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The Most Important Price in Financial Markets

 -- Published: Thursday, 25 August 2016 | Print  | Disqus 

If you have not guessed it by now it is the price of gold in US dollars. It is nothing short of obscene to read Fed officials, government officials, bankers and overpaid analysts bloviate on how gold is a commodity and no one pays it much attention.

Letís start with a clear example of their disingenuousness with the absolute nonsense that happened yesterday. The gold miner ETF was the most heavily traded ETF or stock in the United States markets yesterday and NOTHING was close. Why is this relevant? Letís start with the fact that at the beginning of this calendar year, Apple had more cash on hand than the large and mid-tier gold miners combined were worth in market cap! This is a sector where the largest stock in it has a market cap of $20B and yet there is more interest in the price of GDX than in the S&P 500 ETF? How can this be?

GDX is a derivative of the price of gold and it has influence on the price of gold. If it is bludgeoned like it was yesterday, it absolutely has an influence on the price of gold. Which brings us to why it was bludgeoned. Today is expiration for options on futures for gold and silver. Today is also the day before Janet Yellen pontificates on the readiness of the FED to do something based on the data. If she is dovish and gold were trading near $1360 that is a problem for the banks. It is too close to a trend line break to the upside for such a massive short.

Hence, what we had yesterday in GDX was beyond the pale. The $/yen barely budged and hardly moved all day. Yet, we saw GDX plunge 7%. This is coming at a time where volatility is at modern day lows and the $SPX has not moved more than 2% for the month of AUGUST!

I have said it before and I will say it again. The price of gold is all about levels. At $1900 gold was dangerous. Once it trades there again, they will throw the kitchen sink at it to form a double top. Once it trades above $2000, know that the Western way of life is officially over.

Lastly, what will be the sign that gold is now a danger to the financial system? It is my opinion that the commercials are hedged via currencies and not the metal itself. It is why we see such a tight correlation between gold and the $/yen. If gold breaks free from this correlation, it is over. There will be nothing that can stop it.

For now, the banks will continue to play their games and the miners that no one allegedly cares about will continue thrash about as if their fortunes change dramatically with a 1% move in the price of gold.


Itís a Mystery

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 -- Published: Thursday, 25 August 2016 | E-Mail  | Print  | Source:

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