posted this morning. I saw the numbers with my own eyes this morning which showed an open interest gain of over 10,000 contracts for gold and over 3,500 for silver. If the “new numbers” are correct, there is still more open interest in gold than there was Thursday’s close and only a drop of 2,000 in silver. Still not anywhere near the amounts one would think that was necessary to create the price drops we’ve seen. I know that these numbers were displayed earlier because I have since read commentary similar to mine that had the same figures… I do believe my lying eyes and am not senile yet. I know what I saw and even checked the date to make sure that they were yesterday’s numbers. Who knows, maybe the real numbers were too unbelievable and even a shlep like me saw what happened so they changed them… crazy world we live in!
When there are more buyers than sellers… the “price” goes up, when there are more sellers than buyers… the “price” goes down… right? This is the way it works? Or is supposed to? As you know, we live in a world where nearly everything real has 2 markets, the paper market and the physical market. Originally the paper markets were created so that farmers could “hedge” their crop and outright buyers or speculators could have access to the commodity. This has morphed into a situation where the paper markets have outsized the real physical markets and become more important to “price.” It is a “Wag the Dog” scenario where in gold for example there are at least 100 “paper” ounces for every real ounce (thank you Jeffery Christian for this admission) and the paper markets have “made” the price for years now. We knew all of this before and what has happened since last Wednesday only supports this view and confirms it.
First let’s see what has happened in the paper markets. The open interest in gold went up during Friday’s trading by some 13,000 contracts while silver dropped about 1,000 contracts, yesterday gold open interest increased another 10,000 contracts and silver increased by 3,500. So, while gold and silver’s price was monkey hammered, the amount of contracts open actually increased? How can this be? Weren’t people “selling”, the price went down… more sellers than buyers… right? Well yes, what apparently happened was that there WERE more sellers, the increase in open interest was initiated by “short sellers”. Were the last 2 trading days an event where “longs” finally panicked out and sold, open interest would have gone down, it did not and in gold’s case the open interest actually rose substantially. The obvious fingerprints of what GATA has been saying for 15 years now are all over this move, it was a fake and “made” to happen!
Now let’s look at the physical side of the market. On Friday, Miles Franklin did 116 orders, there was only 1 buyback. Yesterday we did 90 orders with only 3 being sells. So what is this “buy to sell” ratio, at least 30 to 1 buys over sells? Does this sound like a panicked market where everyone wants out of the water? We also can look at what other dealers are doing by going online to look at pricing and availability. Junk silver for all intents and purposes is gone, the only thing left are the scraps that your local dealer has to sell as “bags” are not available and were last trading at $5 (20%) over spot on Friday morning. Other silver product has become spotty as to availability and premiums rose dramatically over the last week. Low price in the physical market IS doing what it is supposed to do; it is bringing out demand and drying up supply. But, if real demand has been exploding and supply is tight, then how did the price get here in the first place? It is obvious that the futures market “wagged this dog” BIG time!
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Gold Market Update
Clive Maund
originally published April 14th, 2013
A number of subscribers have written in to me asking how I knew to load up with Puts on Thursday ahead of Friday’s massive smash in the gold market. The answer to that is that when you have been watching markets and price movements for as long as I have and understand how Big Money thinks and operates, you develop a “sixth sense” for the kind of stunts they can pull.
We have pointed out repeatedly in the recent past the immense importance of the strong and clearly defined support levels for gold and silver at about $1500 - $1530 and $26 respectively, which have generated several significant reversals over the past 18 months or so. We also made clear that if we know how important these support levels are (were) then for sure Big Money does, and that they would plot to crash these support levels and trigger waves of stops if it was in their interests to do so.
Now that they have done so, let’s consider why – what is their motive? There has been a big drawdown in physical gold warehouse stocks at the Comex this year, and a really dramatic drawdown at the J P Morgan Chase depository. If, as a result of this, stocks are too low to meet deliveries, gold would have to be bought in the open market, driving prices sharply higher, and they for sure don’t want that now that their stocks are so low. So the game is to smash the gold price so that they can replenish their stocks on the cheap – and they are not short of friends in high places who can assist them in this endeavor.
The first “smoke signal” came over a week ago with some members of the Fed purported making rumbling noises about reining in QE, as reported in the latest Minutes. That served to get the gold market nervous. Then there were widely circulated reports last week about the “tiny island”, Cyprus, having to sell 400 million euros worth of gold on to the market – not bad for a “tiny island” - which, although unfounded, depressed and weakened gold further. By the way Cyprus is not tiny, it is BIG, and I invite any more ignorant or sloppy commentators referring to Cyprus as a “tiny island” to come with me to the island, where I will gladly drop you off at a remote location with a decent pair of walking boots, and then relax in the capital and see how long it takes you to join me on foot, no buses or hitchhiking permitted.
Finally, just by coincidence you understand, after waves of selling in New York during the day on Friday had softened gold up nicely and brought it down close to its critical support, the London physical market locked up on Friday afternoon. Some investors entertain the romantic notion that this physical market is like an old fashioned cattle auction, with a guy in a tweed jacket and a hat spouting 200 words a minute of auctioneers jargon. It is not. It is computerized and the computers froze on Friday shutting out would be sellers who then went into blind panic, entering the futures market to hedge or short. This tipped the market into a vertical plunge that completed the job of crashing the key support level.
