What a tragic mess the global economy has become with no hope of any outcome other than systemic currency collapse. Each day, our “contrarian” view that sovereign Treasury yields will plunge toward a Japan-like zero is validated further, per what we wrote in May’s “Most Damning Proof Yet of QE Failure.” In other words, irrespective of inexorably rising inflation, particularly in “emerging markets” most vulnerable to Western printing presses, global “big money” will bid Western sovereign bonds to record levels, anticipating the inevitable “QE to Infinity” that accompanies the terminal stage of all fiat Ponzi Schemes. That is, until hyperinflation destroys the real value of essentially all financial assets.
To wit, this morning’s surge in German bonds to record highs; just after an abysmal industrial production report, and before the ECB left its “NIRP” policy unchanged, but kept the “QE door” wide open – when Draghi highlighted “downside risks” to his economic outlook; including, of course, the ambiguous scapegoats of “emerging market woes” and “geopolitical risks.” You mean like the EU threatening Russia, where nearly a third of its natural gas emanates with sanctions?
Here in the United States of Printing Press Devastation, Treasury yields plunged further last night to nearly a new “post-taper” low of 2.45% despite the so-called “recovery” relentlessly trumpeted by Washington, Wall Street and the MSM. Clearly, the “bluff” that is U.S. economic data is being “called” by global investors – like the spreading realization that falling “jobless claims” has if anything had a negative correlation to actual labor market conditions since the economy broke in 2008. Heck, when the BLS reported this morning’s dramatic unexpected decline in “weekly jobless claims” – following the 50% surge in Challenger layoff announcements last week – guess what the 10-year Treasury yield did? Yep, it plunged further to the lows of the day!
But enough of the same old global economic misery we have described for the past six years. Changing topic, let’s return to the “debate du jour”; i.e., whether or not PMs are manipulated. Or better put, suppressed 24/7 in what can best be described as a covert version of the 1960s London Gold Pool. Which, as you know, spectacularly failed when physical demand swamped supply after a measly seven years.
Today, of course, Western government stockpiles are dramatically lower and global physical demand dramatically higher – whilst production is barely changed. The world’s largest buyer, China, wasn’t even a factor in the 1960s, whilst U.S. Treasury gold reserves were purported to be closer to 10,000 tonnes versus 8,133 today. Then again, if you believe even a fraction of that 8,133 tonnes still exists today, we have a bridge in Brooklyn to sell you.
Anyhow, last week’s “ultimate gold manipulation primer” highlighted much of the irrefutable, factual evidence we have published over the years – such as research on “key attack times” like the “2:15 AM” EST open of the London paper “pre-market” session and “Sunday night sentiment” raids in the week’s most thinly traded hours. Regarding these particular Cartel tactics, they have increased exponentially since the April 2013 “closed door meeting” between Obama and the leading TBTF CEOs; one day before the infamous PM attacks that shaved $250/oz. and $5.50/oz., respectively, off gold and silver prices. In fact, we have seen paper raids at the 2:15 AM open of Western paper trading on 274 of the ensuing 309 trading days or 89%, and Sunday night suppressions on all 58 weekends. Actually, I take that back, as on Sunday night, February 16th, gold prices rose (blue line). That said, it was President’s weekend, preceding Monday’s closed U.S. markets. So how did the Cartel follow up? Why, by simply doubling their efforts the next two nights (red and green lines).
Each morning, Americans awaken to see prices rose with extremely low volatility during Asian trading hours; i.e., the 7:45 PM EST open of the Hong Kong market through the 2:15 AM EST open of the aforementioned London “pre-market” session. In fact, per the brilliant work of Dmitri Speck, this trading pattern has been ongoing for two decades, as metal relentlessly emigrates from West to East. Frankly, I’m not sure better manipulation evidence exists than the fact that in New York COMEX trading gold prices were net down in 2000-2011, when gold rose from $250/oz. to $1,920/oz. – and the dollar index plunged from 120 to 70.
As we noted last week, Asian exchanges – such as the dominant Shanghai Futures Exchange, which dwarfs the COMEX in terms of metal delivery – is principally physical based; as opposed to New York and London, where an estimated 100 ounces of paper metal exists for every physical ounce. The former has been experiencing an historic inventory drain; and the latter, unprecedented levels of naked shorting. Frankly, any effort to refute manipulation when the largest supposedly most “sophisticated” investors have been net short throughout a 14-year bull market, in our view, is either dis in genuine or badly misinformed.
Back to the Chinese investor, he is well aware of the same fundamental and technically bullish factors we write of each day – as well as the fact that Eastern demand is rising exponentially in synch with the reported activities of Western Central banks.
He also knows the so-called largest gold holder – the U.S. and the largest physical custodian – the UK have been exporting amounts significantly greater than their production to Hong Kong and Switzerland; and that nearly all of Switzerland’s input goes right out the door to Hong Kong, India and mainland China.
In other words, educated Eastern investors are more incredulous of the blatant paper suppression of their “savings” than their uneducated Western counterparts. Which is why, with 100% certainty, they will continue to acquire physical metal hand over fist until the West’s dramatically depleted supply is gone. And don’t forget the billions of Western investors that will “join the party” the second the Cartel blinks yielding the same inevitable swamping of the shorts that destroyed the London Gold Pool in 1968; the “bullion banks” in the early 2000s and every effort throughout history to elevate fraudulent fiat money at the expense of the time-honored, intrinsic value of gold and silver. Thus, if you want to “bet” against billions of Easterners holding Aces on a handful of Western bankers holding deuces, be our guest. However, we’ll stick with the “safe bet,” which has paid off for thousands of years.