The USDJPY and the "Price Of Gold"

Well, we've finally reached "contract expiration" day as the Dec16 Comex gold and silver contracts go off the board and into "delivery" at the close today. With total Comex open interest now back to the levels of last December, could price finally be near a bottom? As usual, we must look at the USDJPY for clues.

As of last evening, total Dec16 Comex gold open interest was down to just 30,773 contracts and about 50-60% of those will be liquidated and closed out today, leaving 10,000-15,000 "standing for delivery" when "delivery" notices begin being sent out this evening. Last December only saw a total of 2,073 gold "deliveries" so we'll likely be on pace again for something 5X or greater by the time "deliveries" wrap up at the end of the month.

Additionally, TOTAL Comex gold open interest fell again yesterday to a meager 410,824 contracts. Check this out:

DATE           PRICE           TOTAL OI

11/25/15         $1072                393,110

12/31/15         $1065                415,220

7/11/16           $1364                 657,776

11/28/16        $1191                  410,824

So, do you see how this works? Taking their cues from a few key inputs, the HFT Specs buy Comex paper gold exposure and price goes up. To limit the upside damage, The Banks issue new contracts in order to dilute the price impact of all this Spec buying. As the cues change and reverse, the HFT Specs liquidate their gold exposure and price declines. The Banks use this Spec selling to buy back their short positions and the open interest gets retired.

Have the supply/demand fundamentals of physical gold changed over the same time? Maybe just a little as sentiment and physical demand generally improve with a rising price. But by far the key determinant of "price" is the HFT Spec demand for the paper gold derivative, not the actual gold itself.

Some System Apologists will claim that this is efficient and smart...that the cost of acquiring, holding and storing real gold is too great and therefore these derivatives and synthetic forms of gold are preferable. NONSENSE! What I see instead is a Banker Profit Scheme and Confidence Game. The Banks create and manage nearly all of the forms of synthetic gold exposure available today, from futures contracts to unallocated accounts to the GLD, and because they have the power to create from thin air as much synthetic gold as "the market" demands, they also have the de facto power to control price. And they do.

So, OK then. It is what it is. As long as The Banks retain control, the only way you can get "the price of gold" to move higher is to move in your favor the key inputs which drive the buying decisions for synthetic or paper gold. And what are those key inputs?

  • Forex...specifically the USDJPY
  • In a larger sense, the US dollar as measured by the POSX (TFMR slang for the DXY)
  • And, as it's the US dollar gold price that we measure most, the general trend and level of US interest rates, particularly US interest rates adjusted for inflation or "real" rates

That's it. It's those three. Get all of those three working in your favor as we did in the first half of 2016 and you get a 30% rally. However, when all of these turn against you as they have since late September, WATCH OUT!

You've now seen these charts for what must seem like a million times. The inverted USDJPY is in candles and the "price of gold" is in bars. Again, do you see a fundamentally-derived "price of gold" in these charts or do you simply note two closely-correlated digital "assets", where HFTs "see" a move in the USDJPY and instantly buy or sell paper gold in response?

To that end, let's end this post on a positive note...

A week ago, some eco-quants at JPM issued a forecast for the USDJPY that projected a fall back to 100 or even lower. Well today, UBS came out with a nearly identical forecast. I would strongly suggest that you take the time to read this very closely: http://www.zerohedge.com/news/2016-11-29/usdjpy-could-plunge-low-98-after-trump-bubble-bursts-ubs-wealth-warns

Again, when the USDJPY was near 100 last summer (or 1.00 JPYUSD on the charts above), "gold" was primarily between $1330 and $1380. Why? The HFTs had observed the fall in the USDJPY from 120 to 100 and, in turn, purchased "gold exposure" at the Comex. Total Comex open interest surged by over 50% and the price of that gold exposure rallied by over 30%.

Could we be on the verge of another such rally? Well, I hope by now you've figured out that the USDJPY holds the key. If the quants at JPM and UBS are correct, prepare for upside in 2017 and not the doom-and-gloom downside that the usual permabears are attempting to convince you is coming.

TF

www.tfmetalsreport.com/subscribe

54 Comments

forever20's picture

gold, my first ever woohoo

what a feeling :)

Boxingbuddha's picture

2

2

Picabo's picture

Where's GT

?

billhilly's picture

snag

sorry Marchas...but in your honor -------------

KEEP STACKING ! 

and beware of .....

