Gene Arensberg for Got Gold Report

"... In order for the initial 124-tonne sale to have occurred 'legally' it would have had to have been 14 traders, all with zero orders open, all acting simultaneously, all acting independently, in their own self-interest, without colluding with each other to 'sell for effect' or conspiring to foment a price smash.

"In actuality, the chances that there were 14 traders who held zero open orders all acting independently, all throwing their full allowable 3,000 contracts into the gold market within a few minutes of each other are infinitesimally small.

"Much more likely is that the initial sale that triggered the sell-stop putsch in gold was done by a single trader, acting so far outside the position limit regime as to be brazen about it."

“The hedge members can use their bona fide hedger exemptions to sell more than the limit, but not without filing paperwork with the exchange.”    

If true, and we do believe it is true, then whoever blew out the gold market on April 12 is already known to the CFTC (and what documentation they used to back up their trade).   But don't hold your breath waiting to hear about if from the CFTC under Goldman Sachs-ex Gary Gensler.  

Mr. Gensler is a Goldman sausage grinder from way back..."  

http://www.gotgoldreport.com/2013/05/so-much-for-position-limits-on-comex-gold.html

Grant Williams - Do the Math

Jim Rickards Interview

Central Banks Unite

Paper Gold v Physical

"China's demand for gold jumped 20% to 294 tonnes in the first quarter of 2013, while global gold demand overall slid 13% thanks to the dramatic rotation of demand from paper to physical. Chinese demand in gold bars and coins grew to 109.5 tonnes - more than double the five-year quarterly average of 43.8 tonnes.Central banks added 109.2 tonnes of gold to their reserves in Q1 2013, the ninth consecutive quarter of net purchases. But it was the Q1 ETF outflows of 176.9 tonnes, equating to a 7% decline in total gold ETF holdings that obscured the strong rise in investment for gold bars and coins at the retail level. In the face of the huge 'paper' gold ETF outflows, 'physical' gold demand surged to its highest in 18 months..."

"Overall total global demand for gold in Q1 2013 was 963t, down 19% from Q4 2012.

Marcus Grubb, Managing Director, Investment at the World Gold Council commented:

“The price drop in April, fuelled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries. Putting this into context, sales of bars and coins, jewellery and consumption in the technology sector still make up 81% of the market.

“What these figures show is that even before the events of April, the fundamentals of the gold market remain robust with growing demand in India and China, central banks consistently adding gold to their reserves and strong buying of investment products such as gold bars and coins.”

The key findings from the report are as follows:

• Total demand in China totalled 294t in the first quarter, a rise of 20% on the same quarter last year, as the economy continued to pick up from the downturn experienced in the second half of 2012. Of that figure, jewellery demand in the quarter was a record 185t, up 19% on last year, while bar and coin investment was 110t, rising by 22% from last year.

• The Indian market also demonstrated a continued appetite for gold. Total demand was 257t, up 27% on the same quarter last year. Retail investment was up 52% while jewellery was up 15% on Q1 last year.

• Q1 2013 was the seventh consecutive quarter in which central banks acquired more than 100t of gold, and the ninth consecutive quarter in which central banks have been net purchasers as they diversify their portfolios. Central bank net purchases were 109t in Q1 2013, although the figure was 5% lower than the purchases a year ago.

• ETFs saw a net outflow of 177t in the quarter. By contrast there were strong inflows into other forms of investment: bar and coin demand was 378t, 10% higher than last year.

Marcus Grubb, Managing Director, Investment, at the World Gold Council commented further:

“Gold-backed ETFs, which made up 6% of gold demand in 2012, have seen some holders, primarily in the US, collect profits and move into equities. While gold ETF holdings are down, this has been balanced by 378t of investment in bars and coins, an increase of 10% on the same period last year, and up 12% on Q4 2012.

“Overall, the long-term appetite for investment remains strong, demonstrated by the continued demand for bars and coins.”"

http://www.zerohedge.com/news/2013-05-16/gold-demand-one-chart-physical-vs-etf

Fair Value Gold - from James Turk

Gold Chart

courtesy of CIGA Bo Polny via Jim Sinclair's MineSet

Currency Wars

A Proper Cup of Tea

VIX

By Nikolaj Gammeltoft & Whitney Kisling - May 2, 2013 9:05 AM CT

Historical relationships between U.S. equity and options prices have come under increasing strain in the past week, with the record rally in the Standard & Poor’s 500 Index awakening demand among both speculators and hedgers.

