-- Posted Sunday, 5 July 2009 | | Source: GoldSeek.com
By Andy Hoffman
Just a month ago, the Dow Jones Industrial Average was completing a bizarre run from 6,800 to 8,800, following the monster decline from 14,000 less than a year ago. Aside from the obvious “dead cat bounce” phenomenon, the market (helped, of course, by the omnipresent PPT) was aglow with dreams of “green shoots of economic recovery”, a propagandist platform created by a combination of Washington, Wall Street, and scheming media outlets such as CNBC.
There was no real evidence of such a recovery (even in “massaged” government figures), other than that the freefall of economic activity that commenced last autumn had started to slow to a more normalized decline, hardly what I would call reason for excitement. And given the major bankruptcies of General Motors and Chrysler that have occurred since then, as well as continued declines in real estate prices and rising unemployment, I find it laughable that anyone would entertain such a ridiculous idea that the economy is “bottoming.” But that’s another story altogether.
At that point, on roughly June 5th, the stock market peaked following the “bombshell” (facetious) news that May U.S. non-farm payrolls had “only declined by 345,000” compared to the 530,000 estimate. Never mind that the government’s favorite new fudging tool, the employment “Birth/Death model”, added a miraculous 220,000 phantom jobs, its highest level ever by a large margin (except for April, when it added 226,000), preventing the real number from being reported as 565,000. Nor that the ADP employment report, released days earlier, claimed that 473,000 jobs had been lost. All that mattered to the public is that the U.S. government said it was just 345,000, and as we all know, the U.S. government is always truthful.
By the way, yesterday’s reported 467,000 June job loss included a 185,000 phantom job gain from the aforementioned Birth/Death Model, meaning the real number was closer to 652,000. In fact, I’d argue that, if anything, the amount of unreported jobs is going DOWN, not up. Does anyone know someone that just lost their job, and as a result is starting their own business in this environment?
Yeah, right.
In the backdrop of the above stock market scenario, gold had quietly crept up to $980-$990, where over a two-week period in late May/early June it mysteriously was blocked at least a half dozen times in its attempt to yet again reach the important psychological $1,000 level, all at a time when “inflation expectations” were soaring yielding surging interest rates and commodity prices.
However, as you can see below, gold’s rise was finally put to rest the day of the June 5th “better than expected” employment report, with the newspaper headlines gleefully shrilling “gold falls due to strong dollar, end of safe haven trade” because the dollar happened to rise that day. Of course, I challenge anyone to find even one piece of evidence to support the assumption that gold demand was falling (in fact, to the contrary), not to mention that the dollar, even after that day’s rally, was still sitting near its lows after a painful 10% correction (10% is a HUGE MOVE for a major currency).
But that’s how the Gold Cartel game works. Short gold heavily (with unbacked paper contracts) on the way up, so as to mute its rise, and then attack when some market or other (such as the dollar, the Dow, oil, etc.) makes a big move that gold’s fall can be attributed to. Meanwhile, the clueless, and in some cases corrupted press will happily print whatever makes the most sense that day, such as “gold falls on strong dollar”, “gold falls on rising Dow”, or even “gold falls on rising Dow” (counterintuitive, huh?), etc., etc., etc.. As Bill Murphy of GATA writes repeatedly, “price action makes market commentary.”
Dozens of years of history will show that gold actually has little or no (positive or negative) correlation to most of these markets, not to mention that many of gold’s strongest rises have occurred during such seemingly “gold bearish” conditions (such as a strong dollar, a strong Dow, or weak oil), but no matter when it comes to the clueless press and public. Heck, when gold exploded in late 1979/early 1980 from $300 to its then all-time high of $875, guess what the dollar did?
NOTHING, NADA, ZERO! It meandered in a tight one-point range the entire time!
