POSX Continues to S(t)ink

66
Wed, Jun 28, 2017 - 10:56am

As the US Dollar Index makes new lows for 2017, some are surprised that the Comex Digital Metals aren't charging higher. For an explanation, one simply needs to understand the HFT drivers that move price on a daily basis.

Lets start with the dollar as that's where the action is today. After making new 2017 lows yesterday, we knew that today would be a pivotal day. When Count Draghi issued some "clarification" earlier to his remarks of Tuesday, it seemed a clear attempt to help the dollar off the mat. Instead, the POSX has fallen further this morning and now rests at almost exactly 96 and very near the KEY LEVEL of 95.88 that was the Trump election night reaction lows. A break of this level on a closing basis would seem to be a VERY significant development.

So with the POSX at new 2017 lows, why isn't Comex Digital Gold at new 2017 highs. Well, for everyone here at TFMR, the answer should be simple. While paying slight attention to the dollar itself, far more important to the buy/sell decisions of the HFTs is the specific pair of USDJPY and changes in the bond market. These are the two key inputs. The POSX ranks a distant third in level of importance.

And where are the USDJPY and bonds today? They are moving in the exact opposite direction of where they need to go to prompt the HFTs to buy CDG. Even with the POSX down, the USDJPY is barely down today. And bonds are down, too, with the 30-year Long Bond off 4 bps at 2.78%. These two in tandem far outweigh the effect of the tumbling POSX and, thus, CDG is only up as I type at 49.

So let's sum up once again. If you want the price of Comex Digital Gold to move higher, then you need:

  1. Demand for the derivative to exceed available supply
  2. This demand comes primarily from the HFTs so you need them to be buying
  3. The HFTs primarily take their buying cues from USDJPY and bonds
  4. So, in order to get price to rise, you need a combination of a falling USDJPY and falling interest rates.

Here's something intriguing, however. We noted during yesterday's POSX decline that the USDJPY was actually moving higher...which meant that while weakening against the euro, the dollar was actually strengthening versus the yen. This is odd but it is also a persistent bit of divergence that dates back to mid-April. See below where the POSX is shown as a blue line and the USDJPY is displayed as a red line:

A number of things could explain this divergence from just a simple, straight-up "US $ is stronger than the yen" to something more nefarious like The G-3 (Fed, ECB, BoJ) pumping the USDJPY due to its impact on the HFTs that drive the US equity markets. Regardless, it's very simple to deduce that IF the USDJPY had continued to track with the POSX for the past 10 weeks, it would be closer to 106 than 112. And if USDJPY was 106, where do you suppose CDG would be trading today?

So again, at the end of the day, this isn't complicated. The intraday and daily price of digital gold tracks primarily the USDJPY and it is further impacted by changes to US interest rates as discovered in the bond market. Besides that, very little else matters so you should not be surprised or confused when "traditional" correlations no longer seem to be present. We are now in 2017...not 2007 or 1997. There are no "markets" anymore, just HFT playgrounds that are directly or indirectly driven through Central Bank manipulation and policy. To understand and predict the changing price of "gold", this is really all you need to know.

TF

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  66 Comments

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Makeonemillionjourney
Jun 29, 2017 - 8:59am
TF Metals fan
Jun 29, 2017 - 7:32am

interesting overview

So if gold would be the driver of anything it would be the tail to wag the dog. A very huge dog.

TF Metals fan
Jun 29, 2017 - 5:07am

Bulliongold questions

On paper it sounds very good, much better than the cryptocurrencies. But how is this working in real life?

Where is the physical gold & silver going to be stored?

Is this available for inspection (or what garantees are in place this in not another scam).

We have seen huge fluctuations in many financial markets. Not only in the cryptos. Look only at todays price action in gold. Gold is a small market but when all of a sudden 5% is to be sold in the open market this might have a huge drop. Look at the the shifts in the GLD. Is the system set up to cope with these kind of shifts?