The Chicago Board Options Exchange Volatility Index moved in the same direction as the S&P 500 for four straight days through April 29, including three advances and one drop. That’s the longest stretch of lockstep moves since February 2007, according to data compiled by Bloomberg. The indexes swing in the opposite direction about 80 percent of the time.

“Normally we would expect to see the VIX continue to slide lower as the S&P 500 (SPX) grinds up,” Greeley, who helps manage more than $450 million in volatility assets, said yesterday in an interview. “But as we get more extended in the recent trend and approach significant economic reports and central bank meetings, the VIX is capturing greater interest in out-of-the-money options, both calls and puts, as people bet on more stock gains as well as buy hedges.”

Options prices usually fall when equities gain because the optimism driving share prices reduces the demand for protection against losses. That relationship is wavering as traders become less certain about the direction of stocks after a four-year, 134 percent advance, according to Andrew Greeley, a senior managing director at Stamford, Connecticut-based Acorn Derivatives Management Corp. Dealers are charging bears more for insurance and bulls more to speculate on gains.

Lockstep Moves

The VIX rose 1.7 percent from April 24 to April 29, while the S&P 500 gained 0.9 percent as speculation increased that central banks will add stimulus and companies beat earnings estimates. The options and stock benchmark gauges have moved together as traders awaited data on the American labor market and reports from the central banks of Europe and the U.S.

Policy makers at the Federal Reserve said yesterday they will maintain bond buying at a pace of $85 billion a month and are prepared to raise or lower the level of purchases as economic conditions evolve. Chairman Ben S. Bernanke is pressing on with his effort to boost employment as 11.7 million Americans remain jobless almost four years into the expansion.

The European Central Bank cut its benchmark rate to 0.5 percent from 0.75 percent today.

Jobs Report

The U.S. Labor Department publishes its monthly jobs report tomorrow. Combined payrolls for companies and government agencies increased by 145,000 workers in April after rising 88,000 in March, according to a survey of economists by Bloomberg.

“Market highs induce a psychological inflection point,” Ed Tom, global head of equity derivatives strategy at Credit Suisse Group AG in New York, said yesterday in an interview. “As the market nears historic highs, investors simultaneously buy downside puts to protect gains and upside calls to lever into a continuing rally.”

The VIX jumped 7.2 percent to 14.49 yesterday for the biggest advance in two weeks as the normal relationship to stocks returned. The gauge of options prices on the S&P 500 has risen 28 percent since March 14, when it slid to its lowest level in six years. The S&P 500 slipped 0.9 percent to 1,582.70 yesterday. It reached an all-time high on April 30.

The U.S. volatility gauge fell 2.1 percent to 14.19 at 10:05 a.m. in New York today as the S&P 500 added 0.4 percent to 1,588.41.

Options, Stocks

Options traders have been increasing bullish bets on American equities. Outstanding bullish S&P 500 options rose 57 percent since the end of March to 4.17 million on April 29, data compiled by Bloomberg show. During that time, open interest for puts increased 39 percent to 6.75 million. That cut the ratio of puts to calls to 1.62-to-1, close to the lowest level since January.

Puts with an exercise level 10 percent below the S&P 500 cost 8.27 points more than calls 10 percent above, according to data on three-month contracts compiled by Bloomberg.

The last time the options and stocks moved in tandem for four days was in February 2007, according to data compiled by Bloomberg data. Of the 45 instances when they moved in lockstep since 1990, the S&P 500 rose 62 percent of the time in the next four weeks. The equity gauge has gained an average of 1.3 percent in those times, compared with a 0.6 percent gain in all four-week periods.

Cheap Protection

Volatility may return as investors brace for losses during the historically weak second quarter, according to Randall Warren, chief investment officer at Warren Financial Service. U.S. stocks have retreated between April and June in each of the past three years, with losses in the S&P 500 averaging 5.2 percent, data compiled by Bloomberg show.

