From 1999-2002, my oilfield service research team at Salomon Smith Barney was ranked by Institutional Investor magazine as one of the best in the industry. For fundamental analysts, this is the equivalent of an Academy Award; and trust me, we earned it! Back then, financial markets were for all intents and purposes, freely-traded; with few exceptions like precious metals of course. Then again, even PMs weren’t controlled that much back then, as TPTB did not yet fear their message.
Anyhow, the reason we were recognized was simply, we were good analysts. In other words, we did our homework detecting trends others either missed. Sadly, rigged markets became a reality circa 9/11 – becoming so obvious in the ensuing years, that by 2005 I left Wall Street for good. Unfortunately, my initial instinct was to work for mining companies (in investor relations); but rather quickly, I realized mining shares were more rigged than all other sectors combined. Finally, I left the equity business entirely in 2011 (as well as mining share investments) to join Miles Franklin; where fortunately, fundamental analysis still has validity. You see while TPTB can short all the mining shares, ETFs, closed-end funds and other “paper PM investments” they want, they cannot fabricate physical gold and silver. In other words, “Economic Mother Nature” will not be denied no matter how hard manipulators try. I had been analyzing PM fundamentals for GATA since 2005 for free; and at Miles Franklin, was blessed to be given the opportunity to do so as well for a salary.
Today, we’re going to demonstrate how such analysis is performed, as pertains to the “market reaction” to Friday’s supposed Ukrainian attack on a Russian humanitarian convoy; which I deem supposed because as I write Sunday afternoon there is no proof it even occurred. Sort of like July 18th’s MH-17 airline disaster; which certainly occurred, but a month later, it has still not been proven who did it or why. In both cases, the Miles Franklin Blog is not averring opinions as to the perpetrators or their agendas; but simply, discussing how markets traded around these “sixth sigma” events in light of our ongoing research on market manipulation.
To start, let’s go back to the July 17th downing of MH-17 over Eastern Ukraine. Our ensuing article was titled “Coincidence,” in which we described extremely suspect trading before and after the event. Below are excerpts from that article describing “market reaction” eerily similar to Friday’s.
As for the timing of the crash, it couldn’t have been more suspect. I was taping my weekly Butler on Business podcast at roughly 12:00 PM EST – one of my best ever, posted here – when gold suddenly rocketed higher. At the time, we were discussing the horrific housing starts numbers behind the morning’s powerful rally in U.S. Treasury bonds. Readers are well aware that we believe plunging yields in the face of the propagandized “recovery” – and Fed “tapering” – are the “most damning proof yet of QE failure”; and thus, it was quite “coincidental” that with the all-important 10-year yield amidst a desperate struggle to hold the key 2.50% level, an extraneous, “black swan” event suddenly emerged to “finish the job.” As you can see, the yield promptly plunged below 2.45%, and sits at 2.47% as I write – in eminent danger of a dramatic breakdown that could ultimately erase all of the past year’s “post-tapering” gains.
As for gold, consider the “coincidence” that the crash occurred within the narrow three-and-a-half hour window of 8:20 AM to 12:00 PM EST constituting the only period PMs are “allowed” to materially rise. Sure, it was at the end of that window; but no problem, as long-time readers are well aware that I deemed 12:00 PM EST the “cap of last resort” nearly a decade ago. And thus, it probably won’t surprise you that gold’s top tick was +$26, or exactly the “2% cap” the Cartel enforces on 99.9% of all trading days. Not to mention, it occurred at exactly 12:00 PM EST, via the prototypical “Cartel Herald” algorithm utilized to stop every PM surge over the past decade-plus.
What makes the timing of this event that much more suspect is the fact that historically, the Cartel tends to “pre-empt” expected PM surges – for example, when they know a particularly dovish FOMC statement is coming – with vicious paper raids. Well, not only have we seen epic COMEX “commercial” shorting all month – to the tune of $20 billion worth – but “mystery sellers” dumped $1.3 billion and $2.3 billion of gold futures contracts, respectively, on Monday and Tuesday mornings to push prices down a whopping $47/oz. from Friday’s Espirito Santo-related $1,339/oz. close.
Even more “mysterious” was crude oil’s plunge over the past three weeks, from above $107/bbl. to $99/bbl. on Tuesday, whilst other industrial commodities like copper surged along with robust stock markets. This is not the first time crude oil has had suspect plunges, although the nature of such declines is nothing like those of Precious Metals, which invariably occur during the exact same times of day, with the exact same algorithms. Needless to say, oil surged anew yesterday afternoon.
–Miles Franklin, July 18, 2014
All I can say is WOW – as when I read this, I realized it could just as easily have been written to describe the “market action” surrounding Friday’s yet to be validated Ukrainian convoy attack. To wit, the chart below of the 10-year Treasury yield; which as you can see broke below the 2.40% level the Fed has been covertly defending the past two weeks, seven hours before the convoy attack.
