Manipulation May Not Succeed in Keeping Prices Lower For Much Longer – SD Market Wrap

Earlier this week, forecasting today’s market reaction to Yellen’s yammering was easy, but you must excuse me while I wipe some egg off my face given the circus that followed.

As the markets digested Yellen’s remarks, traders correctly concluded the majority of FOMC voting members remain in dove mode, regardless of the endless threats of interest rate normalization.  As Yellen yammered, traders were pricing in declining odds for a September rate hike.

Let’s take a look at Friday’s trading action:

SD Market Wrap:  Eric Dubin

Gold was initially smashed as computer-driven trading ran in front of and through the introduction of her speech.  

This is mostly an artifact of headlines driving high frequency trading systems.  But it didn’t take long for humans to digest Yellen’s remarks and gold rocketed higher:

Silver even made it over $19:

Can’t have that, now can we?  Exit Yellen, stage-left, enter Vice-Chair Stanley Fischer:

Clearly, Yellen and Vice-Chair Stanley Fischer’s comments today were a “good cop, bad cop” setup. Fischer put the kibosh on the organic rally, emphasizing that a September hike is possible and, that the Fed is not political in the face of the Presidential election.  No one believes the Fed is apolitical, and other than seriously questionable BLS employment reports, the majority of economic data continues to show the global economy is spiraling downward and, the US economy is already in a recession in all but name.

It also appears that the Bank of Japan was intervening today, given the magnitude of the move in the dollar/yen.  Craig Hemke over at TFMetalsReport.com nailed the sequence of FX price swings with this beautiful chart, and he was kind enough to greenlight sharing it with you:

This is frustrating, to say the least.  During past Jackson Hole gatherings, it was typical to see good cop, bad cop jawboning rotation over the course of the multi-day confab.  Today’s sequence of events reflects the fact that Fed policy makers are stepping up their coordination of perception management to a rotation window of hours, not days.

Despite the manipulation, the same deep pocket longer-term long bulls that have been taking on JPM and friends at the Comex nearly all year remain active dip buyers.  They were buying this smash, visible in the Kitco chart above.  

Bracketing Yellen’s  speech, four attempts to get silver under $18.60 failed.  There’s a lot of noise in these manipulated markets, but this dip buying reveals the psychology of these longs, and they are not leaving even if the powers that be manage to briefly paint the tape and push silver lower.

At SD Bullion, Doc is seeing some interesting signals with a small rise in 90% “junk” silver premiums, secondary silver rounds drying up, and our working hypothesis about how the inventory cycle of authorized silver eagle purchasers padding their inventory earlier this year working through the market is unfolding.  Tune into this week’s SD Weekly Metals & Markets for more.  

The probability that the BLS will produce another “strong” report next Friday is better than 80%.  What will be most interesting, however, will be market trading Monday through Thursday.  Precious metals are trying to put in an organic bottom and rally.  The dip buying proves this.  With signs that the physical market might be tightening and Indian buying about to rise, it’s not likely manipulation will succeed in keeping prices lower for much longer.

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