EAT MY SHORTS-THE GUERRILLA ECONOMIST-V
Jul 1, 2013
So another week of market hysteria and drama that can fill the pages of a Clive Cussler action novel. Gold and Silver going up and going down, sea-sawing below their cost of production and back up. Those that have been following me on this site and on the Hagmann & Hagmann radio show know that this is not a surprise. This is the parabolic gesticulations of a desperate banking system.
Recap the last two weeks and what have we heard? Precious metals beat down, China economic numbers and dollar regaining it’s strength and fools rallying in stocks all based on parlor tricks, no volume, insider trading, FED manipulations, and contracting growth. If this were a soap opera it would be called “The Dumb & The Reckless”.
The trillion dollar question is what is really going on with metals? I mean no one is selling, everyone is buying, drying up supplies and sending premiums through the roof. I will tell you and make it as clear as I can. I will detail for you the exact reasons behind the scenes from the board room strategies to the public market. We are witnessing a grand chess game being played out right before us.
One thing you all have to understand in the game of slights called the markets Is this. That confidence is everything and suppressing the price of precious metals is imperative to having an image of monetary credibility. Look at the biggest players in the gold market is the Central Banks and the Bullion banks. It is a very dubious and interesting relationship, a Frick to a Frack a Ying to a Wang. Central Banks are not required by the IMF to disclose the Gold Holdings ( of which they have very few) and Bullion Banks are not required to disclose allocations of Gold they have out for loan (except to each other). Now do you see this as a problem? I do. If this is not another empirical evidence of a rigged casino then my friend you have not been paying attention.
The way this Central Bank (CB) and Bullion Bank (BB)relationship works is this: a BB will ask a CB for gold. They will hammer out the details amongst themselves in terms of loan length, amount, rate etc.. Then the BB will take it and loan it out to the market until eventually the CB gets it’s gold back. This happens hundreds of times a week. Recently though what has occurred is that you have had a culmination of a few things.
1. Continued cracking of the financial markets
2. BOJ out stimulating the FED 3:1
3. Continued failures in the corpse that is the EU
4.UK financial issues and contractions
So what should the troubled central banks do? Simple, like I said, the most important thing in this world of smoke and mirrors is having the appearance of financial or monetary credibility. You short metals, pump fear of Chinese economic meltdown and viola the lost sheep come corralling back in to the US Dollar pen.
Something has changed though. Since precious metals have been shortened and every managed money fund (Hedge Fund) has bought the trick, the Bullion banks have fulfilled their shorts contracts for June….Now their contracts for August going forward is guess what? LONG!!! Long on Precious Metals.
The four largest of this cabal are Net long 26,000 plus contracts on gold and the same can be said for silver. Why now? Simple their risk exposure has been mitigated. I have told many of you that you can only ignore market principles of for so long before they come back and haunt you. With the physical supplies drying up the bullion banks are in a consensus, there never was a time in history of modern banking that their risks have been this LOW!!! There is no over abundance of supply like it was in the 80’s and 90’s to create massive volatility. They have with the last shorting de-risked their trading books and are NOW HUNGRY TO BUY and GO LONG!!!! They are expecting the prices to rise and given the fact they suckered the Hedge Funds the move in Gold and Silver is going to be EXPLOSIVE especially when fund manager gets a rude awakening and dashes to close their positions
The market these days is rife with instability and volatility with exchanges trying to keep up appearances of confidence while going through the motions. This is the NORM now not the EXCEPTION. This is the number one reason the world is waking up to the fact that ownership in precious metals make sense. Look it took the Japanese market 21 days to dump 26% it took gold almost two years to drop a similar percentage!!!!! Welcome to my world equity traders and brokers!!! There is NO CONFORMATION BIAS HERE!!!
The world is waking up to the fact that the US, Japan, UK and EU is nothing but a bunch of has beens. the old guard whose wares and services are no longer needed. To them Gold and Silver ownership is a way to protect themselves from the inevitable failings of a system that has run amok for the last few decades. We are witnessing before our eyes the very destruction of the equity and bond markets of the Quagmire Quartet (US,UK, JP, EU). This will end badly for many especially those that still don’t understand the larger agenda and the difference between the paper and physical markets.
What is quickly lost, in this case is quickly gained.