Another Interesting BLSBS Friday
Olly olly oxen free! All is well, don't you know? C'mon in and kick the can a little farther!
Here's what we know:
- American wages are stagnant and the median income remains 15% lower than it was 5 years ago
- The labor force participation rate remains very near 35-year lows
- Of the 214,000 "jobs" that were allegedly added in the just-concluded month of October, 42,000 came in the food service "industry". This means that roughly 20% of the statistical new "jobs" went to waiters and bartenders
- And here's the best part...of the 683,000 new "jobs" that appeared in the Household Survey, 528,000 came from a statistical adjustment (make believe) in the 16-24 year old category. Rrrrriiiiggghhhttt....
Read all about it if you'd like by clicking through these four summaries from ZH:
Meh, whatever.The lies and illusions have gone on for so long now, it's really hard to get too worked up over it all...
On the bright side, the metals have rallied!
Let's start with the HUI. We've been discussing all week the importance of NOT closing below 150 on Friday as a weekly close below that level would amount to the lowest weekly close in over a decade. Thankfully, for this week at least, it appears we will dodge the bullet as I have a last of 160.65, UP over 8 points.
While this is all well, good and encouraging, it is still NOT time to be doing cartwheels. There remain several gaps to be filled and, if history is any guide, the HUI will likely come down and bang around 150 again a few more times before finally moving higher IF, indeed, this level is a bottom.
Anyway, the main and only story remains...how long will the direct 1:1 algo peg of gold to the yen remain. As we discussed yesterday, there are already anecdotal data points of physical delivery stress in the system from the US Mint story to the lowest GOFO rates in 15 years. As you can see on the chart below, twice earlier this week, the paper price of gold attempted to dislodge itself from the "peg". On both occasions, eventually a massive sell order appeared to drive gold back down and re-establish the link. Note the blue boxes and red arrows:
However, the action this morning (albeit related to short-covering, the BLSBS, Russian tanks back in Ukraine) has opened the relative gap to the widest it has been in quite some time. So, THE MAIN QUESTION IS, will this continue? IF gold can break away here and once again begin trading free of the yen peg that has pressed it lower since June, then we will see a very nice recovery and we will know that we have found a floor below which demand for physical breaks the long-held connection to paper.
As I said yesterday, this is a very exciting time! Painful, yes. However, it is very exciting to see such stress in the godforsaken fractional reserve bullion banking system. Again, let's not get the cart before the horse. Another slam may soon materialize that drives price back down to $1145 and back into lock-step with the yen. But let's watch this very closely the rest of the day, through Sunday night and into Monday. All those predicting a drop in gold to $950 and $800 may still be proven dead wrong.
Finally, just a few words about silver, which "broke" earlier today. This "market" is now so oversold with Spec shorts that there might literally be no one left to sell. After all, why did this break happen? Because buying pressure chewed up the entire offer stack in the same way massive sell orders are often placed in order to wipe out the bid stack. And how do you know when you've finally reached a selling climax? It doesn't always come with a massive, high-volume capitulation. Sometimes these things simply happen with a whisper...where everyone who was going to sell has sold. In that case, you're left with nothing but buyers...or at least a simple case of more buyers than sellers...and price begins to recover. All in all, this morning's market break in an UP move is actually a very positive sign.
(chart courtesy Nanex. Twitter @nannexllc)
As I close, gold and silver are both UP nearly 2%. Could this be a new beginning? Maybe. Quite possibly. However, we need to watch the remaining hours today and the action of early next week very closely.
Have a great weekend!