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Gold: Technical Correction Before the Final Frontier
By Economist Forecasts & Opinions
Gold fell for the first time during last week, off 4% on Friday to $1,162.40 an ounce, the biggest drop since Dec. 1, 2008 after the new U.S. jobs data showed unexpected strength. The Dollar rallied against rival currencies while traders reversed the “Sell Dollar/Buy Gold” strategy. (Fig. 1)
The Dollar's decline has been a key factor in the record rising gold price this year by boosting the metal’s appeal as an alternative investment along with other commodities and high-yielding currencies.
Though gold briefly touched a low of $1,136.80 during the Thanksgiving week on fears of a possible debt default in Dubai, the precious metal had otherwise continued its vertical ascend into uncharted territory advancing in 21 of the past 23 sessions.
While gold has some underlying support from central banks and investment funds, there are some indications suggesting gold is moving mostly on momentum, and that a deeper correction may be due.
India Leading the Gold Rush
Gold’s rally in the past couple weeks was largely on speculation that India’s central bank may buy more gold from the IMF adding to the 200 ton purchase it made last month.
This second purchase by India would be the fourth central bank sale this quarter of IMF bullion. The three prior sales were Sri Lanka’s $375 million purchase of 10 metric tons; India’s initial $6.7 billion purchase 200 metric tons, and Mauritius bought 2 tons for $71.7 million.
The three sales so far leave about 190 tons up for grabs from the 403.3 tons the IMF announced Sept. 18 it would divest to shore up its finances.
China, The New King of Gold
Private Chinese gold buying, for both jewelry and investment, will overtake Indian demand this year, predicts metals consultancy Gold Fields Mineral Services (GFMS). China is now the world's No.1 gold mining nation. The People's Bank is widely thought to have grown its gold reserves by buying domestic production direct.
In addition, China has cut the import tax on jewelry and allowed select commercial banks to sell gold bars, and gold is now traded freely on the Shanghai Gold Exchange.
Russia & Vietnam Not Far Behind
On Nov. 23, Russia's central bank announced it had bought 15.6 metric tons of gold in October and has said it aims to increase gold's share in its reserves this year to keep its investments diverse. The Russian central bank had been steadily building its gold stocks this year, which has been up 17% since Jan. 1 to 606.5 tons.
The Vietnamese central bank has also granted quotas to import 10 tons of gold for use by its banking system and gold traders.
Low Interest Rate with Worthless Paper
Some analysts attribute the most recent rally to the reversal of a decades-long selling of gold by developed economy central banks to net buying by emerging market authorities.
Gold accounts for 9% of reserves held by central banks (valued at market prices). Therefore, it is logical for central banks stocking up on gold as it does bring the much needed diversity due to gold’s low correlation with key currencies and its strong inverse correlation with the US Dollar.
However, diversifying reserves primarily via gold rather than other currencies partly suggests the expectation of interest rates around the world to stay low for a long time. Moreover, it reflects central bankers' growing distrust of all paper currencies, not just the Dollar.
Surging Derivative Trading
Some of the world’s most successful traders, including John Paulson, David Einhorn, and Paul Tudor Jones, have positions in gold or gold related investments. Pension funds allocate about 5% as protection against the weakening Dollar. Hedge funds and traders are piling into gold futures markets around the world, lured by the record-high prices in the precious metal.
Based on the Commitment of Trader (COT) report as of November 24 by the U.S. Commodity Futures Trading Commission (CFTC), the number of long positions in gold was around 370,000, up about 5,000 from just a week ago, mostly from non-commercial short-term speculative investors.
It is also interesting to note CFTC Nov. 2009 monthly report shows that while commercial participants held net short positions; non-commercial and other participants, who accounted for 51.4% of open interest, held net long positions,. Some traders already indicated there has been some good upside buying in March and April in the $1,300s and even $1,400s.
Overall, NYMEX Gold futures open interest increased 4.8% in November with longs outnumbering the shorts by 71% to 12%. This would have been the highest number of long speculators in the history of the New York gold market since 1975, except for last year when the gold hit $1,030. (Fig. 2)
High number of speculative positions is the driving force of the commodities rally in general, but that also makes gold vulnerable to further corrections as well as high volatility.
Diminishing Physical Demand
Regardless of the gold fever this year, according to the third quarter 2009 Gold Demand Trends Report from the World Gold Council, demand reached 800.3 tons, representing a drop of 34% year-over-year. The report also found that average gold prices for the quarter were 10% higher than in the same quarter last year.
Diminishing physical demand coupled with higher price suggests it has been mostly speculators that are driving up the price. In addition to central banks using gold to rid Dollar dependency, fund managers and speculators also have been driving up the price of gold, partly seeking protection from potential inflation in a low interest rate environment.
Fear Factor
Gold is a commodity that perception plays a more significant role than other market factors. Almost all other commodities such as crude oil, natural gas, copper, prices often fluctuate on indications of inventory, supply, and demand; whereas gold moves primarily with investor’s fear or perception of inflation, U.S. Dollar and the economy.
But just as fast as the market perception can drive prices straight up, it could tank an asset class in a matter of minutes. As discussed here, investment/speculator demand is clearly a major factor in the current gold price rally, a decline could potentially take the gold price down quite significantly on indications such as rising interest rate, or the U. S. Dollar starts to strengthen.
If history is any indication, after gold rose sharply in 1979-1980 to $850, it was followed by a drop to near $500 in less than 2 months. It is conceivable that gold could take a similar loss in a short time.
