"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."
Sir Eddie George, Bank of England, September 1999
"The wicked encourage and give themselves the license to attempt and commit all manner of transgressions, seeing that the fruit which injustice yields is soon ripe, and offers itself easily to the gatherer’s hand. Whereas punishment comes late, lagging long behind the pleasure of enjoyment."
I think we saw another such period of 'staring into the abyss,' and the Western central banks have reacted, and that reaction has continued, most likely to an excess. And this is yet another one of their many policy errors. But as Brad DeLong said, Bernanke decides what the market is. And for now it is useless to challenge the power of the central banks to set value at will.
I have some more serious thoughts on what has been happening in the markets, and what these things might imply. I think that the official picture of what is going on is not what is happening, and that for some reason we are being misled.
I hate to engage in speculation, but that is required by the nature of how these things are now. I do like to form a 'model' or strawman on which to hang additional data I collect to see if it hangs together, or implies something else. .
One thing I am sure of is that this is not your father's market correction in the metals, or rally in the stock market for that matter. This has semi-official hands all over it, and something significant happened late last year, and it is behind what is going on.
There is also not much doubt that China and Russia could shed more light on this, as well as the other central banks, and a few of the bullion banks, but they will not be talking until it is in their own good time.
No one I have read or spoken to really knows what the heck is going on. They don't. They might wish you to believe that they are somehow 'connected' and have special knowledge but that is a what it is.
But even the guys who would ordinarily be in the know at least to some extent do not know what is going on. And they are getting concerned. And that bothers me. There is something out of the ordinary going on.
That is what is tipping me over to think that this is something fairly significant. When I see water running up hill, it doesn't take a whole lot of effort to realize that something is not quite right with the contextual backdrop being presented.
I think the shit hit the fan late last year, and everything that has happened since then has been a reaction to that. I do think there will be a bank/market holiday, of perhaps three days, and I am looking for any little things that suggest when that might be. Then we can work back from there.
Thanks to you who send in information to me. It does help. Facts are always welcome. The more one can assemble, the better our understanding can become.
For some unrelated but light diversion, after the charts there is an interesting interview between Max Keiser and John Butler that I have included below.
Check the intraday commentary below the charting posts.
Have a pleasant weekend.