Woke up this morning (here on the east coast of Australia), made myself a cup of coffee and fired up the computer to check the "numbers" from the overnight trading in Europe and North America. Gold first, as usual. Oh ho. Spot future price down $US 27.60. Silver? Down $US 0.48. Must have been another bloodbath day on the metals. Not so. Platinum up. Palladium up. Check oil. Up another $US 1.83 to another all time high - of $US 116.69. USDX? Up, but not a lot. A gain of 0.33 points to 72.25. Still less than a point above its all time low set in March.
Was the Gold and silver sell off action initiated by New York? Yep. London AM Gold fix was $US 942.25. The PM fix was $US 908.75.
Over to the stock markets. Ah Ha. Dow up almost 229 points. Isn't it wonderful when an earnings report by a US bank (Citigroup) which is definitely "too big to fail" shows a loss but one that is "within expectations".
Now over to the "explanations" for all this wonderful (for the credit money system) market action. The consensus seems to be that we are in the midst of a "relief rally" on the "real possibility" that the worst of the financial crisis is over. The "evidence"? Well, Citigroup reported its first quarter revenues as being $US 13.2 Billion. That comfortably beat the street "estimates" which averaged out at $US 11.1 Billion. And the bank's first quarter reported loss of $US 5.1 Billion was also better than the street was expecting. It was also a lot better than the $US 9.8 Billion loss they reported for the last quarter of 2007.
We especially enjoyed this quote from an analyst at the Swiss Bank UBS. "We continue to find Gold uninspiring at the moment and are disappointed that the metal is so far off its recent all time-high.". UBS is the only bank in the world which has admitted to losing more money than Citigroup has in recent months. Somehow we do not think that UBS is overly disappointed at this evidence that the credit money system might be in for a reprieve, no matter how short lived.
So, it seems that just over a month after the Fed prevented a certain systemic meltdown by guaranteeing a JP Morgan raid on Bear Stearns, the banks are now expected to be able to "weather" the current financial crisis. The fact that the Fed has cut interest rates faster than at any time in the last quarter of a century over the last six months might have something to do with that. So might have been all the injections of "liquidity" and the "innovative" new funding sources, auction sources and the like. And then there is the blunt fact that the Fed and the Treasury combined have done all but nationalise the US banking system in everything but name. All these new procedures, and many more, might have something to do with it, but none of them are being talked about in "polite company", least of all in the rarefied company of Wall Street and the money centre banks.
The main thing is that the banking system and financial system might possibly just be able to emerge from this crisis still intact. That is the hope on Wall Street and in most of the other major financial capitals of the world. Never mind the devastation being done to global economies. Never mind the countless lives being threatened and ruined by everything from foreclosures to food riots all over the world. Those in charge of the banking system have no interest in the economy.
They DO have an interest, an abiding and tenacious interest, in anything that might threaten the banking and financial system. Part of that interest is shown by the hilarious "analysis" of the system now being practiced as a matter of course by the mainstream financial media. Part of it is shown by them running en masse to the government to be bailed out. Part of it is, in turn, shown by the eagerness of the government, specifically the Fed and the Treasury, to do just that.
Thus we have the obscene spectacle of financial reportage that delights in the reported fact that the losses at a large bank are less than they were expected to be while at the same time ignoring the devastation which is steadily getting worse in the REAL economy. For months, the powers that be were assuring us that the slight problems that the financial system was having would have no effect on the real economy. Now that the effect has long passed the stage where it can be hidden by even the most grotesque statistical presdidigitation, the message is being peddled that our troubles are nearly over because the financial system is expected to ride out the storm. Never mind the millions who have already been engulfed and the millions more who are teetering on the brink.
The sudden and out of the blue plummeting of the $US Gold price on April 18 is as clear a signal as could be given that the REAL situation in the artificial global financial system is very bad indeed. We hark back to the "disappointment in Gold" professed by the analyst at UBS.
The powers that be in the global financial community have wanted us all to be "disappointed with Gold" for a very long time indeed. The sudden retreat from the $US 1000 level, and nasty surprises like the one on April 18, are what they resort to when neither ignoring Gold altogether or ridiculing it work any longer.
On March 17, we added the $US 1000 "X" to this chart - and that is as far as Gold got. As you can see, Gold has descended in two large "spurts" since then, the most recent taking it all the way down below the $US 885 level. This week, spot future Gold actually topped $US 945 on April 16. And then came the big sell off, and the downturn on the chart, two days later.
(Chart appears here in original analysis.)
We have extended the table below into 2008, even though Gold in all four currencies in the table is now well above its 2006 highs. Gold breaking out to new all time highs in $US terms at the end of January led to bull market highs in all four currencies. And as you can see, in March, Gold improved upon those January levels in all four currencies as spot future Gold closed above the $US 1000 level for the first time ever in the middle of March. But then came the big Gold sell-off and the - so far pretty anaemic - "recovery" of the US Dollar.
| |||||||||||||||||||||||||||||||||||||||||||||||||