Tag Archives: YUAN

SEMI-MONTHLY FISCAL/MONETARY REPORT – GOLD LOWER LAST FRIDAY – “MANIPULATION”???

SEMI-MONTHLY FISCAL/MONETARY REPORT – GOLD LOWER LAST FRIDAY, “MANIPULATION” ???

Not much has changed fundamentally in the last couple of weeks. The economy is doing somewhat better, aided materially by increased government spending. Capex investment by corporations is still lagging, housing and auto activity are slowing as interest rates rise, the deficit moves predictably higher as health care costs, higher interest rates on the US debt, and much higher defense spending are long term facts of life. Though consumer sentiment and business optimism is much improved over the last year or so, consumers are still stretched financially and the possibility of a tariff “war” continues to unsettle capital markets and the business community.

Gold and gold miners have been quietly consolidating over the last few months, but had an uncharacteristically volatile day, on the downside last Friday.  That just happened to be an option expiration day, which often can generate unusually large price changes.  This type of volatility, heavy trading volume, especially at illiquid times of the day (“middle of the night”), and at inflection points for the technical chartists, used to be fairly frequent occurrences, in the gold markets in particular. It seemed like every time there was especially bullish news for gold, the price would get hit, with heavy volume in futures and options at times of the day when nobody “in their right mind” would be trying to liquidate a “real” physical position unless they were consciously trying to manipulate the short term price of “paper” gold. In any market where there are futures and options trading, aggressive traders of the “paper” who don’t have to immediately deliver the physical “underlying”, can trigger “stop loss” orders at certain predictable prices. Over time, these distortions get corrected, but the short term volatility can be unsettling. Longer term physical buyers use these distortions as buying opportunities, and it is no coincidence that China, India, Russia, and others have continued to be major buyers of physical gold, demonstrating their diversification of assets away from US Treasury issued securities. China and Russia, in particular, have clear reasons to undermine confidence in the US Dollar, improving trade and investment in the Yuan and Ruble, and a higher gold price would do just that. They understand the nature of the worldwide currency debasement and are doing what they can to cope, though our politicians lack the political will to do the same.

Friday, the fifteenth of June, was an option expiration day which, in and of itself, can increase price volatility. It cannot be coincidental that, after India and China had closed their physical trading markets, large quantities of gold futures contracts were dumped into the CME’s Globex computer trading system just before the Comex gold pit opened for the day (at 8:20 a.m. EST).  The chart below shows the price action, and note especially how the trading volume exploded higher from the typically much lower levels. IN ONE HOUR, from 8-9am EST, futures contracts representing 9.03 million oz. of gold traded, which is slightly more than the 9.01 million oz. of TOTAL GOLD STOCK in the Comex vaults, and 17.7x the number of gold oz. “available to deliver”. For the entire day, 49.5 million oz. worth of “paper” traded, the equivalent of about six months of entire worldwide production.

It does not seem farfetched to conclude that nobody in their right mind would choose this particular time of day and month to “dump” such a large quantity of “real” gold, unless the seller wanted the price lower. This has happened before, and an artificially low short term price gave way to much higher prices in the near future. No individual seller is larger than the worldwide market, over a reasonable period of time. A buyer at an artificially high price had better be prepared to buy “it all”, because they will own it. A seller, at a price lower than the true market would allow, had better have an enormous inventory because the buyers will keep coming. It will be interesting to see how this latest incident of seemingly irrational volatility gets resolved.

Roger Lipton

ABOUT GOLD, THE FED, THE CHINESE YUAN (ALL GROWN UP)

To access this content, you must purchase Website Subscription.

INCLUDED IN YOUR ANNUAL SUBSCRIPTION:

  • Broad economic insight. As described in “Restaurants/Retail – Why Bother?” the restaurant and retail industries provide a leading indicator of far broader economic trends. You no longer have to be the last to know.
  • Two to three analytical pieces per week (“Roger’s Rap”) personally written by Roger Lipton describing corporate developments within his industry specialization, including their relevance to the broader economy.
  • Periodic “macro” discussions personally written by Roger Lipton, analyzing fiscal and monetary matters that will likely affect your investments and your business.
  • Opportunity to “Ask Rog” about your personal concerns, regarding individual companies or broader economic trends. Roger will use his best efforts to answer questions submitted, obviously limited by the number of requests . He may answer your question by email directly and/or include your question with his “Roger’s Rap” releases.
  • You are provided access to “Friends of Rog”, depending on your financial and operational needs. The outstanding individuals suggested here, have been personally “vetted” by Roger over decades. Roger receives no compensation based on whether or not use their services.
  • A free copy of the legendary best selling book, How you can Profit from the coming devaluation, as shown at right, written in 1970 by Harry Browne, which predicted the 2000% rise in the price of gold. This profound piece is more relevant today than ever, so Roger re-published it in 2012. This book will help you preserve the fortune you are in the process of accumulating.