My point, of course, is that few people care to even observe the obvious, let alone try to analyze published data and/or dispute what the “powers that be” say, including the White House, CNBC, or Wall Street analysts, all of whom, by the way, have massive conflicts of interest yielding a burning need for stocks and bonds to do well, and gold to do poorly.
To set the record straight on this latest gold/silver trashing, I have published below a group of charts and tables showing how gold and other markets performed this past month, a period during which gold fell 6% from a high of $990 to $930 today, while silver fell an astounding 17%, from $16.20 to $13.40 today.
First off, below is the chart of gold over that period. Notice the numerous attempts to break toward $1,000 a in early June, all of which were thwarted by Cartel shorting (see below). The big red bar on June 5th represents gold’s waterfall decline following the “gold bearish” unemployment report.
By the way, in a future piece perhaps I’ll prepare a table showing how gold has performed during “U.S. Employment Report” days over the past seven years. Clearly the (un)Employment report is viewed as the most important piece of economic data by the powers that be (due to its high visibility to the public), increasing the incentive of anti-gold organizations to prevent Precious Metals from performing strongly in their wakes.
Without having done the data, I can confidently estimate that, despite a seven-year “gold bullish” trend in U.S. employment, gold declined on 90%-95% of the days that such reports were issued (the first Friday of the month), with the media alternately reporting the contradictory headlines of “gold hammered on strong jobless report” and “gold hammered on weak jobless report.”
I’m not kidding!
Silver, a much more volatile (read: manipulatable) commodity due to its small market size and more dominant “commercial” trading positions on the COMEX futures market, as usual falls much more than gold during such Precious Metals trashings, despite it having a significantly tighter supply/demand balance, dramatically lower global inventories, and the dual utilities of investment/currency and industrial applications.
Here, too, is the chart of the HUI, or unhedged gold and silver stock index, a good representative of how the largest gold and silver mining companies (nearly all producers) performed. Quite amazing how “the Street” somehow believed that this group, given the ragingly positive fundamentals, for at least the 50th time in the past decade, needed to be re-rated downward by nearly 25% in a three-week period!
Now lets’ look at what the other major markets did during a period in which gold and silver prices were trashed, with the most commonly used headline (as always) being “gold declines on rising dollar”.http://stockcharts.com/h-sc/ui
First, the dollar, which according to the press has literally exploded upward during this latest Precious Metal trashing.
But what’s this I see? The dollar has barely budged in the past month, trading in a very tight range between 79.5 and 80.5, essentially the same level as on June 5th, when gold started getting trashed due to the “strong dollar” according to the press
In my view, the value of the “dollar index” is relatively trivial when analyzing gold price fundamentals, as who gives a _____ what the value of paper dollars and paper Euros are versus each other. But that is another story for another time. Supply and demand make markets, and in my view the value of the dollar index is just one of many variables in this equation, and far from the most important.
Anyway, onwards and upwards.
Let’s look next at the Dow Jones Garbage (sorry, Industrial) Average (DJIA), a conglomeration of just 30 of the 10,000 or so public companies in America, chock full of upstanding firms such as AIG, Citibank, and General Motors (whoops, these companies were recently dropped from the DJIA, a major reason why it continues to be a meaningless measure of U.S. economic activity).
Either way, the clueless media loves to get excited when the Dow is rising and gold is falling, as these two markets are clearly the ”key barometers of economic activity” in the eyes of the public, and not coincidentally, the combination that best serves their own interests. In other words, a rising Dow and falling gold is “good”, while a falling Dow and rising gold is “bad.”
Get the picture why it is so important for the Plunge Protection Team (sorry, the President’s Working Group on Capital Markets) and the Gold Cartel to work their magic?
Anyway, lets’ take a look to see if gold fell because a soaring Dow yielded an end to the need for a gold “safe haven”, or if a plummeting Dow led to renewed “deflation fears”, although, if you actually do the analysis, gold has historically had a negative correlation to the Dow.
OK, so here we go.
