Following Friday’s impressive rip through the $1800 level in gold in under an hour, the price had been smashed down by $30. Now we’re not in the camp that every time gold and silver drop in price, we cry havoc and let slip the dogs of war, far from it. However, when there is no fundamental reason, one must question the narrative.
The widely held answer was that Powell’s comments on inflation not being transitory and lasting well into 2022 was the catalyst for the price drop. Another eight months of inflation and gold and silver get hammered on the news.
However, the headlines are always interpreted by how the author writes them and which camp they favor. Euphemizing a headline to ensure the stock market doesn’t wobble is always their priority, whatever their agenda.
For what could have read, “Powell panics about inflation” or “Powell admits inflation is not transitory,” read “Inflation to ease by mid-2022”.
The last CPI reading caused gold and silver to get hammered, yet surge minutes later, so we know that the tapering ad interest rate narrative is baked into the $1800 area.
The European Central Bank (ECB) has an interest rate decision this Thursday and the nonfarm payrolls on Friday, so expect some smoke and mirrors posturing as the week draws to a close.
The Fed has a remarkable history of not being able to deal with inflation. The markets almost grasped this recently, but then the major indexes bounced back.
If Powell, or anyone else, thinks that raising rates or tapering will solve the supply chain issues causing inflation, they are wrong.
Speaking of London and, more specifically, the London Metal Exchange (LME), they virtually defaulted on copper last week with supply with inventories at their lowest levels since 1974.
That was kept very quiet, as was the LME and their “partnering” agreement with several big banks on futures contracts that look certain to be coming to an end.
This was a five-year project that commenced in 2017 with insiders certain it won’t continue. The specifics are that the LME was looking for cohorts and had hoped the tightening regulations would push bullion desks in London away from over-the-counter (OTC) trading.
Regulators see deals between banks, brokers, and exchanges as safer and more transparent as OTC. Perhaps the tightening up on unallocated positions has improved for some who wish not to be snuffed out in the coming months.
So far, we have seen the dollar index up, yields up, and gold and silver up. Today, gold and silver are down, as are yields and the dollar index.
The Fed can control that with a single sentence. So can the Commodities Futures Trading Commission (CFTC), as they told us in March 2021, and their action when London nearly ran out of silver.
The London Bullion Market Association (LBMA) is not designed as a delivery exchange with 95% paper trading. There is still potential for it to collapse.
As time has elapsed, more and more people are becoming cynical towards the games that have been played for years that should see an end soon.
Headlines that move price day today will be inconsequential soon enough. When this game is up, it is going to blow big. Alasdair Macleod said it best,
When this is over, there will be two types of people: Those who hold gold and silver and those that don’t.
I couldn’t agree more.