Days like Thursday are rough on those of us who have faith in gold and silver. That makes it even more important to take a step back and think about what lies ahead. Below is an article from Zero Hedge:
Submitted by Tyler Durden on 09/12/2013
There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as “banging the close.” It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night’s slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!
To summarize: a humble block of 2000 gold futs (GC) taking out the bid stack, and slamming the price of gold, managed to halt the gold market: one of the largest “asset” markets in the world in terms of total notional, for 20 seconds.
Here is Exhibit A of either market manipulation or yet another broken market from Nanex:
December 2013 Gold (GC) Futures Depth of Book
Zooming in on the drop and showing the trading halt.
The following are from Ed Steer and Ted Butler:
September 13, 2013
If the commercials succeed in causing technical traders and other momentum type traders to sell, then the commercials will likely continue to rig prices lower so that they (the commercials) can continue to buy. In retrospect, this was why we fell so steeply in the first half, namely, the technical funds not only sold and liquidated long positions, they established record or near record new short positions as well on the dramatic decline in price. Throw in the massive liquidation in GLD and that’s why we dropped so much in gold (and silver). Since the technical funds kept selling, the commercials kept lowering the price and kept buying. This is how JPMorgan came to hold a long market corner in COMEX gold futures.
The reason I’m narrowing it down to a question of new short selling by technical funds is because data from the Commitments of Traders Report indicates that there has been virtually no build up of technical fund or other speculative new long positions on the rally in gold and silver prices to over $1,400 in gold and $24 in silver. There can be no selling of new long positions that don’t exist. Of course, there could be some selling from old long positions, but logic would hold not massive amounts.
– Silver analyst Ted Butler, 11 September 2013
It’s my opinion that everything you need to know about how this engineered price decline will unfold is contained in the Ted Butler quote above. He’s absolutely correct about this, and you don’t have to look elsewhere for any other explanation, as it’s all there.
Gold closed below its 50-day moving average yesterday, but silver still has a ways to go [but not much after this morning’s Far East and London price action].
Since the Lehman Brothers failure, five years ago, it now takes 18 dollars of debt for every dollar of GDP in the industrialized world (G7). Leading the way was an astounding $5 trillion of central bank balance sheet expansion by the Fed, the Bank of Japan and the European Central Bank.
Wouldn’t you think that under these circumstances the Fed wouldn’t dare to taper? Gary North thinks the Fed will taper by $10 billion/month.
Zero Hedge thinks the Fed will reduce their bond purchase by $25 billion, but not all at once. Without going into their reasoning, I seriously doubt it – it would cause such major disruptions throughout the world, it just isn’t possible.
Here is another viewpoint from the Sovereign Investor below:
Will the Fed Keep Printing?
So far this turmoil in some emerging markets hasn’t really affected the U.S. economy. That’s why some Fed members have said that problems in the emerging markets are not the concern of U.S. policy. But I think it’s just a matter of time before problems in those markets start impacting our economy. After all, emerging markets are responsible for more than 40% of global growth. The bottom line is that the global economy cannot handle higher yields. Once the Fed realizes that, it will have no choice but to continue printing money. Even if the Fed starts to reduce the size of QE this month, as everyone expects, it’s still likely that it will increase the size of the program later on. Perhaps that’s why gold has started to recover. The market has started to price in the fact the Fed is trapped. It can’t stop printing. This will ultimately drive gold higher.
–The Sovereign Investor, September 3, 2013
One can only wonder what all of this will mean for the economy and the stock market. It certainly will be bad news for housing and bonds. But whatever happens, it will be short-lived. For me, (and Andy Hoffman and Bill Holter) nothing has changed. The big picture remains intact.
Here is a viewpoint that I can live with, from one of my valued sources of information. I also think he nails it with his comment that the market has already priced in the Fed’s taper plans.
I expect a low to form tomorrow or Monday. Some technical damage has been done but I don’t see much reason, other than fear, to expect continued downside. The Fed meets next week and that could be a logical reason to spark the next rally. This taper nonsense has been going on since early in the year and should already be priced into the market. Remember, the market looks ahead several quarters so its ridiculous to think a news event (which has been ongoing for months) could push this sector to a retest of its lows.
The market will do what it does regardless of whatever some cycle says. When the gold market does well from August to February, it’s because there are reasons for that, not because the seasonal cycle predicted it. There is one popular cycles analyst who apparently called the $1900 top and the recent bottom. I looked into his past calls and they were all over the map.