Ned Braden's picture

Just finished some stacking

sorry Marchas

Dr Jerome's picture

Amazing

I am simply amazed to watch the tick by tic of the USD/JPY and see gold move with it a few seconds later. Now challenging 113. I suppose there was a round of profit taking among forex traders at that level, so upward movement has stalled and pulled back a bit.

I suppose since I'll be 3rd, or maybe 4th if I post now, that I ought to wait a while until Marchas has the opportunity to grab 4th. So I'll keep rambling here about nothing in particular.

So yesterday, one of my uber-feminist colleagues said,"Oh yes, there WILL be a revolution."

I replied I know, I just hope it doesn't turn violent."

She responded "It will be violent."  

And I thought all of my university colleagues tended to be anti-war pacifists.  What a fool I have been.

130.05 on hte USD/JPY now! A PM sale may be in the works.

chocolatechiphorses's picture

Very Sad News

Brazilian Plane Carrying Top Football Team Crashes In Colombia, 76 Dead

A plane carrying 81 people, including top Brazilian football team Chapecoense, heading for the biggest game in its history, crashed on its approach to the city of Medellin in Colombia. 76 of those on board have perished.

http://www.zerohedge.com/news/2016-11-29/brazilian-plane-carrying-top-football-team-crashes-colombia-76-dead

joeblack's picture

JPM and UBS?

Are their recommendations any more useful than that of Goldman Sachs?

tvend's picture

Stacked like a madman

Took advantage of some black Friday deals that made me swap out more fiat than I expected. And I loved every second of it. 

Benitho's picture

Maybe coincidence, but...

...last time around this year, Great Panther Silver GPL was one of the first PM shares to go into hyperdrive and now over the last few days, they buck the trend quite nicely again...

B.

RickshawETF's picture

Top Ten?

Damn!  Missed it by that much . . .

benque's picture

What we are allowed to burn

and what we are not allowed to burn is kind of interesting.

Allowed:  National flag and other symbols of peace, prosperity and justice....because these things/symbols we own.

NOT allowed:  Fiat currency....because we never really own it.....even the silver coins from 1960s and earlier.

This post has made me think twice about owning silver monetary coins.  OK, I've thought about it and will continue stacking as before.

Turd Ferguson's picture

And this is interesting

MODERATOR
Turd Ferguson's picture

Allison seems to be the guy

MODERATOR

Allison seems to be the guy to be rooting for when the announcement is made later today.

Dr Jerome's picture

I get it...

Hmmm... Allison,  So that's why gold is hanging in tough this morning, refusing to drop.

Edit: Strange things happening on my brand new, university issued computer this morning. I was typing up a few comments in my word processing program about Obama's legacy and how he has really screwed up the Middle East, and when I typed in certain key terms--the kind that our big brother is on the lookout for, my computer crashed before I got to the end of the sentence. 

Paranoid!

I better sign off... a black SUV just parked across the street. devil

tonym9's picture

yesterday morning I was

yesterday morning I was walking by the tv with cnbc on at about 10am cst....I thought it odd that I heard Don Chuu or whatever his name is making a BIG deal about 'gold miners are surging and GDX is up 2%. CNBC never talks about surging miners. Now the USD/JPY to 100 x2 announcements. Hmmmm

H8Fiat's picture

Comex thoughts

There is no doubt about that HFT's buy / sell with certain financial indicators (USD / Yen), GDP, BLSBS data, etc.  What I have never seen is WHO owns / controls these HFT's and the defined entities of Speculators and Commercials.   

Could they all be the same people trading the same derivatives back and forth within different Corp departments or offshore companies?  Even the commissions on each sale they can then create out of thin air to bolster transaction profits.  Virtual control of markets based on anything so long if multiple entities are in collusion.  We KNOW that the collusion exists.

H8

Blaggers's picture

USDJPY

USD/JPY all over the place today. Hard to see a direction that it's going to go in.

I like Great Panther Silver as well Benitho.........it's looking pretty good today.......again

Another silver which is trying to break up through a trendline today is First Majestic.

Angry Chef's picture

Welcome Aboard Trump Flight 1600

I tell you what. We'll accept these folks into Canada but you've got to take our Prime Minister.

