NIRP Negative For Gold?
So the Swiss National Bank announces a plan for negative interest rates and gold prices fall. Of course negative interest rates are negative for gold! Only a blockhead would think that NIRP should be gold bullish.
And if you don't think I'm being facetious, then you obviously haven't been hanging around Turdville for long....
If you ever needed an example of what a complete and total farce the current precious metal pricing structure is, you got it today. Perhaps you haven't seen the news: http://www.zerohedge.com/news/2014-12-18/swiss-central-bank-scrambles-against-russian-capital-flight-joins-ecb-sending-deposi
So the idea of negative interest rates is now being institutionalized by the Swiss National Bank. Beginning on January 22, the SNB will actually charge 25 bps for the privilege of parking money...and the price of paper gold declines. OK. Whatever. Just more proof that a system where a small handful of computer algorithms actively trading against each other is simply an unsustainable method of producing a "price". Simply put, when the paper supply price is this disconnected from the physical demand reality, something is bound to give. I'm happy to report that we are nearing that breaking point.
Today in London, the GOFO rates have plunged once again. As noted here incessantly the past few weeks, the historic GOFO plunge of November was a clear indication of a fraying paper-physical connection at prices below $1180 and near $1150. When GOFO suddenly "normalized" in early December, it was very likely due to the magical appearance of a newly found but limited supply of readily-deliverable London gold. This gold was then used to meet delivery demands as well as create paper gold for driving price back down and away from the 100-day moving average.
As you can see below, The Forces of Darkness have now exhausted whatever supply they had found and GOFO is now sinking like a stone again. This clearly indicates that, as we strongly suspected, paper prices below $1200 are unsustainable. This ultimately puts The Evil Ones in a very tight box as we head into 2015 and it sets us up for an explosive and powerful Q1. Until then, do like I do and just laugh away at the silliness and perversion of it all. NIRP = lower gold. That's an alltime classic!
And here's why today's SNB announcement only raises my confidence level in expecting a January breakout. Did you notice the date which the SNB will institute NIRP? January 22, 2015. And what's the significance of this date? As John Butler informed us during today's A2A, January 22 is the date of the next ECB meeting. It is entirely logical to assume that the SNB already knows that "ECBQE" is going to be announced on January 22 and they are taking steps to prepare themselves. If the euro is going to decline after the ECBQE announcement, only NIRP is Switzerland will keep money from rushing into the Swiss Franc and putting extreme pressure on the beloved euro peg. Therefore, this is clearly a preemptive move by the SNB ahead of expected ECBQE in January.
Putting it all together:
- NIRP now being institutionalized around the globe
- ECBQE in January along with continued yen devaluation
- Physical floor put under gold price at/near $1150
This makes it highly likely if not probable/inevitable that gold finally breaks out and UP, away from the Cartel-imposed, momentum-stifling pattern we've been forced to deal with since May of 2013:
Of course, in the meantime, we're left dealing with the current situation. Clearly, the movement that's been afoot all week has been to sell the rallies and cap prices as much as possible. However, as I've been telling you all week, gold has really nice support between $1180 and $1190 and anytime silver has neared $15.50 these past six weeks, it has almost immediately bounced. I expect this to continue and, frankly, would not be the least bit surprised if the selling finally relents soon and we instead rally into tomorrow's close.
And finally today, just a few words on crude. As discussed in yesterday's podcast, it has now failed multiple times to get back above $59 as, just this morning, it reversed again right at $59.01. I have a last of $55.66 and, if it begins breaking down again through $55, the bottom might drop out really fast as recent knife-catching longs quickly head the exits. WATCH THIS CLOSELY in the hours ahead for the short-term impact on equities, the miners and the metals.
Today's A2A with John Butler was simply fantastic and it is required listening for everyone. Therefore, I'll be posting it this afternoon instead of a podcast. Please look for the link in a few hours and then be sure to listen. Invaluable stuff from a brilliant guy.