“The VIX and the S&P 500 moving together tell a tale that even though the market is moving up, people are still looking for protection,” Warren, who oversees about $85 million including VIX options, said yesterday on the phone from Exton, Pennsylvania. “Protection is pretty cheap and maybe it’s time to pick up some for a rainy day. It’s well known that this time of year is tough for investors.”

Investors using exchange-traded funds have increased bets that stock swings will widen. Shares outstanding for the iPath S&P 500 VIX Short-Term Futures ETN climbed to an all-time high of 68.8 million on April 15, data compiled by Bloomberg show. The figure for the ProShares Ultra VIX Short-Term Futures reached a record 54.6 million shares on April 11. The two had the highest volume in the past 30 days among volatility-related securities.

There are more outstanding options betting on higher volatility than lower, with 4.82 million VIXcalls versus 2.23 million puts as of April 29, data compiled by Bloomberg show. The ratio of calls-to-puts climbed to 3.10-to-1 on March 28, the highest level since February 2010.

Bullish Options

The VIX moving with the S&P 500 is a sign that investors may be expecting further market gains, buying bullish options on the benchmark equity index (VIX) while at the same time using bearish contracts to hedge their increasing stock positions, according to Gene Lynch, an equity derivatives trader at Access Securities Inc. in Stamford, Connecticut.

“VIX levels can be driven by greed as much as by fear,” Lynch said yesterday in an interview. “The fear now seems to be driven more by being underinvested, which translates to buying calls and/or stocks with protective index puts.”

To contact the reporters on this story: Nikolaj Gammeltoft in New York atngammeltoft@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

http://www.bloomberg.com/news/2013-05-02/vix-clings-to-stocks-like-it-s-2007-as-s-p-500-peaks.html

Martin Armstrong - Cyprus, MF Global, Gold Correction

Martin Armstrong is the founder of Princeton Economics and developer of the cycles-based Economic Confidence Model, which has been cited by numerous publications for pinpointing major turning points in the market.

In a recent conversation with Financial Sense Newshour, he explains how MF Global here in the U.S., not Cyprus, was the first example of confiscating funds to bailout creditors:  

The next time the banks need money they’re not going to get it. What they’re going to do is allow them to take the money from the depositors. Now this—Cyprus—wasn’t the first. The first was actually MF Global. The law is that your money deposited at a brokerage house is supposed to be segregated from the house. If the house loses money, your money is not supposed to legally be taken, under CFTC regs, to satisfy the creditors of the brokerage house. What happened to that? They just stole everybody’s money… So, MF Global was actually your first Cyprus. That was the first test. Let’s just take the money of the depositors. They got away with it there. Cyprus—they’ve gotten away with it there, and next, when this economy begins to turn down in 2016, that’s what you’re going to see.

On whether this is part of a big plan or conspiracy he says:

There’s no long-term planning. I know a lot of people like conspiracy theories and say, you know, it’s the Rothschilds and all that. Nobody’s planning this. It’s much worse. It’s completely ad hoc. They’re going by the seat of their pants.

On why quantitative easing hasn’t worked to stimulate the American economy or create U.S. jobs:

They’re working under theories that are 50 years old. They take it as if it’s official. Okay, fine, if I buy 30 year bonds, I’m therefore putting money into the system and it should be inflationary… Wasn’t inflationary! Why? Because the economy is porous. You’re assuming that you’re buying these 30 year bonds and an American is selling them to you. What happened? China said, ‘Gee, thank you very much.’ They sold all their long-term stuff and lowered their maturity on U.S. bond holdings to under 5 years. They said, ‘Thank you very much.’ So all the money went right out the back door; it didn’t stimulate anything! They did it again. I said, ‘Listen it’s not going to work.’ Finally QE3 comes: ‘Oh, okay, now we understand. We can’t actually guarantee that an American is going to get the money.’ You’re right! So, what do they do? They try mortgages, and what happens? All their doing is bailing out the banks!

On a downside target for gold:

It’s basically a short-term move. We’re probably going to see lower prices. You might get down to about $1150 or so. But this is a normal correction process. I mean we went up for 13 years! You have to at least pullback a little bit and...probably the biggest short position in history happens to be the dollar.

http://www.financialsense.com/contributors/martin-armstrong/cyprus-mf-global-gold