So what now? We can expect a wave a margin calls to go out over the weekend that could crash the market further next week, possibly causing the vertical plunge that began on Friday to continue, perhaps for several days. The ball may be kicked further downhill by Big Money’s media pals having a field day over the weekend proclaiming the death of the gold bullmarket. Once all the stops in the $1500 area and beneath have been triggered, it will take a lot of pressure off Big Money and the Comex to meet deliveries – and it will also enable them to replenish inventories at knockdown prices. This is why we were in favor of Puts rather than being stopped out, and thus becoming victims of the trap that they had set.
So, is the gold bullmarket over? Only if the Fed and other Central Banks choke off QE, and there is no sign of that happening, nor is it logical for them to do so as it would trigger a devastating deflationary implosion. The bull case for gold remains intact, as a friend in California put it this weekend – “Did gold fall off the cliff because the dollar index ripped higher? NO! Did Uncle Ben Bernanke say they were stopping the $85 billion + QE immediately? NO! Has physical gold become more abundant than any time in the recent past? NO! Are the world's central banks stopping their counterfeiting operations by devaluing their currency by stopping the printing presses? NO! It's quite the opposite, Japan, U.S., and the EU are increasing the money supply.
Things to look at that are happening. Are Russia, China, and India amongst other nations still buying huge amounts of gold? YES! Is QE going to continue? YES! They cannot stop it now, because they'll have a HUGE deflationary episodes which those in power do not want. It would be what is needed to reset the scales of the financial system and debts around the globe, but would mean huge financial losses to the powers that be. Silver isn't becoming more abundant, it is rarer than gold, so why is it around $26 bucks per ounce?
As we look at the charts on the precious metals, just remember, not all is what it seems. In chess you disguise your true intentions by moving the pieces around the board, setting them up for the attack; better deception skills you have, the more likely you'll win the game. Think 2-3 moves ahead of your opponent, and you'll always come out a winner.”
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Maguire - LBMA Default Triggered Gold & Silver Takedown
With massive selling once again in the gold and silver markets, today whistleblower Andrew Maguire told King World News the reason for the recent takedown in gold and silver was because of an imminent LBMA default. Here is what Maguire had to say in part II of this remarkable and exclusive interview.
Maguire: “Gold and silver only have this type of selling when there are extreme shortages of the physical metal. I am totally aware that before this takedown occurred there was an imminent LBMA default.
We had already seen COMEX inventories plunging. In 90 days COMEX inventories saw an incredible decline. So immediately available physical gold was disappearing. People around the world don’t understand what has been happening since Cyprus....
“Entities went to the LBMA and said, ‘We don’t trust anybody anymore. We want our physical metal.’ They were told they would be cash settled instead by a bullion bank. The Western governments have been trying to plug holes, and the reason for it has to do with the default that was taking place at the LBMA.
This is why this smash has been orchestrated because of the run that has been taking place on physical metal. So Western governments had to do this because of an imminent run on the unallocated LBMA system. The LBMA bullion banks had become so mismatched at one point on their trading positions vs real world demand that they had to orchestrate this smash.
This orchestrated smash in gold and silver was nothing short of a bailout for the bullion banks. So there is a run on physical gold that is taking place and the Ponzi scheme the West is running is being threatened because of it.”
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This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks
It likely signals a big downdraft in the stock market, too
by Chris Martenson
Monday, April 15, 2013, 3:55 PM
A while back, I noted to Adam that the gold slams that were first detected back in January were among the weakest I'd ever seen. Back then I was seeing the usual pattern of late-night, thin-market futures dumping, which I had seen before in 2008 and 2011, two other periods when precious metals were slammed hard.
The process is simple enough to understand; if you want to move the price down for any asset, your best results will happen in a thin market when there's not a lot of participation so that whatever volume you supply has a chance of wiping out whatever bids are sitting on the books. It is in those dark hours that the market-makers just dump, preferably as fast as possible.
This is exactly what I saw repeatedly leading up to Friday's epic dump-fest. The mainstream media (MSM), for its part, fully supports these practices by failing to even note them. The CFTC has never once commented on the practice, and we all know that central banks support a well-contained precious metals (PM) price because they are actively trying to build confidence in their fiat money and rising PM prices serve to reduce confidence.
Here's a perfect example of the MSM in action, courtesy of the Financial Times:
“There is no other way to put gold’s recent sell-off: nasty,” said Joni Teves, precious metals strategist at UBS in London, adding that gold would have to work to “rebuild trust” among investors.
Tom Kendall, precious metals analyst at Credit Suisse said “Once again gold investors are being reminded that the metal is not a very effective hedge against broad-based risk-off moves in the commodity markets.”
There are two things to note in these snippets. The first is that the main ideas being promoted about gold are that it is no longer to be trusted and that somehow the recent move is a result of "risk off" decisions – meaning, conversely, that there is increased trust in the larger financial markets that 'investors' are rotating towards. Note that these ideas are exactly the sort of messages that central bankers quite desperately want to have conveyed.
The second observation is even more interesting, namely that the only people quoted work directly for the largest bullion banks in the world. These are the very same outfits that stood to gain enormously if precious metals dropped in price. Of course they are thrilled with the recent sell off. They made billions.
In February, Credit Suisse 'predicted' that the gold market had peaked, SocGen said the end of the gold era was upon us, and recently Goldman Sachs told everyone to short the metal.
While that's somewhat interesting, you should first know that the largest bullion banks had amassed huge short positions in precious metals by January.
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In this MUST LISTEN interview, the Golden Jackass Jim Willie states that in the wake of the impending LBMA default that Andrew Maguire warned was in progress Monday, physical gold orders in size are being filled at the $2,000/oz price level, while the COMEX futures prices crashes and burns!
The Price Smash – Who, What, How and Why?