Equities, following the worst-performing week since October, staged a massive comeback, with the NASDAQ and S&P 500 closing on Friday at record highs and the Dow and NYSE Composite finishing within one percent of all-time levels.
Lagging the insatiable desire for paper holdings was the Dow Jones Industrial Average, which added a stunning 1,165 points on the week, but was up a mere 3.89%, a pittance compared to the six percent gain on the NASDAQ, which was rocketed higher by 785 points.
It was the best week of the new year, by far, suggesting that stock markets are either overheating or preparing to blast off into unknown territory once again. Considering that the US congress is knee-deep in negotiations over a $1.9 trillion stimulus package that includes payments of $1400 to millions of individuals, Wall Street's rampage to higher ground seems to be etched in stone, for now.
Despite the general slowdown from COVID-19 restrictions in a handful of states, companies - particularly those in the tech arena - posted solid, if not outstanding, fourth quarter and year-end reports. With the coronavirus crisis abating - cases are down more than 40% in some states - stocks are likely to maintain strong momentum while the market fosters more madcap episodes like those seen in GameStop (GME), AMC Entertainment (AMC), and others.
Speculation largely drives stock prices higher, and speculation with free money from the Fed (banks, brokerages) and the federal government (individuals) should keep the rally alive and well through Winter and into Spring, which is a mere six weeks hence.
Fixed income markets were less enthusiastic. The Treasury complex saw a steepening fo the yield curve, as yield on short-dated maturities collapsed and the long end sold off, producing yields on the 10-year note, 20-year, and 30-year bonds at 12-month highs.
Yields on 1-month, 2-month, and 3-month bills fell to 0.02%, 0.03%, and 0.03%, respectively, while the benchmark 10-year note yielded 1.19% at week's end. The 20-year yield was 1.79%, while the 30-year yielded 1.97%, both the highest since 2/20/2020. The 10-year was at it's highest yield since February 27, 2020, an indication that the wholesale global debt binge is well underway.
From an investor's perspective, oil had another banner week, with WTI crude rising to $57.07 in the current futures contract. However, oil futures are in backwardation, with subsequent futures contracts bid at lower prices than the up front contract. For instance, the July '21 contract is priced at $55.69 and so forth. This is almost certainly a condition caused by the recent spate of chilling and stormy weather cascading across large swaths of the continental United States, spiking demand for heating fuel.
While cold weather brings out the highest prices for fuel oil, it is essentially a short-term dynamic as expressed by the futures trading. Gas at the pump barely budged over the course of the week, particularly in the southern states, where demand is still sluggish and supply is steady.
Here's an excellent short video explaining the conditions of contango and backwardation.
Cryptocurrencies were solid, with Bitcoin getting a major boost on Friday into Saturday morning, with price topping out at $41,000 at around 11:00 am ET before taking a dip down to $38,000. As of this writing, it's recovered to the mid-$39,000 level.
Etherium made a new all-time high at $1,720 on Saturday and has since leveled off in the $1,600 range.
At last, the crux of last week's trading highlights, with the focus on the Reddit group r/wallstreetbets and its foray into the silver market.
When the redditers at r/wallstreetbets launched their assault on the silver market (remember, this is a group seven million strong, with untold number of followers), the price of silver on the COMEX was $25.26 per troy ounce. That was at the close on Wednesday, January 27. The following day, the rush was on, sending silver to $26.52 and following through with another huge gain to $27.71 on Friday. Over the two days, silver had advanced $2.45 (+9.7%).
On Monday, February 1, the COMEX price was bid as high as $29.38, with the ask at $30.38, the spread widened due to liquidity issues and also to discourage buyers. Though the efforts of the redditers was focused on ETFs, SLV and PSLV, and in the physical market, COMEX and the LBMA could hardly ignore the flows of physical metal leaving shelves of online dealers and local coin shops, but, by the end of Monday's trading in New York, they had managed to keep the price at a somwhat unreasonable (to them) $28.99.
