Derelicts and Their DerivativesRob KirbyRemember how equities indexes that represent the precious metals sector [HUI, XAU] all got ‘smoked’ despite the dramatic advance in the price of gold with the yellow metal fulfilling its historic role as THE-GO-TO-ASSET in times of financial upheaval?Now how many of you remember THE REASON pundits ‘floated’ [or flaunted, perhaps?] in the mainstream financial press to explain why gold equities were being dumped – en masse – while the price of gold was rocketing higher?For those of you who do not remember, pundit after pundit made claims then - that investors were selling their gold equities to meet margin calls or because they were the only investments that they owned with profits in them. This was THE ONLY REASON offered at the time, or since, to explain this completely counter-intuitive de-coupling of the precious metals equities from the underlying.That is – until now:By examining historical Put / Call open-interest data on the Philadelphia Exchange's XAU index – we can clearly see a pre-emptive build in Put [short] open interest on the XAU Index Futures that is counter-intuitive to the upward price movement in the underlying precious metals prices.The bloating of the open interest in the XAU Puts [a precious metals derivative] was DIRECTLY RESPONSIBLE for the collapse in the XAU. These derivative induced sales of equities had NOTHING TO DO with raising cash to meet other commitments as widely reported. This was a show of overwhelming brute force by placing ‘levered bets’ [I prefer the term fore-knowledge] to bring precious metals equity values DOWN prior to predictable dollar-negative news / events [like Iran telling Japan that they would only accept Yen for Crude oil shipments].Someone clearly did not want investor sentiment aroused by soaring precious metals prices.  You see folks - the sub-prime debacle has been a banking-led crisis from the beginning. Isn’t it strange that Put [short] open interest build in the mining stocks has been consistently and overwhelmingly MORE than that of the BKX [KBW Bank Index] and the MFX [Mortgage Finance Index]?Precious metals equities have categorically been ‘ambushed’ to prevent the buzz or same investor excitement that helped propel the last great gold bull market in the 1970’s. Monetary Authorities and their agents were absolutely behind this massacre in the precious metals equities – derelicts with their paper derivatives.Then, they lied and spread false rumors to cover their tracks.Their real Achilles Heel – however – is their increasing lack of physical metal and/or their increasing reluctance to sell their remaining vaulted stocks to continue suppressing demand for the real thing - physical metal – bars and coins.But that’s another murky, disingenuous story for another day.The physical markets for precious metals are tight [little supply] and growing more so by the day.Got physical gold yet?  

Dear CIGAs,Something smells mighty fishy to me about what is going on in this ETF of late. Some of us have long believed that the inherent flaw in this ETF is in its auditing process which is less than transparent. If the bad guys who comprise COT and are the price managers on behalf of the US monetary authorities needed another source of gold for the supply that they feed into the market to suppress the price, the ETF is a perfect vehicle for this. I find it a huge stretch of the imagination to see gold soaring into all time highs and the one major indicator of investment demand for that same metal sitting there unchanged when it comes to reported holdings for nearly two weeks! I just read this AM that platinum and palladium holdings in the London ETFs for those metals are soaring because of investment demand. Why then is the gold ETF not reporting a sharp increase in its holdings? To believe that nothing has changed in there is to believe that the sun rises in the West.