Diamond News Archives

Gold rallies to $1516 as stocks and bond yields plunge on China’s trade negotiators cutting trip short - Gold Today September 20, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International

 Overnight –choppy trade between $1498 - $1507

·        Gold was a little choppy last night, trading in a range of $1498 - $1507.

·        It climbed to its $1507 during Asian and early European hours, taking out resistance at yesterday’s $1504 high, but was capped by the down trendline from the 9/4 $1557 high. 

·        The move was fueled by a decline in the US 10 year bond yield (1.794% - 1.76%) along with a softer US dollar (DX from 98.38 – 98.14). 

·        The dollar was pressured by a firmer yen (108.09 – 107.74, stronger Japanese Core CPI), euro ($1.1038 - $1.1068), and pound ($1.2520 - $1.2580, EU’s Juncker’s openness toward alternative solutions to the Irish backstop yesterday still resonating).  

·        Gold also benefitted from a surprise cut in India’s corporate tax rate. 

·        Later during European time, gold slipped back to $1499, fading strength in S&P futures (+8 to 3016), which were helped by news the US was temporarily exempting more than 400 types of Chinese products from tariffs that the Trump Administration had imposed last year.  

·        A rebound in the US 10-year bond yield (1.793%) and US dollar (DX to 98.49) also weighed on the yellow metal. 

·        The greenback was helped by a decline in the euro ($1.1026) from a weaker German PPI report and the pound ($1.2476) from comments from the EU’s Chief...

By now, it would have been hard not to have read about the Justice Department’s landmark criminal indictments against three additional precious metals traders from JPMorgan. Two of the traders charged are current employees and include the head of global metals trading. The charges involve spoofing and market manipulation that extend back for nearly a decade. In a very serious turn, the Justice Department invoked the Racketeering and Corrupt Organization Act (RICO) and referred to the pattern of wrongdoing at JPMorgan as that of a criminal enterprise. I am grateful that the new charges validate virtually everything I have alleged about JPMorgan for more than ten years to the point where a subscriber quipped that the DOJ was plagiarizing my work. 

Simply put, the Justice Department leveled the most serious (and deserved) charges against traders of JPMorgan possible, but stopped short of stepping over the critical line of charging the bank itself. This is not a knock on the Justice Department, whose case has been near flawless to this point. As much as I am convinced that JPMorgan has been the prime precious metals manipulator since 2008, indicting the bank for that would likely be a death sentence for JPMorgan with incomprehensible collateral damage to the financial system and society in general.

Another line that the Justice Department went right up to but didn’t cross was in not acknowledging the real crimes that JPMorgan has committed since it acquired Bear Stearns in 2008, and particularly since 2011. Sure, the many instances of spoofing cited – the entry of orders that are immediately cancelled and are solely intended to artificially move prices in a direction beneficial to the spoofer – are devoid of legitimacy and should be cracked down on. And there can be no...

The New York Fed outlined a schedule on Friday that would see it conduct daily repurchasing operations through^[1] October 10. The repurchasing rate is the amount borrowers like banks and hedge funds pay for short-term funds in return for highly rated collateral. The central bank said it would carry out daily overnight repos of up to $75 billion. In addition, it said it would conduct three so-called term repos of $30 billion every week until October 10. These repos would have borrowers taking out funds for a longer period of 14 days. After October 10, the central bank said it would conduct repo operations as necessary....

References

1. ^{^} that would see it conduct daily repurchasing operations through (www.newyorkfed.org)

In the same year that the Bank of England was created – 1694 – John Law became a fugitive. He killed a man in a duel, was thrown in prison awaiting execution, and escaped to Europe. After some years of gambling his way through the European courts and writing surprisingly prescient texts on monetary economics he landed in France. One of history’s first grand experiments with unbacked paper money was about to begin.

Law’s monetary extravagance ^[1] between 1715 and 1720 was not simply a Ponzi scheme by a monetary quack, but — at least initially — a real value-add. He set up the General Bank (“Banque Générale”) and received a charter in 1716. The bank’s notes were not legal tender, were redeemable on demand in gold, and looked to the world as another private joint-stock company. As the paid-up capital was only partly subscribed and three-quarters of that was paid with billets d’état (government debt that traded at 40% of par value), his effective capital was only around 825,000 livres – a fairly small company. His charter permitted him only to accept deposits and discount creditworthy bills.

Richard Dale^[2] explains in his classic account of the South Sea Company (whose conversation strategy was based on Law’s then-seemingly successfully scheme) that “customers [of Law’s bank] would receive back the same amount of coins that they had deposited, regardless of any revaluation/devaluation of the livre that might occur”. In times where kings and queens altered and changed the specie content of the currency almost at a whim, such an insurance service provided by Law’s bank was very useful. Dale continues:

the Bank in effect united the unit of account with the medium of exchange, thereby...