Gold & Precious Metals

Why invest in the monetary metals and their miners if they won’t defend themselves?

Posted by Chris Powell, Secretary/Treasurer, GATA

on Thursday, 22 December 2016 15:20

gata paintingDear Friend of GATA and Gold:

The more it exposes and documents manipulation of the monetary metals markets by governments, central banks, and their agents in the financial industry, the more GATA is resented by those in the monetary metals industry who are merely touters of mining shares. 

That’s because GATA tells people what they are up against when they invest in the monetary metals — indeed, when they aspire to free and transparent markets and to liberty itself. So while there was a victory for GATA in this month’s disgorgement in federal court in New York of Deutsche Bank’s electronic records of market rigging by its traders and the traders of other banks, on the whole the revelations may have been a defeat for the mining industry.

Toronto market analyst and broker Michael Ballanger explained why in his financial letter this week:

https://www.streetwisereports.com/pub/na/twas-the-week-before-christmas

Ballanger wrote: “Until the regulators can finally put an end to this horrific process whereby the bullion banks have a total carte blanche to issue as many [futures] contracts as they desire under the guise of ‘hedging,’ prospective gold investors are simply going to say, ‘Nope, not playing.’ The intervention, collusion, and bank-coordinated gang attacks such as we are now witnessing via the Deutsche Bank evidence coming out is actually having a negative effect on sentiment, because as much as the revelations are creating transparency, they are also scaring prospective investors. The prevailing wisdom emanating from the trading desks is: ‘Wow! If they can get away with that, why would anyone put money into the gold and silver markets?” 

The Deutsche Bank disgorgement has incriminated not just Deutsche Bank itself but all the recent participants of the daily London gold and silver price “fixings” — HSBC, Bank of Nova Scotia, UBS, Barclays, and Societe Generale. But apparently none of them is reported to be under investigation by government law-enforcement agencies for rigging the gold and silver markets. Indeed, three years ago the U.S. Commodity Futures Trading Commission announced that it had closed a five-year investigation of the silver market without finding any cause for an enforcement action: 

http://www.cftc.gov/PressRoom/PressReleases/pr6709-13

While the CFTC has subpoena power and dozens of investigators, it apparently was unable to discover what the anti-trust class-action lawsuit in New York did. 

It is not hard to understand why the CFTC might have failed — or, rather, why it might not have tried very hard. That is, all the trading bank defendants in the gold and silver lawsuits are also primary dealers in U.S. government securities, the most intimate associates of the Federal Reserve Bank of New York.

This is unlikely to be a mere coincidence.

According to the New York Fed — 

https://www.newyorkfed.org/markets/primarydealers

— “Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.” 

Gold and silver are money, and as GATA’s documentation has shown, governments still treat them as such and they remain of great interest to “monetary policy,” which is not to let them compete effectively with government-issued money. Governments and central banks can’t be much bothered by their primary dealers pushing gold and silver prices around as long as the primary dealers are pushing those prices where governments and central banks want them to go and providing camouflage for government and central bank intervention. 

But if that explains the failure of governments to prosecute the gold and silver market riggers, what explains the silence of the monetary metals mining industry and its nominal representatives, like the World Gold Council, even after Deutsche Bank’s disgorgement? Enough clamor and exposure would compel governments and central banks either to stop rigging the monetary metals markets or at least to do it in the open, which soon would destroy the rigging’s effectiveness, as doing it in the open destroyed the London Gold Pool in 1968:

https://en.wikipedia.org/wiki/London_Gold_Pool

Yet mining companies and the World Gold Council act as if they are owned by the governments destroying them. The mining companies do not act as if they understand the monetary nature of their products or their own function as minters of independent money for free people.

The mining industry’s failure to defend itself against predators goes even beyond this. The industry doesn’t defend individual companies being systematically victimized. 

