Today's Market Observation  09.14.2009  Mon  Tue  Wed  Thu  Fri  Kirby Archive

Another Day in the Matrix

BY ROB KIRBY | september 14, 2009

I present to you all some very recent price/chart activity in both gold and silver.

Here’s a chart of gold for Sept. 8, 2009:

And now here’s a chart of silver over the exact same time period:

Now, I’d like everyone to see the two charts overlaid:

 

Think Sept. 8 was an “unusual” day?

Take a look at Sept. 10, 2009:

And now for silver:

And now the Sept. 10 overlay:

The interplay between gold and silver is CLEARLY and CLEVERLY controlled. An alert and brilliant reader named Don recently pointed out that the manipulation is BIPHASIC – meaning the upward movements are demonstrably “just as controlled/measured” as the downward movements.

I asked a good friend, Dr. Jim Willie [PhD – Statistics] what he reckoned – statistically - the odds were of two commodities moving in such “lock-step” in free markets. His reply,

“Only a guess, but a likely probability of between 0.05% and 0.005%, or,
between 1 in 2000 and 1 in 20000. Probably much less, like 1 in 50
million - but slightly more likely than President Obama is Rodney
Dangerfield reincarnated.”

Interestingly, or amazingly – perhaps, the folks at the Commodities Futures Trading Commission [CFTC] do not see things this way,

CFTC Sees No Evidence of Manipulation in Silver Market 

SEATTLE (ResourceInvestor.com) -- Much to the chagrin of silver enthusiasts who believe the price has been artificially held back, a second study in four years by the U.S. Commodity Futures Trading Commission (CFTC) revealed no evidence of manipulation in the silver futures market. Silver bugs now question the CFTC…

How the price of gold is managed to such a degree, in my opinion, is by creating mechanisms like COMEX and the London Bullion Market Association [LBMA] where unfathomable volumes of paper proxies for real stuff are traded in ENORMOUS concentrations among a few players. In this way, genuine end-use-demand becomes a non-factor in pricing.

This would help explain “how” the LBMA – which claims to be the centre of the world’s physical precious metals trade – makes claims that they trade 256,790.3 metric tonnes of physical gold per year when the entire world has only ever mined approximately 165,000 tonnes.

This model of creating an artificial construct to effectively “set” price would also seem to fit how the U.S. Government Bond Market [where long term interest rates are set] is overwhelmed by the 400 Trillion Interest Rate Swap Market, where a very few players trade hideous amounts of these financial products for which there is no observable end user.

Source: U.S. Office of the Comptroller of the Currency

If what I’m saying here is actually accurate, the implications are that “economics” now has little to do with the pricing of key strategic goods and of capital itself – it’s all become arbitrary.

Long term – one might suspect – this would logically lead to mal-investment and inappropriate / wasteful resource allocation on a grand scale.

Does this sound like the world we currently live in?

Today’s Market

Overseas equity markets began the week on a negative note with Japan’s Nikkei Index dropping 242 points to 10,202. North American Markets shrugged that off with the DOW gaining 21.4 to 9,626.80, the NASDAQ ahead 10.88 to 2,091.78 and the S & P gaining 6.60 to finish the day at 1,049.35. NYMEX crude oil futures ended the day off .48 at 68.81 per barrel.

Key interest rates: the 5 yr. government bond ended the day at 2.36% while the 10 yr. bond finished at 3.42%.

On foreign exchange markets the U.S. Dollar Index eked out a gain of .04 to 76.72.

Precious metals were down across the board with COMEX gold futures losing 6.60 to 999.50 per ounce while COMEX silver futures lost .19 to 16.58 per ounce. The XAU Index fell 2.02 to 167.06 and the HUI Index dropped 6.54 to 419.56.

On tap for tomorrow, at 8:30 a.m. Aug. PPI data is due, headline number expected +1.0% vs. prior -.9%. Core PPI expected 0.0% vs. prior -.1%. Also at 8:30 a.m. Aug. Retail Sales data is due, expected +2.1% vs. prior -.1%. Ex-Autos, Aug. retail sales expected +.1% vs. prior -.6%. Sept. Empire Manufacturing data is also due at 8:30 a.m. tomorrow, expected 13.00 vs. prior 12.08. At 10:00 a.m. July Business Inventory data is due, expected -1.2% vs. prior -1.1%.

Wishing you all a pleasant evening!

Rob Kirby
Registered Representative

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Rob Kirby
Kirby Analytics Newsletter | Toronto, Ontario, Canada
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