Monday, March 8, 2010

Today's Comex/Paper Gold Smack Verifies that Fed QE Will Continue

Gold drifted higher in overnight trading, as Asia/India continue to accumulate the yellow dog, and then was promptly smashed about 45 minutes into the pure paper-traded Comex market.  This is a pattern that has persisted since the beginning of the bull market in gold 9 years ago, but has become more blatant during the past 18 months, as eastern hemisphere Central Banks buy gold and nearly all Central Banks have stopped selling gold. 

There's some news items that people might have missed which would explain why the Fed would be interested in slamming gold this week.  Paul Volker was in the news yesterday lecturing that it is too soon to tighten interest rates OR monetary stimulus:  “This is not the time to take aggressive tightening action, either fiscally or monetary-wise,” said Volcker in an interview in Berlin March 6, pointing to “high” unemployment. “So I think we have to, as best as we can, maintain the expectation that it will be taken care of in a timely way.”   This was in Bloomberg News yesterday, so I'm sure it was not widely read or dissemintated:   LINK

Please note that Volker specifically referred to managing "expectations" with regard to monetary policy.  Part of the Government/Fed program of Management Of Perception Economics (Jim Sinclair's term, Larry Summers' hallmark) is trying to keep the price of gold from rising too far and too fast.  It makes sense that gold would be attacked with paper on the Comex after Volker's statements yesterday.

The other news that hit the tape quietly this morning is the fact that the FDIC is bleeding badly and needs to raise billions in funding in order to keep the ongoing bank collapse orderly.  In a speech today to a group of economists, FDIC head Sheila Bair pontificated, begged actually, for more FDIC funding.  The lipstick on the pig is being sold as new bank fees to fund the FDIC bailout - but we know better than that.  The House has passed a Bill authorizing fees charged to banks to raise this money.  The Senate wants to pass legislation that would use Taxpayer money.  Here's the link:  Taxpayers will end up funding the FDIC

There is no doubt in my mind that Congress will convince itself that the Taxpayers need to fund the FDIC and the money can be garnished from the banks later.  If anyone really believes that Congress will force the banks to cough up the money needed to for FDIC to continue guaranteeing bank deposits, I would like to show them a bridge that connects Manhattan with Brooklyn that I can sell you cheaply.  It's a good deal, really.

The point here is that the Fed is going to continue printing 100's of billions to keep the system from collapsing and the Taxpayers are going to be forced by Obama and Congress to continue monetizing the banking system.  The price-action in gold today tells me I'm right.


  1. Dave,

    Did you see this post by KD?

    KD does not like gold or gold bugs and I can't believe he printed this on his blog, but he would have only done so if he saw the writing on the wall.

    So do you think this is the point of the end-game? A little tin-foily, but I have seen so many things occur that past 2 years that I would have bet my life would never happen, it's all starting to seem really possible now.

  2. Thanks for the heads up on that. See my latest posting.

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