In freely-traded markets, plunging rates amidst recessionary fears would have been construed as wildly PM-bullish. However, typically, gold was “mysteriously” attacked with naked shorting just before the COMEX open, taking it from $1,314 to $1,302. And don’t forget, today was the first day of the “new silver fix”; so it shouldn’t surprise anyone that said attack commenced when silver was again on the verge of breaching the Cartel’s multi-year “line in the sand” at $20/oz. Then, when the Empire State Manufacturing Index was reported to have its biggest plunge in two years, the TIC report showed significant foreign outflows from U.S. securities, July industrial production barely budged higher, consumer confidence plunged to nine-month lows, and Minneapolis Fed President Kocherlakota offered uber-dovish comments and PMs were smashed even more – with gold plunging to $1,293/oz. whilst equities sat quietly, and the 10-year yield fell further to 2.38%.
And then, for the “manipulation coup de gras,” the supposed convoy attack occurred around 11 AM EST, an hour after the global physical PM markets has closed for the weekend. This headline generated all the “market” needed to collapse the 10-year yield further, giving the Fed an excuse for having failed to protect 2.6%, 2.5% and now 2.4%. In fact, rates fell all the way to 2.3%, before rebounding to 2.34% when another highly suspicious data point emerged; i.e., that just an hour after Ukraine supposedly destroyed, unprovoked Russia’s humanitarian convoy; the Foreign Ministers of both countries had agreed to meet in Berlin on Sunday!
The “Dow Jones Propaganda Average, of course, nearly recovered its losses via prototypical “dead ringer” algorithm; and the NASDAQ actually closed higher! However, silver was mauled in blatant fashion; and as for gold, check out the damning charts below – first of gold’s trading in the aftermath of MH-17; and next, the Russian convoy attack. As you can see by the upward spikes, they both occurred at EXACTLY the same time of day; and per the commentary above, both were stopped cold at EXACTLY the 12:00 PM “cap of last resort” with prototypical Cartel Herald algorithms – in Friday’s case, not even allowing prices to turn positive for the day!
Better yet, recall oil’s mysterious plunge from $107 to $99 before the MH-17 disaster. Well guess what it’s done in the past two weeks? Yep, it crashed from $104 to $96, or essentially the same percentage! And most comical of all, was Yahoo! Finance’s top story headline at 3:30 AM EST, just before the 10-year yield breached 2.4% seven hours before a potential “Archduke Ferdinand Moment.” Need we say more?
As for the latter part of today’s title, re: Cartel failure. Friday’s PM attacks may have “worked” in the short-term, in that both metals closed lower amidst blatantly PM-bullish economic and geopolitical events. However, the initial gold slam didn’t even reach its 200 DMA of $1,286/oz.; and capping and all, it still closed above the 50 DMA of $1,303. In silver’s case, sure they knocked it down further – as they always do. However, in doing so, they have pushed it into extremely oversold territory, well above the $18.50-$19.00 level that has created a massive quadruple bottom formation over the past year-plus. And why shouldn’t it, given the cost of production is nearly $25/oz. and long-term industry sustainability closer to $30/oz.?
Yet again, we emphasize that this commentary does not constitute a geopolitical conclusion of any sort. That is not our focus here; but instead, to supply you with the tools to perform your personal due diligence. Clearly, something is “fishy” here, but only you can determine what. And hopefully, you reach the correct assertion regarding market manipulation which couldn’t be more obvious – or UNSUSTAINABLE!
Thanks again for your timely and important update.
Yes, it’s very fishy and our whole system smells rotten!
After silver stacking for the better part of this entire year. Now that I finally have some skin in this game, I share investors’ frustrations at this “market”–a market with the boot-heels of TPTB crushing its windpipe.
Whereas I used to hope for continued low prices, I now find myself rooting for a rising PM spot price–and am continually foiled. You point out all the evidence at to why and how in this (and your fellow contributors’) columns. Thanks to all.
In the meantime, I am not defeated. I will continue to stack and play their game by buying precious, physical argentum and aureus.
We will have the upper hand!
Thanks for the great post Andy. You have pointed out before that the current silver price is below production costs, and therefore cannot be sustained in the long run.
I was wondering, since this has now been going on for more than a year, did this affect the output of the primary silver miners over the past year, or did they maintain production at a loss? Now that (more than) a year has gone by, wouldn’t it be interesting to look back on this and see how they are doing, and maybe even extrapolate how long they could go on like this.
Another thing that I keep wondering about, is how problematic the primary silver miners sub-production-cost-situation really is, considering that 75% (or so) of the total silver output comes as byproduct from miners who primarily mine for other metals (like zinc). Aren’t they going to maintain silver output regardless the price?
Miners have been losing money forever, and it keeps getting worse. Follow SRSRocco.com, he is the expert and constantly reports on costs.