GibboDr. P. Metals
Jun 29, 2017 - 4:20am

ZenGold

@Dr.P.Metals

They are limiting the number of coins available to 100 million. This will create an artificial pricing mechanism where the restriction will distort the coin's value more and more over time irrelevant of the price of gold.

BullionCoin has no such limitation - you have gold or silver? you can then create coins that represent a known physical quantity which therefore allows it to be correctly and accurately valued.

David

Mickey
Jun 28, 2017 - 11:26pm

Illinois

Illinois is working toward just raising taxes. Not the best outcome but workable. It wil keep IL going for a couple of years and by then many those remaining individuals and companies with the most income will leave the state. Thus in 2 years the jackass legislators will learn that raising rates results in lower tax dollars, something that should have been learned already.

The other states should be watching very carefully. Most all og them also have their big city, a bunch of counties and the state underwater on pensions and the states are underwater on Medicaid liability.

Part of the scam of the Obama administration was to start to transfer the cost of Medicaid to the States with 10% already transferred. That actually was the straw that broke Illinois back-it owes 2 or 3 billion for Medicaid and just received a court order to pay that.

Meanwhile that's how Obama, Gruber and the bunch were able to keep Obamacare form costing as much as it was, although you would not know it since there has been no accounting for Obamacare.

Obama btw, was an Illinois State Senator from 1997 to 2004 when he became the IL newest US Senator--Apparently he was unremarkable for those 7 years because he abstained from most votes, but by default is part of the Illinois problem.

The guy leaves a trail of messes wherever he has gone.Just because he looks good, speaks well and has likeable personality, does not translate to competence.

Finally, for Illinois, There is a former Governor, Rod Blogovich in prison now for "pay for play" to a much much lesser degree than Hillary and Bill. He got in trouble fo trying to "sell" Obamas IL senate seat.

funny on how things tie together.

Dr. P. Metals
Jun 28, 2017 - 10:14pm

ZenGold

just ran across this one now:

https://www.newsbtc.com/2017/06/29/zengold-gold-backed-metaverse-platform/

I'm guessing there will be dozens of these "metal backed" cryptos shortly...

AGXIIK
Jun 28, 2017 - 6:45pm

Angry Chef Illinois will start grabbing at the grabbing place

The tax payers. They are the only chocolate milk cows left. Until they are turned upside down and shaken vigorously, so that all cash falls to the ground, this FUBAR will continue

There was one telling item that spoke volumes to me

A doctor has deferred his paycheck, $250,000 worth, so he can pay the bills and retain his employees. What of the doctor and his personal obligations? His paycheck with worth $100,000 in state and federal taxes yet without his receivables, he's one week from bankruptcy. I don't think he signed up for that. Doctors are a portable business and skill. They say CASH ONLY. Close their doors to only those who are all cash---like my primary care doctor They move to a state where they can make money and save their lives

The other small business are the feeder fish for state taxes Without them the tax revenues drop by an order of magnitude. That makes the cash flow tax cycle move ever faster into a worse bankruptcy-like situation. Illinois is totally fooked.

It's just a matter of time until the state implodes. Nothing short of a total repudiation of the pension and state employee get rich quick scheme takes place.

Until that happens these leeches and hag fish will continue feeding until their host is dead

Markedtofuture
Jun 28, 2017 - 6:07pm

Project Veritas Exposes CNN's Van Jones:

Project Veritas Exposes CNN's Van Jones: "The Russia Thing Is Just A Big Nothing Burger"

For 24 hours, Americans have been waiting with bated breath for James O'Keefe to reveal the subject of his 2nd undercover CNN video. As it turns out, it is none other than CNN's Van Jones who inadvertently revealed his real thoughts on CNN's 'Russian meddling' narrative, namely that it's a "big nothing burger."

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Marcus
Jun 28, 2017 - 5:52pm

The pig continues to stink?

Turd, you silver tongued devil, you say the sweetest things. Flattery will get you everywhere!

JackPutter
Jun 28, 2017 - 5:21pm

The Fed's comments

are starting to scare me.

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