Stock Market Watch

Fire!!! Money Running for the Exits

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The Swiss 2-year sovereign just reached a -0.47 rate, and with JP Morgan doing such a good job suppressing paper bullion prices, gold has gone into a stealth ‘backwardation’, according to Goldmoney’s James Turk.

Quietly, the Swiss 2-year sovereign just broke through recent lows Friday, plunging to -0.435 percent.  Instead of getting a toaster with your deposit, investors have to give the Swiss government a toaster along with their money—each month, for two years?!


In other words, big money knows a catastrophic event is near and a response by central banks won’t be far behind.

Gold‘s range-bound pricing while Swiss sovereign rates drop like a stone suggest an explosion in the gold price is also near.  In fact, because of the LIBOR manipulation scheme, gold may be already be in ‘backwardation’, but the market hasn’t picked up on the fire in the theater.

James Turk stated his rational for suggesting gold has reached backwardation to Eric King of King World News (KWN).

“Interest rates are a reflection of risk.  Normally, the lower the interest rate, the lower the risk of holding that particular type of money,” Turk explained. “Historically, gold’s interest rate has always been the lowest. . .

“So interest rates for currencies are always higher than gold’s interest rate.  But because of this LIBOR scandal, and the fact that we are seeing interest rates being manipulated by central banks, for the past year we have had dollar interest rates lower than gold interest rates and that’s a huge anomaly.”

Here’s the anomaly shown graphically; and from the graph, below, Turk’s observation can lead the investor to conclude that he may have a valid point.

Pay particular attention to the white arrow in the chart, right around mid-May when the Swiss 2-year broke to a new low of -0.07 to -0.08 percent.

“On Monday, May 14, something happened that hasn’t happened since Dec of 2008,” stated Keith Weiner in a post on futures contracts were in backwardation at the same time.”

Gold (and silver) touched ‘backwardation’ the week following the Greek legislative elections.

“On May 14, this is precisely what occurred,” Weiner continued.  “Both May and July silver are backwardated.  And June gold is backwardated. Incredibly, the May silver contract is giving away a 3% annualized profit to anyone who would sell physical silver and buy a May future that delivers in a few weeks (thus recovering the same position). Even more incredibly, no one can or will take the profit that is dangling out there!

“This should not be possible at all.”

Of course, central bank “manhandling” of interest rates, as Jim Grant puts it, are possible and create all sorts of distortions as well, not seen clearly, of course, during ‘normal’ times, but distortions become especially transparent during a financial crisis.

Jim Sinclair’s panic announcement of the possibility of an over-the-weekend global announcement of a new round of massive round of money printing from the G-6 was apparently warranted, as the Spanish 10-year rate began to distance itself to the upside from the 7 percent Maginot line of a Greece-like run while Swiss rates plunged.

“A lot of people are misinterpreting what that [LIBOR manipulation] means,” Turk continued.  “It’s really just a temporary phenomenon.”  It’s really just a reflection of all of the interventions we have in the market today.”

Turk asked rhetorically, “What we really have to consider is, is gold in backwardation?”

“I think it is, even though the gold forward rate doesn’t show it simply because dollar interest rates are manipulated,” he speculated.

As amateur money watches the Dow, the big money isn’t buying into the Friday’s jobs number (or any job number), Warren Buffett’s truly shameful malarkey about gold, and certainly not central bankers’ equally pathetic diatribe.

Most recent case in point: Another nonsensical jobs report out of the U.S. ministry of propaganda showed an ‘unexpected’ rise of 163,000 non-farm payroll jobs and an 8.3 percent jobless rate.  But, Swiss money manager Egon von Greyerz of Matterhorn Asset Management explains why there’s a panic run into Swiss paper.

“The real unemployment is 23%,” von Greyerz toldKWN, on the same day as the Turk interview Friday. “The Non-farm Payroll going up by 163,000, if you look at the seasonal adjustments and the birth/death model, those two adjustments were 429,000.  So they added 429,000 out of nowhere, on paper.

“If you take those 429,000 off of the 163,000, instead of an increase, you get a 266,00 decline in payroll.  So the figures are nonsense….”

Take it from the Swiss; they know money, and they know gold.  They were smart enough not to join the eurozone; they’re smart enough to hold the highest per capita official gold stock of the world—by far!

The Swiss aren’t about to be fooled by the Bernanke-Draghi tinkering of the financial ‘weights and measures’ as the rest of the world has been duped.  And which European country was never attacked by Hitler’s Third Reich?  Switzerland.

von Greyerz and other smart money managers know that the U.S. economy is tanking fast, which explains the sudden mass exodus into Swiss paper since May.  Therefore, gold must play catch up, or JP Morgan faces a force majeure in one of the precious metals—most likely in the silver market.

“. . . we probably missed the last chance to buy gold at $1,580, and silver under $27,” said Turk.

“I think it’s becoming increasingly clear that the central planners are bluffing,” Turk continued.  “They are holding a losing hand….People are starting to understand they are being played with by these guys.”

Turk believes the next big rally in the precious metals has begun.  He was correct last year, and from the looks of the Swiss 2-year bill, gold could breakout above $1,640 as early as this week.


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Post Written By: Mr. Dominique de Kevelioc, de Bailleul

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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