Tuesday, December 31, 2013

A Year-End Discussion Of The Precious Metals And Housing Markets

Eric Dubin of The News Doctors  and "Doc" of Silver Doctors invited me to chat about the precious metals and housing markets the the other day.  One of my main themes with respect to the markets since 2008 is that the Federal Reserve and U.S. Government have implemented an historically unprecedented degree of intervention and attempted control over our markets.  They are interfering in all of the markets, but especially and specifically the precious metals, housing and stock markets.

As everyone with a basic education knows, all Governmental attempts to control markets have always ended in disaster.  Currently the U.S. stock markets - the Dow, S&P 500 and Russell 2000 - are now the most overvalued they've been in history.  The housing market has been artificially pumped up with price inflation that will soon reverse - hard.  And gold and silver have been pushed down in price to a level which has created an enormous demand for physical gold from China that has to be delivered.  This has triggered a global shortage of physical bullion.  The latter point is best exemplified by the U.S. Government's de facto default on Germany's request to repatriate part of its gold held in NY by the NY Fed.

The goal of the Fed/Government with the massive market intervention program is to drive the stock market inexorably higher and the precious metals lower as mechanism to "signal" to the world that everything is getting better when, in fact, this country is systemically collapsing.  The degree of intensity behind the market interventions is directly correlated with the degree to which things are actually getting worse.

Here's my conversation with Eric and Doc in which we discuss the gold/silver markets, including China's incredible demand for physically delivered bullion, and what's next for the housing market:

In terms of what occurred this morning - with no associated news that would have triggered a deep plunge in gold and silver via the Comex paper markets -  the action today tells us how "stretched" the gold market is to the short side in paper shorts vs. physical delivery demands coming from China and soon will be coming from India again. For as stretched as the sentiment and short side is with regard to bearish positions in the metals, the sentiment and leveraged long position is stretched to the bullish side in the stock market.

When the trigger is pulled that unwinds this historically unprecedented set-up in both markets, the stock market will collapse worse than in 1929/1987 and the metals will make a move that will cause a lot people on Wall Street and, hopefully, DC to jump out the window.


  1. Why do you suppose GLD underlying physical inventory is driven down but SLV inventory is not? I understand physical gold being drained, but why not physucal silver too?

    1. 1) we don't really know how much silver might be moving in and out of the SLV trust because JPM is the custodian. I know there's a website that supposedly tracks the bar numbers but the information used by the site is dependent on the reliability of the data that is given to the Trustee of the SLV trust FROM JPM. Do you trust JPM given all the other areas of their business in which they've already been caught committing fraud.

      2) an enormous amount of silver moves in and out of the Comex vaults - especially Scotia and JPM - every week. Millions of ounces. That may be all that is required to satisfy silver delivery demands. 1 billion ozs of silver is mined every year, although that number will likely be lower this year. That may be enough, for now, to satisfy global appetite.

      3) gold has been in deficit consumption vs the mined supply over 15 years. The big Central Banks have been leasing and hypothecating gold to make up the deficit. GLD gold is being used now, which tells us that the CB's are running low on gold top supply the global demand.

    2. Thanks! Makes sense to me.

  2. What do you suppose is the endgame for GLD physical inventory? Will it go to zero amidst a musical chairs scramble or will the dollar price be allowed to rise before that happens? It is surprising to me that the drain hasn't already accelerated at an increasing rate with the writing on the wall, hundredth monkey style. Can't wait to get Jim Rickards new book due out in April...

  3. Nice interview. Thanks for your blog throughout 2013. Very good information and best of all, it's free and you don't have an agenda. I check it daily and get excited when there is a post and down when there isn't one! 2013 was a disaster for us in this sector. I went from anger to depression to flat out not caring anymore since in time things have to turn. Here's to hoping it is in 2014!

  4. I know that an opinion that contradicts the theme of this blog is not appreciated. The attached link is from the Aden sisters. I also hold P.M. as a hedge against the progressive stupidity that has take over Central Banking and Government in general. I 'm posting it in order to help those that cannot afford to take anymore loss on their current position or for those getting ready to purchase to maybe look for a better entry point. Best of luck to all.

  5. I listen to all these pundits who say gold to the moon or gold going down. The old adage he who has the gold makes the rules is passé. The new rule is, he who has the most advanced weapons makes the rules. The dollar is not going anywhere for at least a few years. The U.S. and there "partners" are not going to just roll over and let go of this monopoly. If the dollar looks like it is going to tank we all better duck n cover, cause it will be on hell of a war.

  6. Sun Zhaoxue: US Intends To Suppress Gold To Ensure Dollar’s Dominance

    I’ve got a confession to make: I believe in conspiracy facts. After having witnessed scandals like NSA, LIBOR, Lance Armstrong, ISDAfix, money laundering by too big to fail banks, rigging currency rates, the fall of Madoff, the US sub-prime event, bank bailouts (in Europe and the US), the Greek tragedy, 9/11, the Iraq invasion and Enron, I came to the conclusion it is just what people do when there is money and power at stake: they conspire.

    When it comes to gold price manipulation there are currently four camps:


  7. Flawed Fee Model Distorts U.S. Trading, Virtu Says

    Regulators could stem the migration of U.S. equity trading to dark pools by coordinating a cut in trading fees, an action exchanges are unlikely to take on their own, according to one of the biggest high-frequency firms.

    Most exchanges are charging users too much -- 30 cents per 100 shares -- pushing transactions off public markets to lower-cost private platforms such as dark pools, said Chris Concannon, an executive vice president at Virtu Financial LLC in New York. Regulators should review enacting a blanket reduction of the fees, which would also curb the rebates exchanges pay traders who facilitate transactions, he said.

    The system of charging investors for trades while paying brokers, a model known in the industry as maker-taker, is common in the U.S. and elsewhere after market making by humans became less profitable over the last decade. While these pricing systems probably can’t be dismantled, there are “things you can regulate to mitigate their impact on market structure,” Concannon, whose firm provides offers to buy and sell securities on the New York Stock Exchange and dozens of other venues globally, said during an interview.