What’s this, the Dow is at the same price (roughly 8,300) that is was a month ago, and if you take out yesterday’s 223-point drubbing it was squarely at 8,500, right in the middle of that range. Strange how this whole gold trashing began with a “stronger than expected” jobless report, yet yesterday, when the June jobless report was decidedly “weaker than expected”, gold was again hit.
And this goes back to my earlier commentary about how gold, despite being in a bull market for nine years, seems to get smashed 90%-95% of the days that a U.S. employment report is issued, whether it is perceived to be “good” or “bad.”
Next up, treasury yields (chart below). Have they done something outlandish in the past month, something which could legitimately be tied to sharply declining gold/silver prices?
Not that I can see. They initially surged in the first half of the month, which should have been massively bullish for gold and silver as this rise in yields was accompanied (below) by a surge to multi-month highs in all commodities, particularly the most watched commodities, oil and copper, which rose by 14% each!
But no, apparently the combination of rising commodities and inflation expectations was in this case somehow negative for gold and silver, which during this period fell by 6% and, what do you know, 14%, respectively?
So oil and copper during this two week period were revalued upward by 14%, but silver was valued downward by 14%?
Hooray for free markets!
In the second half of the month, Treasury yields and commodities came back down to where they started, yet gold and silver didn’t budge from their lows. Heck, silver even continued to decline as the speculators continued to be flushed out of the CRIMEX, sorry COMEX, by the “Commercial” futures trades (explanation later).
So I pose the question, for the millionth time: What IS good for gold and silver? And it’s not a trick question. Both have been in bull markets for close to a decade, so clearly something is.
Which brings me to my final points, starting with….
AH YES, the trading activity of the “Commercial” traders on the New York COMEX futures (paper) exchange. If only only people realized that THE CHART BELOW IS ALL THAT HAS MATTERED in determining the strange “paper price” movements of gold and silver for the past decade…..alas.
But they most certainly will soon!
As I’ve noted dozens of times before, the “Commercials” are no such thing. Commercials imply companies involved in actually using the product in their business, such as refiners and jewelers, and in silver’s case, end industrial users as well. And if this truly was a category dominated by actual commercial users, their positions would be decidedly long, or at least significantly less short than a decade ago given that EVERY SINGLE hedged gold producer on EARTH has, in documented form, been DEHEDGING for years (that includes Newmont, Barrick, Anglogold, etc.).
However, somehow the “Commercial” category has been expanded to include “bullion banks”, which is a fancy way of saying scheming investment banks that short paper gold contracts to keep the price down and profit from short-term price swings, mostly to the downside.
As you can see from this chart, in the mother of all counterintuitive trades, the “Commercials” have become steadily more SHORT gold and silver throughout the entire bull market. In other words, despite their prices RISING for nearly a decade, the “Commercial” traders have gotten more and more short, particularly in gold where they are now near their shortest levels EVER.
In silver, they are off their lowest short levels ever, but remain significantly more short than when the silver bull market began in 2001, and in fact the “Commercials” have NEVER been net long, particularly puzzling given that silver has been in a net supply/demand deficit for the past 15 years!
Either way, these long-term charts don’t do justice to the short-term changes in “Commercial” trading positions over the past three-years, which not coincidentally is the period in which the government’s “fear” over the ramifications of a falling economy and dollar have reached the forefront of public perception.
All you need to do is look at these two charts since the middle of 2006, and you will see that, uncannily, EVERY TIME gold and silver moved upward, the “Commercial” traders MANIACALLY shorted gold and silver, irrespective of whether the Dow, the dollar, or commodity prices were rising or falling. Heck, when gold hit $1,000 this February, it was during a period whem the dollar was much HIGHER than today, and the Dow and Commodities much LOWER! But don’t let those facts get in the way of a good story, such as “gold declines on strong dollar.”
Once the public, which does dastardly things like study fundamental and technical analysis, is fleeced by yet another unsubstantiated gold/silver crash, this group of “Commercials”, like clockwork, will cover their shorts and go long again, only to be joined at the top once again by the unsuspecting public, just in time for the “Commercials” to re-short the paper market and fleece the public anew.