As Rudi P. Fronk, chairman and chief executive officer of Seabridge Gold, a company that long has supported GATA, writes today:

“I don’t know if you have been following the recent trading activity in Seabridge, but last week the company got caught up in a significant rebalancing of the exchange-traded fund GDXJ that occurred Friday with more than 2.17 million shares sold as a block at the close. Going into last week, GDXJ owned just over 6 million common shares of Seabridge, or approximately 12 percent of our shares outstanding. The fund ended the week owning only 3.7 million shares (7 percent of Seabridge), having sold more than 2.3 million shares of the company during a tough week for gold. 

“Unfortunately we do not get any notice of the extent of these rebalancings and learn about them only after the fact. But it is clear to me that someone knows ahead of time about the rebalancings, as we get shorted days before the block crosses with the shorters knowing that they will be able to cover at a low price with the end-of-week block. 

“This has happened to us before, and while such events usually make great entry points for new buyers, current shareholders get screwed.”

The mining industry should have an association to clamor against such mistreatment as well. But where is it? The World Gold Council seems to function mainly to divert into mere derivatives investment funds intended for real metal and to ensure that there never is a world gold council.

So what can be done by investors in the monetary metals and by advocates of free and transparent markets and limited and accountable government? 

Plenty can be done, once you realize that, powerful as the other side is, exercising all the power of government, its most powerful weapon is your own demoralization.

For starters people can challenge the gold and silver companies in which they are invested, insisting that company executives review the documentation of surreptitious intervention in the gold and silver markets by central banks and take a position on it:

http://www.gata.org/node/14839

Is the documentation genuine and valid or forged or misconstrued? If the mining industry protested about it to its elected representatives in government, it would make serious trouble.

Second, people can query their elected representatives about the market rigging — urging them to review and investigate the documentation as well and to question treasury and central bank officials about it. Are governments surreptitiously trading the gold market and, if so, for what purpose? Then any responses or refusals to respond should be publicized. 

The same questions should be directed to financial regulators too and their answers publicized — particularly the U.S. Commodity Futures Trading Commission, whose failure to crack the silver case is now a spectacular embarrassment. 

Sensational as the revelations in the Deutsche Bank case have been, the case has a long way to go before resolution. It likely will prompt more lawsuits against more trading banks, but maybe not until the current case is resolved. No one should wait for that. 

And of course since apart from the lawsuit in New York only GATA seems to be doing anything about this fraud, people can support us financially:

http://www.gata.org/node/16

Even a $5 donation will be more than Newmont Mining has contributed to the cause.

The logic of the use of derivatives to suppress monetary metals prices is that there is enormous potential for prices to explode if the rigging stops and the physical market defeats the paper market. But as long as investors are ready to accept mere certificates from bullion banks in place of real metal, and governments, central banks, and their agents are ready to issue paper for infinite amounts of imaginary gold, the market rigging can go on forever. 

As with everything else in the world, it’s entirely a question of whether people can ever bring themselves to act.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

