Jeez, Louise. It's hard to know where to start. The metals are down but that's not surprising. Crude oil is staring at 5+ year lows and the bond market is continuing to rally. The "global disinflation bias" continues and it all appears to be accelerating again.
I guess we should start with crude. OPEC failed to agree on anything yesterday and prices have been crushed. Of course, much of this occurred while the NYMEX was closed for the Thanksgiving holiday so the move had been somewhat exaggerated. But not today! There has not even been the slightest hint of a bounce from below $70 and, with a last of $69.09, crude looks like it might put on its lowest monthly close since June of 2009! Holy, moley! Man, woman and child!! What the heck does that mean??
One thing it definitely means is a continuation of the "global disinflation bias" that we've been discussing here since late August. This bias continues to drive every global market except US equities (hmmm...I wonder why that is?) and you cannot and should not ignore the eerie similarities of that crude chart to 2008. I'm still of the ardent belief that the initial drive from $108 crude last summer was begun by the U.S. as a "covert sanction regime" against Russia. It has since generated a life of its own as spec money has poured into the short side of a rapidly accelerating, downward momentum trade. It now seems out of control and what no one knows is what kind of damage this may be inflicting to a daisy chain of derivative exposure across global hedge funds, sovereign wealth funds and banks. DO NOT UNDERESTIMATE the possibility of a 2008-style breakdown in the weeks ahead. The global crude oil/energy markets are HUGE and a move of this magnitude has almost certainly caught a number of market participants flat-footed, over-leveraged and under-capitalized.
That silver is down over 5% today should come as no surprise to anyone. Why?
- I warned everyone in Monday's podcast that the days surrounding delivery month contract expiration are exceedingly volatile and that "you should expect an opportunity to buy gold sub-1180 and silver sub-16 very soon".
- The spec algos have aggressively paired crude with silver since last summer in nearly the same fashion that they have paired gold with the yen and we have been documenting this for months. Therefore, with crude down 7% you should not be surprised that silver is down 5%.
- When silver had the audacity to finally break out of it's 4-month down channel earlier this week, you had to expect an effort to break it back down...and so there is.
But silver saw A LOT of support below $15.50 earlier this month and I expect support there again. Just because the crude-linked spec selling has driven price back down below $16, this DOES NOT change my opinion that physical silver is difficult to source and deliver at a sub $15.50 price. I haven't added to my stack for a few weeks. I'll be doing so again later today or Monday.
Continuing with the disinflation bias theme, have you seen the bond market? Again, disinflation or deflation makes even bonds at 2% looks pretty freaking good on a "real" basis. Couple this with a lack of supply due to The Fed owning half of the market and you get rates that are falling off the cliff again. As I type, the 10-year note is back down to 2.20% and the 30-yr Long Bond is well under 3% at 2.91%. These are the lowest rates since the meltdown/liquidity squeeze of October 15. Additionally, with just another half point or so, The Long Bond will close even higher than it did that day! Rest assured, we'll be watching this very, very closely next week and next nonth.
All of this affects gold, of course, and it is down as well...though not as much on a percentage basis. In fact, as I type, it is clinging to a toehold above $1180 and, should this continue, it will still paint a third, consecutive weekly close above that important level.
The yen is moving lower again and the USDJPY is pushing toward 119. WOW! This isn't helping, either, but still gold holds. Again, all I'm watching is $1180 into the close. Let's see what happens.
GOFO is now so negative that I must admit that I'm beginning to question its relevance. You'll recall that we discussed this earlier this week and rates have plummeted even further today. Check it out:
Note that the 12-month rate looks like it will be negative, too, by Monday. This has only occurred on one day before...in September of 1999 when the Washington Agreement was signed to "save" the fractional reserve bullion bank system. Therefore, we are only left with two choices:
- The fractional reserve bullion banking system is once again on the verge of complete collapse.
- The GOFO rates are now simply horseshit and not indicative of anything.
I'll guess we'll know soon which one it is.
The miners are all down considerably today but that's to be expected, too. Just keep an eye on the HUI. So long as it remains and closes above 165, it's not the end of the world and it could just as easily reverse and head higher on Monday.
And the December gold and silver contracts have now expired and have begun trading first notice. Almost exactly as we projected last week, there were 11,524 standing in the Dec gold and 3,950 standing in the Dec silver. How many actually end up taking "delivery" remains to be seen. The CME delivery report for Wednesday already shows 582 "deliveries" pending with 580 of them coming out of The Scoshe's house account. This, of course, is the same Scoshe that hurriedly stopped 1,331 contracts of Nov gold just two weeks ago...4+ metric tonnes of gold that still has yet to leave the JPM vault for the Scoshe's. WHAT A FREAKING JOKE THIS ALL IS!
And silver has already seen 1,614 delivery notices sent out. That's nearly half of all the standing open interest! So much for the theory that the Comex was going to break in December. I warned you NOT to get your hopes up. Anyway, you can see it all and follow along here: http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsReport.pdf
Finally, the long-awaited vote on the Swiss Gold Initiative is Sunday. As you know, ole Turd has been all over this since May and has been begging the Swiss to reclaim their sovereignty and independence by voting "YES". We'll have to wait and see what happens but let me just state that I will be absolutely stunned and flabbergasted is "YES" actually wins. Just like Scottish independence, too many folks will never, ever question the status quo out of fear and personal greed. Additionally, when the forces of global finance are aligned against the issue, the issue is very likely to fail. I'll be hoping and praying for victory come Sunday but by no means am I optimistic or even hopeful.
For what it's worth, here's a fun related link from SoveriegnMan: http://www.sovereignman.com/trends/this-sunday-may-mark-the-end-of-western-monetary-dominance-15646/
And one more thing, today is "Black Friday" and Monday is "Cyber Monday". Nearly all of our sponsors and advertisers are running specials and discounts so please be sure to check the TurdMart store for all of your holiday stacking and prepping needs. If you go to these sites via the TurdMart pages, your old pal Turd actually earns a small commishkey so please be sure to give all of the links your thorough consideration. http://www.tfmetalsreport.com/store
Because of the holiday, there won't be a CoT today. It will instead be released on Monday, a full six days after the survey was taken. Thanks, CFTC!! Anyway, I might record a podcast later today but I might also wait until tomorrow. We'll just have to see how the day goes. Have a great weekend, regardless!