Well, Y-Day is here! We've waited for years for the Chinese and their Shanghai Gold exchange to offer a competing Price "fix" to the existing structure out of London...and it all starts tomorrow! How will this impact the gold market? At what price will the Shanghai Fix come in?
By about 8:30 London time tomorrow morning (3:30 am EDT), we'll know. And won't it be fun to find out? How will this process work? At what price will tomorrow's yuan-denominated Fix be set?
From a "process" stand point, I don't suppose it will be radically different. The current spot market will be assessed and a "fix" price will be set. Then, for the next 24 hours, this will be the accepted price for wholesale gold that is transacted in yuan. Come Wednesday, the Fix will be reset to a new price according to market conditions.
But what about "price"? What price will the Chinese use? Again, this will be a yuan-denominated price so you'll have to take relative currency valuations into consideration, as well. At the end of the day, I do not expect this first Chinese fix to radically alter the landscape. The Chinese will likely assess the current spot prices, particularly in Asia and Shanghai, and set tomorrow's fix accordingly. I asked Andrew Maguire about this earlier today and he indicated it might be three to five dollars above whatever spot price was currently being seen in London. That sounds about right. If they do too much right away, they risk delegitimizing their process. They also risk some significant arbitrage. So, in the end, don't expect some crazy new price scheme overnight. However, DO EXPECT this new competing price fix to have a major impact over time. As we've stated repeatedly, anything that draws power away from the manipulated hellholes that are London and New York is a good thing!
(Of course, I could be wrong. Maybe all hell is about to break loose. I guess we'll know soon enough.)
The big news over the weekend was the total failure of the Doha crude oil meeting. When crude opened last evening, it immediately fell nearly 6% and it's currently still down 3.5%. Given the way that the S&P was linked with rising crude last week, you'd think that the stock market would be sharply lower. HAHAHAHAHAHA! YOU SILLY RUBE! WHY WOULD YOU THINK THAT?!? THAT'S NOT ALLOWED TO HAPPEN!
The S&P futures did trade lower overnight, often looking 8-12 points down. But, in a stunning development, look at what has happened once the NYSE opened:
So what is the S&P tracking today? The USDJPY, of course! Again, it's as if the HFTs simply get flipped to whatever is going UP on any given day. If it's crude, they track crude. If it's the USDJPY, they track USDJPY. If it's neither, then VIX gets slammed and the HFT algos buy S&Ps because of it. It truly is remarkable and sickening to watch. Here's your USDJPY chart for the same time period as the S&P chart show above. Do you notice any similarities?
Anyway, turning to gold, we sure have been testing The Never, Ever, Ever, Ever Rule quite a bit recently...and I find that interesting. If you've followed the metals for a while, then you know that The London Monkeys usually attack price about 4 days out of five. Andy Hoffman calls this "The Cartel Herald" and it has literally been this way for years. However, over the past month or so, it seems like The London Monkeys only attack about one day out of three...leaving all of these tests of The NEEE Rule. So what's the deal? Are The London Monkeys being forced to stand down due to all of the investigations and lawsuits? Is it simply that physical demand os so strong that The Monkeys are unable to overcome it? I don't know for sure but any type of pattern change always grabs my attention and this certainly seems like a change of pattern/behavior.
After rallying then being slammed lower overnight, gold got to $1243 earlier this morning but is now back to a $1235 last. Whatever. At least it's not down $20 AND it is still holding above its 50-day MA, which today is near $1235. Keep your eyes on this level and then we'll wait to see what tomorrow brings.
And silver remains resolute and holding firm above $16.20...even after is was deliberately rigged lower and away from a possible breakout back on Friday. Again, we'll have to see what the rest of the day brings but, with a clear emphasis being placed upon spiking the USDJPY and, by extension, the "stock market", we may continue to see rigging pressure back toward $16.
We've got a lot to do this morning so I think I'll shut this down here and get it posted. Be sure to check back later today, though, for the usual full podcast summary and review.