* * *

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Dec 20, 2016

  1. At this time last year, most gold investors and analysts were predicting lower prices for gold. Many of them were shorting it.
  2. The shorts were obliterated, because gold bottomed the day after the December 2105 FOMC meeting. It soared about $330 an ounce, from about $1045 to above $1375. 
  3. It’s been said that history doesn’t exactly repeat, but it does rhyme. On that note, please  click here now. Double-click to enlarge this daily bars gold chart.
  4. Gold has a cyclical tendency to decline ahead of a rate hike, and rally after it is announced. 
  5. This time, the US election may delay the rally, but create one that is bigger and more sustained than the rally of 2016. Here’s why:
  6. Republican parties have cyclically been associated with significant US dollar downtrends. The next presidential inauguration occurs on January 20, 2017. 
  7. Donald Trump has repeatedly stated that he wants a lower dollar. He’ll have control of both the senate and the congress, putting him in a position of tremendous power to impose his will on US markets.
  8. Please  click here now. Double-click to enlarge. Most technicians are now wildly bullish on the US dollar index.
  9. They are excited about what appears to be an “upside breakout”, and there’s no question that the US dollar index could move higher until inauguration day.
  10. Note the RSI non-confirmation with the price on that daily bars US dollar index chart. The dollar’s technical strength is weakening quite dramatically.
  11. For a big picture view of the dollar’s price action during the past few presidencies, please  click here now. Double-click to enlarge. 
  12. As rates rise, and Trump increases government debt while cutting taxes, the US government’s credit rating could get downgraded, adding more downwards pressure on the dollar. 
  13. Janet Yellen initially endorsed a “high pressure” economy, but after the latest FOMC meeting she said that she’s not necessarily looking for easy money policy to continue.
  14. That’s superb news for inflation enthusiasts, because higher rates incentivize banks to move money out of government bonds and into the fractional reserve banking system.
  15. Trump’s tax cuts will further incentivize the banks to make loans to the private sector, and move even more money out of the US government bond market.
  16. The bottom line is that Janet Yellen can create a higher pressure economy with rate hikes than without them. With Donald “The Golden Trumpster” in power, inflation may rise much faster than anticipated, regardless of what Janet does. 
  17. I expect US money velocity to bottom by the summer of 2017 and begin a long term bull cycle, mainly because of the policies of both Trump and Yellen.
  18. Gold stocks can dramatically outperform gold in that environment. On that note, please  click here now. Double-click to enlarge this GDX daily bars chart.
  19. There’s no question that GDX is in a downtrend. The pattern of lower minor trend lows and lower highs is what defines a downtrend in any market.
  20. Please  click here now. Double-click to enlarge. That’s another look at the GDX daily chart. In strong uptrend, the RSI oscillator tends to oscillate between the 70 area and 50. In a downtrend, RSI tends to oscillate between 20 and 50. 
  21. Amateur investors tend to be obsessed with trying to figure out whether a market is making a major bottom, top, or about to accelerate its trend. I would argue that such an obsession doesn’t build wealth that is sustained. It’s a subtle form of gambling, and gamblers tend to lose money on an ongoing basis.
  22. Rather than trying to gamble on whether GDX will continue its current pattern of lower highs and lower lows or not, my suggestion to the world gold community is to simply wait for a pattern of higher highs and higher lows to appear. That’s what defines an uptrend.
  23. Please  click here now. Double-click to enlarge. That’s a third view of the GDX daily chart. There is support in the $17 – $18 area, and an important buying area. Importantly, this chart shows that there was no uptrend in place in the days following last year’s rate hike. GDX declined to a final low in January of 2016, but it wasn’t until the spring that an uptrend was apparent. The bottom line:
  24. Professional investors have a lot of patience, and amateur investors need to focus on developing it. It’s highly likely that a new and sustained uptrend in precious metals will begin, once the weak dollar policy of the Trump administration becomes clear!

Thanks! 

Cheers
st

….related by Morris Hubbartt: Gold: Tactics After US Rate Hike

Dec 20, 2016
Stewart Thomson  
Graceland Updates
website: www.gracelandupdates.com

Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.

Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

Federal Reserve and Stronger Real Rates Cause Breakdown in Gold

Posted by Jordan Roy-Byrne - The Daily Gold

on Monday, 19 December 2016 15:07

Gold and gold mining stocks were setting up for a rebound until the market suddenly priced in tighter policy from the Federal Reserve. Both nominal and real yields surged and that pushed an already oversold sector below key support. Gold lost support in the mid $1100s while gold stocks (GDX) lost a critical support level. While the sector is oversold and likely to rebound as 2017 begins, the primary trend remains lower.

Our first chart plots Gold and the real yield on the 5-year TIP security. The US Treasury provides daily data and it gives us a look at day to day changes in real yields. The real 5-year tips year yield closed last week at an 11-month high. Stronger real yields hurt Gold’s desirability as an investment. This is why Gold and gold stocks have sold off.

43297 a

We had expected Gold to rebound from the $1140/oz to $1155/oz range but it declined to as low as $1124/oz. Its next weekly support is from $1085/oz to $1095/oz. An immediate rebound to resistance at $1155/oz could setup a decline down to $1085/oz. The other scenario is Gold immediately dumps down to $1085-$1095/oz before beginning a sustained rebound.

