Don’t do it folks.

There’s no "reflation" trade.  Nor is this "manipulation."  

There is one thing to watch, and that is if the physical commodity at real, no-BS volume sources de-couples from the futures price.  This is a nightmare scenario as it posits the imminent destruction of the capital market structure, since futures are allegedly deliverables.

That is, if I own a gold mine and know I can dig gold out of the ground for $1,200 an ounce "all-in" I will short whatever I’m sure I can deliver over the next year or two into the market so long as the price is over that amount, as it guarantees my profit.

I’m not interested as a miner in speculating on the price.  I make my money digging the stuff out of the ground — doing real work and getting paid in real money.  I am singularly uninterested in the speculative fervor or the "gold bug hard money" mania; it means nothing to me at all.

If this relationship changes then — and only then — do you get panicky.  But then you get panicky about everything, because as soon as you lose the fungible nature of financial products with their underlying assets the market is telling you that the electronic representation of all such assets are about to be marked down dramatically and quite possibly to zero.

The reason is simple — that fungible nature of cash and financial price means that as soon as one moves there is money to be made by arbitraging the two.  If the price of "cash" gold is higher than that of "futures market" gold you can buy the cash hold and short the futures, locking in a guaranteed profit because you can deliver the actual gold.  Likewise, if the other happens you buy the futures and immediately notice to take delivery, and you have acquired the gold at a below-market price.  So long as this relationship holds all claims of "market failure" or any sort of conspiracy nonsense are crap.

Today, here and now, despite all the screaming from various people who are trying to fend off the margin clerk such claims are unsupported as there is no such spread of material consequence and thus are utter crap.

Instead, what you’re being told today (and have been for a while, if you have been watching the charts, particularly for copper) is that central bank "money printing" doesn’t work.

That is, all it that "QE"ing and "printing" has done is inflate financial asset prices in the expectation of actual economic growth.  But now, five years into this garbage, we are seeing that exactly as I predicted it has factually done nothing for the broader economy, such as the jobs market, which means that the central banks have done is blown another bubble!

You just heard a "pop."  

Ignore it at your own peril.

via Gold and Silver Crash – Don't Be An Idiot – MarketTicker Forums.