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Gold and the “Grexit” Threat
Gold and the “Grexit” Threat
The Everything is Fine Meme
Initially, we were also a bit surprised that the gold price didn’t rise when the threat of a Greek exit from the euro area became more palpable following the breakdown in negotiations and the outcome of the Greek referendum. After all, it was to be expected that “risk assets” would suffer and so-called safe haven assets would be sought after, at least temporarily.
However, upon giving the matter some thought, we have concluded that gold’s lack of a response (in fact, it went slightly down rather than up, so there was actually a response) could actually be explained quite easily. For one thing, speculators increased their net long position in gold futures by more than 20,000 contracts net in the week before the negotiations broke down, apparently in anticipation. While they did so, the gold price barely budged, so in a sense it was “wasted firepower”.
Image via eghtesadnews.com
Prior to the breakdown in negotiations between the troika and Greece, speculators increased their net long position in gold (above the net hedger position is shown, which is the inverse of the speculative position) – click to enlarge.
When no large increase in prices occurred on the Monday after the referendum had been announced, these new positions were quickly liquidated again. The downturn in prices in turn emboldened speculators to add to their short positions, pressuring prices even further.
There are other reasons for the reaction as well. One is that in spite of a bit of a wobble in stocks, the essential “everything is just fine” story hasn’t really been derailed. The dangers of a “Grexit” are probably underestimated and up until recently, no-one believed it to be a likely outcome anyway (it still isn’t, although it is more likely than it once used to be).
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Gold Futures Market Used For Fraud
Gold Futures Market Used For Fraud
The Comex is a complete fraud.
It’s one of the biggest Ponzi schemes in history.
With China and Viet Nam (the latter being a major gold importing country) now closed until next Wednesday in observance of their Lunar New Year, the bullion banks have engaged in a major attempt to drive the price of gold lower. Yesterday (Tuesday) 99,000 gold contracts – 9.9 million ounces or 287 tonnes – were sold into the market between 9 a.m and 11 a.m. EST, which had the effect of driving the price of gold down over $26. To put this into context, a total of 179,833 contracts traded between 6 p.m. Monday and 5 p.m. Tues. The entire daily trading period is 23 hours. But 55% of yesterday’s total trading volume – the volume used to slam gold – was traded in a two-hour window of NY trading.
Think about it this way: in that two-hour window, 35 days worth of daily global gold mine production traded in the form of paper gold. The open interest expanded by 5,290 contracts, which translates into just over 15 tonnes of gold. The total amount of gold available for delivery – the “registered” account gold – is 804.9k ounces, or 23 tonnes. In just one day, the bullion banks (JP Morgan, HSBC and Scotia) sold forward 65% of the entire stock of deliverable gold on the Comex. And that’s if you really believe the unaudited bank reports which produce the gold warehouse stock reports. I do not.
Gold was raided again today (Wednesday, Feb 18) – again at 11:00 a.m. EST. This time gold was slammed another $9 in the space of 30 minutes, most of it in the first seven minutes. Today 18,000 April gold contracts traded in the 30 minute space, representing 24% of the total volume in the April gold contract up to that point since 6:00 p.m EST the previous evening. This is 52 tonnes of paper gold – more than twice the amount of gold in Comex vaults available for delivery.
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