Turning to the gold stocks, we see that GDX broke below a key level at the end of last week. It had been holding above $20, which was a confluence of strong support. The weekly candle shows a clear breakdown below that support. GDX could snapback to the breakdown point near $20 which would setup a decline to support at $17. The other scenario is it plunges to $17 this week. GDXJ lost support at $32.50 and dumped 12% last week. Its next strong support is around $27.

43297 b

Although Gold and gold stocks are very oversold and sentiment indicators are bullish, the breakdown in price signals that more selling could occur before the sector rebounds. A big rally in Gold is more likely to begin from $1095-$1095/oz than from $1120/oz. The gold stocks could also test lower levels before a sizeable rebound begins. We had expected a rebound but the sector brokedown. We were wrong. However, our bearish big picture view remains on target. We reiterate that we do not want to buy investment positions until we see sub $1100 Gold coupled with an extreme oversold condition and bearish sentiment.

….related from Morris Hubbartt: Gold: Tactics After US Rate Hike

Gold: Tactics After US Rate Hike

Posted by Morris Hubbartt - Super Force Signals

on Friday, 16 December 2016 13:34

gold right

Gold, Silver, & T-Bonds Video Analysis

Precious Metal ETFs Key Charts & Tactics Video Analysis

SF Trader Time Key Charts & Tactics Video Analysis

SF Juniors Key Charts & Tactics Video Analysis

(double click links and chart to enlarge and listen to analysis)

Thanks,

Morris

 

About Super Force Signals:
Our Surge Index Signals are created thru our proprietary blend of the highest quality technical analysis and many years of successful business building. We are two business owners with excellent synergy. We understand risk and reward. Our subscribers are generally successfully business owners, people like yourself with speculative funds, looking for serious management of your risk and reward in the market.

Frank Johnson: Executive Editor, Macro Risk Manager.
Morris Hubbartt: Chief Market Analyst, Trading Risk Specialist.

website: www.superforcesignals.com

First published Sat Dec 10 for members:  Almost daily, I am asked if I think the complex will see lower lows below those seen in the previous  January and December.  My answer has been and remains the same and I will explain to you what I am seeing that still keeps me in that perspective.  And, I will also explain what does sway me into thinking I may be wrong.  You will then have all the information I am seeing and you can make your own assessments.

Now, I want to start out by saying that, as a long term investor in this complex, with a horizon of 2-3 decades in front of me, I secretly wish for lower lows to buy at even better prices.  But, I can wish all I want, yet the weight of evidence is still suggestive to me that the bottom has been seen.

Support For Bottom

1.   As you know, I am an Elliottician.  And, as an Elliottician, I look for a completed number of waves in one direction, followed by a 5 wave move in the opposite direction to suggest that the market has changed trend.  While this is not a certainty, it does strongly suggest a change in direction.  And, that is what we have seen in the metals market over the last 5 years.  We have what can be a completed a-b-c structure to the downside followed by a 5 wave rally in 2016 off those lows.

 

2.   The correction we have seen off the highs in 2011 have struck appropriate Fibonacci retracements.  While the HUI struck a standard .618 retracement, gold had a shallow Fibonacci retracement, whereas silver had a rather deep one.  But, overall, the complex as a whole seems to have struck appropriate Fibonacci retracement percentages to complete this degree of correction.

3.  Next, the move off the lows is more likely a 5 wave move than a corrective move due to the size of what we are counting as a 5th wave.  I believe counting the 2016 rally as a corrective a-b-c structure is not correct BASED UPON STANDARD STRUCTURES.  (Of course, it can be a non-standard structure, but they are in the lower probability range of market moves).  The significant majority of a-b-c structures see the c-wave presenting as the same size of the a-wave, or, it will exceed the size of the a-wave to as much as 1.382 or even 1.618 the size of the a-wave, especially in the metals complex.  In our case, the 5th wave struck where it normally does in the metals complex between the .618 and .764 extensions.  That is the standard size I would expect in this structure for a 5th wave and not a c-wave.   To me, this is strongly suggestive that the 2016 rally was an impulsive structure which is starting the next bull phase, and presenting a much lower likelihood that this move was a corrective a-b-c corrective structure, since, based upon standards, the c-wave would generally be too small, especially in the metals complex.