Overnight, in the thinly traded Asian markets, the riggers went to work in earnest, pushing the price below $28 by the time trading opened Tuesday in Europe and then, the Americas. Their payback was vicious and unmistakable, crushing the price to $26.73 at the close in New York. A small bounce to $26.91, with the spread down to $0.50 from $1.00, ended trading Wednesday, but again on Thursday, they took a knife to silver, sending it to the low of the week, $26.53. Friday's bounce back to $26.90 by the close left COMEX silver down 81 cents for the week.
Gold was likewise shunted, though the affect was less profound initially. As of Monday morning, gold was priced at $1874.00. On Monday, it was struck down to $1860.00, even as silver was higher, but the riggers at the COMEX were just getting started. By Tuesday, gold was down to $1837.90, then $1833.85 Wednesday, and finally, the crushing blow to $1794.00 on Thursday. A bit of a reprive was granted on Friday, leaving gold priced at $1810.80 for the weekend.
Through the entire episode - resembling a skirmish in a larger war - both parties may have been satisfied with the immediate results but left with lingering longer term doubts. For the Reddit Rebels, the price of physical silver had gone out of control from the COMEX. Dealers were left with empty shelves and severe shipping delays on the few products they could source. Unsure about future supply, online dealers had shed the cloak of the COMEX and left prices at levels not seen since 2011, when silver and gold had reached record highs and nearly broken the COMEX/LBMA cabal.
For the bullion banks, the COMEX, LBMA, and central bankers from the Federal Reserve to the ECB, BOJ, and the Bank of England they should have realized that the horde of commoners had nearly overwhelmed their long-standing position on the high ground of institutionalized fiat currency. Talk of hearings into the operations of the Reddit Rebels (not the COMEX, hedge funds, or brokerages) were bandied about the halls of congress.
Newwly confirmed Treasury Secretary, Janet Yellen, convened a meeting with the heads of the Securities and Exchange Commission (SEC), the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission (CFTC) on Thursday, coming to a conclusion that the stock market hasd shown resilience through the GameStop frenzy and calling on the CFTC and SEC to examine the events more closely and establish a timeline for how the market mayhem unfolded.
Yellen sought and received permission from ethics lawyers before calling the meeting, along with clearance to engage on wide-ranging issues in the financial services industry.
Yellen's decision to seek the waiver followed a report by Reuters that because of speaking fees she was paid by a key player in the GameStop saga, hedge fund Citadel LLC, she would need permission to deal with matters involving the firm. That's how badly shaken was the financial services industry. Even their top regulators and overseers have been involved in deals with market participants. Yellen received hundreds of thousands of dollars in speaking fees from various firms and groups in the industry after her stint as head of the Federal Reserve (February 3, 2014 – February 3, 2018) and prior to her appointment as Treasury Secretary by illegitimate president Joe Biden.
Yellen was nominated to chair the Federal Reserve by former president Barack Hussein Obama and confirmed by the Senate in 2014 and confirmed again for Treasury Secretary just weeks ago. President Donald J. Trump removed Yellen in 2018, replacing her with Jerome Powell, the current Chairman.
Thus, Washington's elites have been shaken to their core by the commoners. The COMEX and LBMA will continue to conspire against the hopes for honest money. By keeping prices at elevated levels, precious metals dealers have registered their resistance to the onerous control that has plagued the market for decades. The redditers have neither conceded nor surrendered. The war will rage on from here, pitting hedge funds, the financial services industry, and regulators against the commons.
A full discussion on the workings and intermingling of central banks, industrial banks, commercial banks, miners, smelters, brokers, and dealers in the metals markets would take more time and space than afforded here. Interested readers can familiarize themselves with such intricate relationships by perusing this explanatory article at Bullion Star, "Bullion Banking Mechanics"
According to Blanchard and Company, a large retailer in rare coins, the six "clearing banks" that handle gold bullion transactions are: "Barclays Bank PLC, ScotiaMocatta, Deutsche Bank AG, HSBC Bank, JPMorgan Chase Bank and UBS AG."