So, once again, don’t believe for a second the BS media headlines such as “gold falls due to stronger dollar.” Not just because it is a lie, but because if you try to trade gold based on this information, you will surely lose!
Next up, I wanted to take this argument a step further, showing several other examples of just how insane the rigging of gold and silver have gotten, and even more insane, the public lethargy about getting to the bottom of it, and thus understanding better WHY the U.S. economy has collapsed, as well as WHY it will only get worse, by many multiples.
Taking a page from Ted Butler, one of the top silver analysts on earth, I have published two charts below from his brilliant June 29th piece, “The Senate Report”, which can be found for free at www.investmentrarities.com.
In this report, it discusses how a recent government investigation concluded that the Wheat futures market has been manipulated by COMEX (paper) traders.
As you can see by the two charts below, the COMEX has position limits on the amount of paper wheat contracts that can be shorted, amounting to just 0.16% of global wheat production and 1.60% of U.S. wheat production. These limits, by the way, are created so that “paper speculators” cannot cause undue volatility in the prices of the underlying commodities, products that need to be reliably supplied in order for business activity to function normally.
However, in the case of silver, these limits are 4.50% of world production and an astonishing 83.0% (!) of U.S. production, giving the paper traders carte blanche to essentially do whatever they want to the price. No doubt this is why silver is among the most volatile commodities (with most of the volatility due to constant waterfall declines) despite it being in a supply/demand deficit for the past 15 years.
Amazingly, the Commodity Futures Trading Commission (CFTC) is now investigating silver trading for the third time (mainly due to Mr. Butler’s pushing), but clearly nothing will be done, as everyone knows the CFTC is no more “independent” of government influence as the supposedly independent Federal Reserve (LOL), the same Federal Reserve in which its esteemed (facetious) Chairman, Ben Bernanke, said only last week should not be audited (per the terms of Congressman Ron Paul’s proposed bill) because it would cause the ‘destruction of the U.S. economy and dollar.’
Finally, I wanted to note one more incredible “smoking gun” which, in a par for the course analogy, is completely ignored. And that is the fact that COMEX traders have essentially sought delivery of nearly all the Exchange’s gold and silver inventory in the past six months, yet little of it ever seems to be delivered!
Below is a chart from www.meltdown2011.com, a website dedicated, like GATA, to helping expose the manipulation of the gold and silver markets.
Each day, this table listed the delivery notices given by COMEX gold traders aiming to take delivery of physical gold via the December 2008 futures contract, which expired at the end of that month. Just five days into that month, 40.7% of ALL registered COMEX inventory had been claimed, and although I had trouble locating the end-of-month chart, I am reasonably sure the final number was closer to 46%, as was also the case with the December 2008 silver contract. Moreover, additional, large percentages were claimed of the March 2009 contracts traders holding futures contracts.
However, amazingly the COMEX inventories of both gold and silver have barely budged since December, (see below), and to this day no one seems to bring this “pink elephant in the room” up, yet another example of investor/public lethargy and willingness to believe whatever BS is shoveled to them by the powers that be.
And, by the way, for those that feel daunted by the “overhang” of such inventories (if they even exist), 2.6 million ounces of gold totals just $2.4 billion at current prices, a rounding error in the account of numerous hedge funds (and even individuals!), while 64 million ounces of silver totals just $960 million at current market prices, an amount that doesn’t even register as a “pimple on the butt” of global money supplies!
Conclude what you will, but if I can accomplish one thing from this article, it will be to get you to at least start doubting headlines such as “gold falls due to strong dollar”, and at best see them for the propaganda they are, on the same level of BS as “green shoots of economic recovery.”
PROTECT YOURSELF!
-- Posted Sunday, 5 July 2009 | Digg This Article
| Source: GoldSeek.com