 4.  When a 2nd wave occurs off a major bottom, the sentiment has to develop so bearishly that the great majority of the market is going to believe that the bear market has returned.  We need that type of sentiment to support a 3rd wave rally, which will be larger than the initial move off the lows. In fact, it can easily be double the size of the move off the lows.  And, based upon much of the anecdotal sentiment I am seeing in the market, as well as the sentiment indicators which track the market, we seem to have enough “disbelief” in a 3rdwave rally as the great majority is now quite certain of lower lows. 

5.  In the last drop in gold, which has been the weakest of the complex to date, the volume seems to have dried up.  That is ordinarily suggestive of selling pressure waning, which often precedes a market turn.

6. I am seeing positive divergences in ALMOST ALL the technical indicators within the complex.  While they can all still support another drop yet to be seen, the indicators are such as we normally see as the market is bottoming, rather than accelerating lower.  And, this is most true in the mining complex.

Support For Lower Lows

1.  Well, we have to start with the fact that the market has not yet turned up with a 5 wave move off any lows we have struck yet.  Even though silver has been the strongest within the complex, I cannot confidently say that even it has developed a CLEAR 5 wave structure off the lows.  Now, while this does mean that we have no clear evidence that the low has yet been struck in the complex, I would classify this as a weak signal that we “can” see lower lows in the complex relative to January and December.

2.  The technicals on the daily chart of GLD are not typical of what I would like to see for an a-b-c retracement.  I have no clear positive divergence on the daily chart, even though the MACD has begun to turn up this past week.  But, at the same time, it does not “look” like the set up which is strongly suggestive of lows to be struck below those seen in December.  While it is certainly possible we can see a series of 4’s and 5’s to drop us below the December low, I am not convinced the MACD is in such a posture.  But, again, the lack of positive divergences on the daily chart is concerning to me, and I have pointed this out several times in the past.

3.  The only way I can count a 5 wave move off the lows in the complex for silver is as a leading diagonal.  For those of you that have read my analysis in the past, you will know that I have a hard time relying on leading diagonals as a strong trading cue.  So, clearly, this does weaken my overall conviction a bit.  But, with the structure seen in gold, the GDX, and the individual miners that we track, this is much less of an issue to me at this time.

4.  While the depth of the pullback in the GDX “THUS FAR” has still not broken below its .618 retracement of the rally off the lows, the GLD and silver has both broken below that support.  In my experience, when this market is very bullish, it often sees very shallow retracements, whereas a drop below the .618 retracement is often suggestive of lower lows, especially since we still have no clear structure suggesting that the bottom is in place.

5.  The complex has still not been able to take out any of its resistance we have been citing for the last two weeks.

Conclusion

While not a complete list of those things that I consider in my assessment of the complex, this is a general review of the factors I have been weighing in my larger degree perspective of the complex.  And, it still sways me to remain bullishly inclined even though some of the bearish issues have weakened my conviction a bit. But, I still see the weight of evidence as overall still bullish in the larger degree.

While the action we have seen this past week is still suggestive that we can still see another drop, I think the weight of evidence still suggests that it is not likely that the market will drop to levels below those seen in December and January.  Yet, due to the potential for another drop, and until we have developed more of an immediate bullish structure, I will remain hedged in my own account, as I have been stressing since we bounced back to the 28.50 region in the GDX. But, as a long-term investor in the complex, I still do secretly yearn for lower lows below December and January levels for even better bargain prices.   Yet, based upon the weight of evidence, I think this yearning will likely see the same end as an unrequited love.

See charts illustrating the wave counts on the GLD, GDX and Silver (YI) at https://www.elliottwavetrader.net/scharts/Charts-on-GDX-GLD-Silver-201612111443.html.