In this extensive analysis on bullion banking mechanics by Bullion Star, many more - as many as 35 - banks are cited as "bullion banks" that handle gold, and likely, silver. Almost all of thse banking interests are members of the London Bullion Market Association (LBMA).
In a notable development, Canadian Bank of Nova Scotia (Scotiabank) decided last year to exit the metals market. Their announced departure was to be completed sometime in early 2021.
Back in 2017, Scotiabank tried to sell ScotiaMocatta, the world’s oldest gold trader owned by Scotiabank.
Unable to finalize the sale, however, Scotiabank ended up keeping its precious metals trading business but downsized it at the beginning of 2018. ScotiaMocatta’s history goes all the way back to 1600s when Moses Mocatta partnered with the East India Co. to ship gold to India. The operations were set up in London in 1684. In 1997, Scotiabank acquired Mocatta Bullion by purchasing it from Standard Chartered.
At the end of all the mayhem lies gold, central banks, and debt-based fiat currencies which dominate life in the 21st century. What the redditers have accomplished, first, through their dealings in the stock market, and, secondly, via their assault on the price of silver, is open wounds into the central banking facade of infallability.
The physical (market) price of silver has now decoupled from the spot price established by the LBMA and traded upon the COMEX. Gold is also moving towards a similar disconnect or decoupling. What have commonly been referred to as "premiums" over spot, have, thanks to r/wallstreetbets, are now so far apart as to engender the need for dual prices, one for the 5,000-ounce contracts traded on the COMEX (spot) and one for physical, finished products (market).
The war, and the story of the century, will continue.
As has become customary every Sunday, here are the most recent prices for common gold and silver one-ounce coins and bars sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
1 oz silver coin: 33.00 / 53.49 / 41.76 / 40.48
1 oz silver bar: 30.00 / 54.95 / 42.15 / 40.50
1 oz gold coin: 1,906.00 / 2,033.34 / 1,990.27 / 2,000.44
1 oz gold bar: 1,897.00 / 1,992.98 / 1,956.07 / 1,955.63
Last week, Money Daily unveiled a benchmark market pricing mechanism for physical silver, based on our weekly surveys and strict methodology. See the current Single Ounce Silver Market Price Benchmark (SOSMPB), set this Sunday morning at $41.22.
There was no shortage of market commentary from the usual (and unusual) sources; so many of them in fact, that only links can be provided in this space.
Here's two by Jake Ducey, from I Love Prosperity, the first with noted analyst, Alidair Macleod of goldmoney.com:
https://www.youtube.com/watch?v=sQwQoMnCq8c
The second with David Morgan from themorganreport.com
https://www.youtube.com/watch?v=qT1QIsULi6U
Here's Max Keiser and Stacey Herbert explaining how Fed policies contribute to the racial wealth gap:
https://www.youtube.com/watch?v=L9iSeJa996I
Best-selling author of the Big Reset Willem Middelkoop tells Daniela Cambone how the silver squeeze may affect the gold market and central banking:
https://www.youtube.com/watch?v=qeY1n67LUOg&feature=push-fr&attr_tag=5DPdjODOrXZa21UD%3A6
At last, we defer to the genius of Ted Butler in a deep dive into the silver market, via an interview with Pallisades Radio (47 minutes):
There are many more opinion pieces and videos out there. Readers are advised to do their own due diligence.
At the Close, Friday, February 5, 2021:
Dow: 31,148.24, +92.38 (+0.30%)
NASDAQ: 13,856.30, +78.55 (+0.57%)
S&P 500: 3,886.83, +15.09 (+0.39%)
NYSE: 15,069.60, +94.17 (+0.63%)
For the Week:
Dow: +1165.62 (+3.89%)
NASDAQ: +785.60 (+6.01%)
S&P 500: +172.59 (+4.65%)
NYSE: +672.40 (+4.67%)
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