April 28, 2013
Weekly Market Outlook
By Keith Schneider
Back in 1964, the plot of the movie Goldfinger (one of the great James Bond movies), villain Myron Goldfinger attempts to corner the Gold market only to be thwarted by James Bond. Fast forward to the late 1970’s and the real life Hunt brothers cornered the silver market by taking delivery of as much silver their multi-billion dollar fortune would allow. They did this partially by buying Comex silver contracts, taking physical delivery and then shipping it out of the country on private jets, as they had concerns the government would seize their hoard. This took silver from around $5 an ounce to $50 with silver going limit up for days before it crashed, causing the Hunts to go bankrupt. The Comex (the metals futures exchange) Board of Directors fearing a default, changed the rules and only allowed for selling silver on liquidation only, breaking the back of the corner, causing silver to go limit down for weeks, while inflicting financial ruin for several brokerages houses and the Hunts as well. As a member of Comex in the 1970’s, I had a front row seat to financial history. Which bring us to the present, where we just had a historic drop in Gold prices along with an historic drop in Gold‘s physical reserves. The amount of physical gold held by JPM (the world’s largest custodian) has dropped to its lowest levels in history. What is very strange is how prices could drop at historic rates while the demand for physical gold is at its highest levels in history. Is someone making a call on the viability of the institutions that are maintaining our markets? Are the powers that be manipulating the markets to force liquidation and pop the emerging bubble? JPM are the biggest custodians of physical gold and their reserves have dropped to just 400,000 ounces from over 2 million ounces, almost 20% in one day!
Add into the mix, that US stocks at or near highs with bond yields barely budging from nearly historic lows, while Japan is in a free fall. I would say this activity is pretty far from ok and requires intense scrutiny.
To sum up the week in US Equities, that April 15th high taunts us in all the indexes with only the S&P 500 closing the week out above it. Friday was such a slow day, All week long, the thought that ran through many investors heads is how hard the market is working to stay strong. Typically, the stock market is a predictor not a laggard, around 6 months ahead of the economic facts. So, in spite of the markets inability to end the week on new highs, ending darn close to them has to mean the anticipation is for some positive numbers ahead. Of course, always subject to change, the savvy traders take profits on the rallies and look for buy opportunities on the dips.
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