Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover the price action of gold and examine the “what” and “why” behind those numbers.
What Did Gold Do in December?
Every December is a time of thin volumes in all assets. One good-sized sale or purchase can move prices. All this was exaggerated by the Fed’s December 16 interest rate hike. Gold jumped $20 an ounce multiple times this month, only to see the gains slowly eaten away each time.
December 4th was a strange day, as a very good non-farm payrolls report lifted the dollar and the stock market. What was unexpected was the price of gold jumping at the same time as the dollar.
“Sell the rumor, buy the fact” was in full swing just hours ahead of the Fed’s December 16 interest rate announcement, as gold jumped $14 an ounce and held onto those gains through the closing bell. The fortunes of the yellow metal reversed the next day, brought down by a rampaging dollar. This was only a temporary setback, as gold then went on a two-day to test the $1080 mark. Gold slowly lost steam for the rest of the month, weighed down by a collapse in crude oil prices.
Factors Affecting Gold This Month
Job Numbers
U.S. non-farm payrolls came in at 211,000 new jobs added for the month, better than the 200,000 expected. Unemployment remained at 5%. This data basically gave the Fed the green light to raise interest rates for the first time since 2006.
Strong Dollar
The dollar was expected to gain throughout the month on strong jobs news and a Fed rate hike, but the European Central Bank’s announcement of further stimulus measures did not go as far as many expected. This caused a big squeeze in the crowded short euro/long dollar speculation, which saw the euro jump to close to $1.10. This was another case of speculators betting on a “sure thing,” only to get burned.
Fed Rate Hike
The December 16th interest rate hike by the Fed roiled markets that were already volatile on a lack of trading volume. Contrary to expectations, gold did not fare badly at all in the following days, though it lost ground after this last rally of the year.
Year-end Selling
Most senior traders take most of December off, leaving the junior traders to hold down the fort. Most serious investors also take their holidays then, meaning there are much fewer trades happening. The most common trades for December are tax-loss trades and rebalancing of fund portfolios.
If an investor or fund has realized large stock gains but losses in gold, they will sell that gold the last week of the year to count the losses against the profits in stocks. Diversified funds that hold gold will have to buy more gold at the end of the year if gold posts a loss.
This happens when many traders and investors are gone for the holidays, which means that trading activity is very low. This allows large trades to move prices.
Paper Gold Speculators
Paper gold speculators hit a record short position early in the month, as speculators piled into “a slam dunk” trade. Net short positions on COMEX gold were 17,949. The traders taking the long side of that short play were the bullion banks, which set a record net long position. Speculators, noting that futures contracts were for 325x the amount of actual physical gold in COMEX warehouses, decided to jump over to the bullion banks’ side of the equation. The December 29 Commitment of Traders report showed that the all-time record net short position at the first of the month had turned into a massive net long position. The number of traders going long over the number of shorts rose by 12,771 contracts to 26,427.
This is good news for those holding physical gold, as it means that more of the biggest players expect gold to rise in the near future.
Oil Collapse
Crude oil had a rollercoaster month, but it was mostly downhill. Starting the month at $40 a barrel, U.S. crude fell to multi-year lows by mid-month. Crashing crude prices pulled most commodities, including precious metals, down with it. U.S. crude ended the month at $37 a barrel.
Junk Bond Meltdown
Believing the lullaby that the Fed would not let anything bad happen, some investors piled into junk bond mutual funds without understanding exactly what they were getting into. They found out that the old saying “high yield equals high risk” when three large junk bond mutual funds collapsed in three business days. This contagion led to a risk-off sentiment in stocks as well as bonds, as billions of dollars worth of investments were yanked from the market.
On the Retail Front
Us Mint
The American Silver Eagle set a new all-time sales record for 2015, selling the complete production run of 47 million coins by December 16. The record had actually been broken November 30th, when sales exceeded 44 million ounces.
To put this in perspective, 47 million troy ounces equals 1,461.8 metric tons. The total amount of silver mined in the U.S. for the year was only 1,169 metric tons.
Silver Eagles weren’t the only hot commodity at the US Mint. Gold Eagle sales were up almost 53% from last year, and all 45,000 of the America the Beautiful 5 oz Saratoga National Historical Park silver coin sold in two days!
Central Banks
The Red Twins of Russia and China show no signs of slowing down their acquisition of gold reserves. Russia bought another 22 metric tons of gold in November, marking the ninth straight month of net gold purchases. (Part of this is supporting domestic gold mines by buying their output.) Through November, Moscow has added almost 187 metric tons to its gold reserves.
China added almost 21 metric tons to its gold reserves, making five months in a row that Beijing has bought gold. Kazakhstan has them all beat on buying sprees, as November marked the 38th month in a row that the little nation has scraped up as much gold as it can.
Even with all these gold purchases, both China and Russia are far behind the Western nations when it comes to the percentage of gold they hold in their reserves.
Market Buzz
First Step In Gold Confiscation
On December 1st, the Greek government (remember those “stick it to the banks” socialists that won the election?) declared that citizens MUST declare on a new tax form any cash over €15,000, jewelry, and physical precious metals they own, either at home or in safety deposit boxes, in Greece or in foreign nations. While the government says this only applies to members of Parliament, government employees, media owners, and “other categories of persons,” it’s obviously aimed at suppressing dissent with threats of confiscation or charges of corruption. You don’t have to be Pythagoras to see the angle the government in Athens is taking with this. It won’t be long until ALL categories of persons will be forced to declare their assets held outside the banking system, on pain of confiscation
Original article at the Enikonomia newspaper
Same article, translated to English
Steve St. Angelo – SRSRoccoReport looks at US silver import and export data, and discovers that a substantial amount of silver is missing from normal trade. The only explanation is “large entities” are acquiring physical silver and abandoning paper silver on a gigantic scale.
After “junk bond dominoes” started falling, David Stockman warned of “carnage in the casino” that the Federal Reserve has built. He urged people to “sell the bonds, sell the stocks, sell the house, dread the Fed.
“Bond King” Bill Gross also goes with the gambling theme, calling central banks “casinos” that are printing money
Peter Schiff is among those warning that the economy is far weaker than the Fed wants you to believe. He predicts that this month’s rate hike will soon be reversed, with quantitative easing resuming shortly afterward.
China gold expert Koos Jansen interviews economist Willem Middelkoop about the coming “Big Reset” in the global economy, aimed at ending the US dollar hegemony.
In the category of “So obvious, even a liberal can see it,” Bernie Sanders says that the Wall St. banks are running the Fed, and it’s time to stop them.
While on the subject of the Fed, former Chairman Ben Bernanke, who first started up the money presses to bail out the elites, said recently he never expected zero interest rates for so long.
Marc Faber talks about all the mistakes the Fed has made, and what it means to different assets. He says if someone forced him to choose to put $1 million on the Dow Jones Industrial Average, or gold, he’d pick gold.
Finally, Ron Paul gets a little coverage on his charges that the gold price is being manipulated.
Looking Ahead
Looking ahead, expect the “January effect” in stocks and also gold. The first week in January is when diversified funds rebalance and will need more gold. Also, those investors and fund managers who sold gold for the tax writeoff in December will be looking to replace the bullion they sold.
We end this month with the story that the Daesh (aka ISIS) are using blank passports they seized from government offices in Syria and Iraq to make fake passports for terrorists to get to Europe and the U.S.