A Warning... . . .
Second day in a row that gold is down more than silver... the ratio has backed off from just over 98 back down to just over 97... which doesn't seem like much ?
It looks like a flashing red light, to me... At the least this bears careful watching... so, at least a "caution" being signaled, if not a warning.
I should have seen the oil trade coming... as soon as the GTE caveat (oil prices sustaining the uptrend) failed... but I missed the signal. I'm not wanting to miss others like that... which are obvious in hind sight.
Silver, by rights, should be cratering... it is tied to industrial uses in electronics manufacturing with that accounting for half of its demand... China has been wrapped up in the virus for months already... and silver should be reflecting that now... while gold should be... at least holding its own ? Not surprised to see the metals declining in current environment... and have predicted that would occur as we move past the initial round of the fear driven trade.... BUT... why the reversal in the divergence... now ?
Gold bugs who have been stacking gold in the basement... are probably not heading to the pawn shop today seeking to shed their stack for a bit of paper that's most useful to them just now as a virus vector ? The preppers now are more likely to be all hunkered down in their basements guarding the stack... patting themselves on the back for being so right for so long while everyone dissed their pet rock collection.
So, why the divergence ?
The only obvious explanation I see... is that, for the same reason as we see the price manipulation in metals markets... banks have been actively accumulating gold as a tier one asset under the Basel III arrangement. Good enough evidence to consider it... that banks have long been planning an eventual end to the current fiat currencies, with a "reset" that includes, at least, a new currency regime, and new currencies to be created with a direct tie to gold... if perhaps among others in a "basket" of commodities. But gold alone has already been re-monetized... it IS a tier one asset under Basel III now... and that's why banks have been manipulating the price lower while working at accumulating gold... before "the reset".
But right now... we're seeing... distribution. Someone is liquidating gold holdings... which wouldn't be that unusual in a major market reversal, to see some of that...
Perhaps its only unwinding the prior excess... as that is made apparent in the ratio at a peak ? That's possible... but it doesn't comport with the market situation... it begs the question of why we're not seeing more of the same in gold being accumulated... as the system undergoes greater stresses... more if gold is already known to be one of the eventual solutions to that problem being experienced.
Seeing gold falling more than silver ? That, to me, indicates a bank, or banks, that are under enough stress dealing with a declining market... that selling the gold reserve is the only obviously accessible source of liquidity left to them. In other words... non-monetary assets like silver... are outperforming monetary assets like gold... because of the stresses the monetary system is experiencing.
I note that the energy trade is on fire again today... DRIP is up 28%... so perhaps that's the source of stress... So, which major bank is it that has the most risk in that trade ? Which bank that is famous for "talking its book" has been touting gold recently ? (Goldman) And, which was prescient enough that the CEO had a heart attack ? (JP Morgan) Which is already fully well known to be a "dead man walking" without a real hope of being bailed out ? (Deutschbank). Or... China ? Saudi Arabia ? Russia ?
Someone is leaking gold.
And the market isn't helping them out by running gold higher...
As I write this... I'm also working on a bit on the inverse ETFs... as I examine each of them, I've noted that some are already disappearing...
Watch the Repo numbers... which have been growing daily... ?
There is a rapidly growing risk of market failures... and the 3X ETFs are clearly not immune to the market stresses, as the banks themselves would appear to be undergoing some stresses that aren't being discussed...
Next up.... bank failures ? Liquidity risks don't appear to be contained...
At some point, the interest in capital preservation should begin to outweigh the interest in amplified returns... |