Welcome Aboard Trump Flight 1600 - YouTube

billhilly's picture

Hooverville...

Here is a comment from the "Hooverville" article posted on ZH yesterday;

http://www.zerohedge.com/news/2016-11-28/welcome-hooverville

Shemp 4 Victory cowdiddly Nov 28, 2016 8:54 PM

Trump can avoid this if he comes clean with America during his first State of the Union address. This is the only time he can do it and maintain credibility.

The state of the union is bleak. Trump needs to tell it like it is, no bullshit, explaining the situation, how we got here, how the economy is way worse than the rigged government figures indicate, and how everyone (including the Hamptons) is going to have to endure difficulties before things start to improve.

If he waits a year and then tries to tell everyone, all you'll hear is "why didn't you tell us a year ago".

-----------------------------------------------------------------------------------------------------

This is SO true...Trump needs to make this State of the Union address the most powerful and  candid one EVER.  Stand up there Mr. President and tell it like it is !  Address the BIG guns too...The Fed, the MIC, the DEBT !  Give it to us straight.  Shock people out of their complacency.  Let us know that you want to really clean up the mess and that it will cause pain and hardship.  And then, maybe then, we will have a real chance of saving this Union. 

If he does not do this straight away, it will not happen and he will have already failed this country in what truly NEEDS to be done. 

For me, if he gives some middle of the road softy speech then I figure nothing significant will change.  The only way to right this country is the HARD way and I have hope he will lay out his plan to do just that !

----------------------------------------------------------------------------------------

edit:  On his strong side, at least he is willing to call out the MSM and bash them.  I cannot recall any other Pres having the cajones to do this before !

http://www.zerohedge.com/news/2016-11-29/trump-launches-renewed-tweet-storm-blasting-pathetic-media

tyberious's picture

Obama was in on Hillary’s

Obama was in on Hillary’s Emails Huma Abedin Tells FBI

armstrongeconomics.com / by Martin Armstrong / Nov 29, 2016

What is really disturbing is just how far politics has fallen. The FBI released Huma Abedin 302, or the notes on her interview with the FBI. It is becoming painfully clear why Obama would never indict Hillary and may provide her a pardon to protect himself. Abedin told FBI agents she “had to tell the White House” every time Hillary Clinton changed her email address to make sure Obama’s device would accept it. Therefore, Obama outright lied saying the first time he heard of Hillary’s private emails was when the New York Times broke the story.

READ MORE

Mickey's picture

SOTU

is there a SOTU address when the President is inaugurated or is the first one the next year?

in that  event Trump can just make a press conference or an oval office presentation, reminding a comment of last year SOTU that anybody saying the economy is in decline is peddling fiction. 

but yo are correct--when a new CEO and CFO come into a company the first thing they do is write off anything remotely bad and get everything known bad out of the way, and  then increase loss reserves a bit just in case.  . 

Orange's picture

This is not good

billhilly's picture

google search...

copied...

Who gives the State of the Union address in 2017?

Though Mr. Obama does not leave office until January 2017, the outgoing president does not typically give the speech. The incoming president traditionally gives a speech to a joint session of Congress but it is not billed as a State of the Union address.

Date TBD.

Pining 4 the Fjords's picture

Is there such a thing as a "swiss stair disgorging"?

One of the earliest things I learned from TF back in 2010 was the term "Swiss stair accumulation pattern" which was a nice, bullish sign that big money was moving into silver and you could see it from the pattern of accumulation it formed on the charts.  Price would rise, then hold steady as players decided that yes, they wanted metal at this new high.  Then it would break higher to a new step, hold there, and people would accumulate at the new price, as well.  Here is a classic TF example from back in the day:

Well if that is a bullish signal, is the opposite a bearish signal?  I bring it up because I've noticed that for the last three weeks, we are seeing 20 dollar steps down, a "Swiss stair disgorging pattern" if you will, every five trading days like clockwork:

Just putting it out there for consideration, be extra wary and careful my friends. 

Blaggers's picture

SLV and USD/JPY

SLV above it's open for the day and the USD/JPY rolling over now.

GDX holding up well and coming up to a recent trendline resistance.

First Majestic Silver looking good and above it's 50 day MA (first time since August)

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