Short-term Outlook
The general expectation is that the Federal Reserve will not act in favor of the Dollar until later next year. Gold and Dollar correlation is still highly negative, but one should expect a fair amount of volatility given the uncertainty of global economic direction intensified by the Dubai crisis. In that sense, gold could certainly challenge the $1,225 levels again, with $1080, $1050 and $1025 each represents significant support level.
Technically Overbought
Friday’s pullback has moved gold’s MACD to the downside and the 14-day Relative Strength Index (RSI) back in the neutral territory (Fig. 1), which could spur more selling if Dollar retains its strength.
Though gold’s longest rally (nine days) since 1982 ended last Wednesday, the precious metal is racking up a near 35% gain on the year, and moved up almost 17% this month alone, heading for the sharpest annual increase in two decades.
So, at this level, gold has also run into profit-taking, as well as year-end fund managers' portfolio repositioning. Closes below the 20-day moving average crossing would likely confirm that a short-term top has been posted.
Long Term Bullish Intact
Sporadic green shoots of economic data could obscure the harsh reality, and lead to gold weakness in the short term. Nevertheless, there's enough momentum around for gold to make new highs as long as the Dollar stays weak spurring further safe haven demand on concerns about a double dip recession.
Therefore, the potential exists for a large rise in the longer term. However, if this rally extends into uncharted water on momentum without a healthy enough correction, upside targets will be hard to project with the eventual correction equally difficult to predict, just as they say, "The higher you climb, the harder you fall."
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Have you noticed that between GOLD and HOLD there only changes the first letter Gold <-> Hold.
Haha!
39 times ?? equals 1287. Too difficult!!!
I deal with this stuff when the "guns and ammo have REAL value" crowd talks down gold. Or those who say grow your own food or something, that you can't eat gold.
The response is...are there going to be jews in this new world order? These people love gold so much they name themselves after it and beat it into idols. You couldn't eat gold for the past 5000 years either but you could always trade it for something you can eat.
Gold has value in a collapse simply because there is NO alternative.
The paper bulls like Douchinger and those here can yuck it up in any correction, but how've your dollars done? You can buy LESS sandwich with them this year. Less oil, less milk, less gasoline...less of pretty much everything except OTHER paper.
Fucking stop being ADDICTED to reaping what you DO NOT SOW. It is the HEIGHT of irony that the fiat paper bulls are the ones who talk about GROWING their own food when everything they are ABOUT in terms of being a fiat bull is to try to earn INTEREST and "gains" on fucking SPECULATIVE TRADING.
The TRADER crowd LOVES FIAT because it allows THEM to earn what they did not produce, to be interest lenders, to reap entirely speculative profits. These fiat bulls are not producers, they are freaking GAMBLERS. They hate anything and everything real because real things require real people doing real activities to produce them. If they hate gold or oil or any other THING that people ascribe value to, you can judge them by what they DO like.
Every single fiat bull on TF or any other forum has explicitly announced the future they desire, where anybody who has stockpiled PHYSICAL and REAL things gets screwed and the fiat bulls holding mountains of paper get to ride in during a liquidation and VULTURE real things in exchange for paper!
The fiat bulls are the ultimate wannabe banksters. They want to use their fiat to take your real.
Uggh.
Now I feel so dirty.
:(
The latest in blatantly duplicitous headlines on Bloomberg:
"Gold Can't Beat Interest-Bearing Checking Account 30 Years After Last Peak"
It's about diversification and being able to sleep at night. I'm not a credit market expert, nor a commodity expert, nor a stock expert, nor a currency expert. But I follow along and have tried my hand at trading. I know these facts.
About 10 years ago the dollar I have in a checking account was worth about one Euro. Today, 2/3 a Euro. Similarly, a dollar was worth 1.8 Swiss Francs, today, 1. Etc. Not a good trend. Oil? 20/30 per barrel then. Now, 70s. Gold, 300s, now 1000s.
Stocks? The averages are lower, many stocks have gotten decimated, a few have done well, like AAPL. Compounding interest? Not enough to keep up with currency devaluation and commodity inflation and loss of principle in stocks.
Obviously, you're not going to pay for things in gold coins, gold coins are a large store of wealth. You sell your gold coins like you might sell stocks or bonds to retrieve the local currency. For small items use silver coins. The handy one ounce silver coins are a very handy 20 dollars.
But in this world of confetti its about diversification and capital preservation.
And, if the carry trade unwinds again and stocks and commodities crash, have some money on the side to buy some, but keep cash on hand too.
Ed Steer's analysis indicates that we are at the beginning of an engineered correction, so the big boys can cover their enormous short positions in gold and silver. When this is over, hold on to your hats! We will be riding a skyrocket!
Concur. The correction, to allow short covering, has been predicted for months now. When suddenly do a 180 and start planting stores written by Wall St. good old boys in the US MSM about why you should put your money in a "checking account" rather than own gold, it is far too obvious. Fortunately the rest of world is not looking through those same rose coloed glasses and sees the true critical path we are headed for.
There is a gold mine at Hayden Hill Ca that was shuttered at $280/oz.Why is it still closeed?
It's BLM land now, kinross wouldn't have let it go, if there were significant concentrations left. my choice to prospect, would be the north side of the grand canyon.maybe with a metal detector and a gold pan. it would be nice if you could use a suction dredge in the river.
Clint Eastwood would have to ride up flingin' sticks of dynamite. You wouldn't want that now, would you?
There is a gold mine at Hayden Hill Ca that was shuttered at $280/oz.Why is it still closeed?
Gold?
Please. C'mon, y'all. It is a bit beyond obsession, don't we think?
It is a useless rock. It is pretty.
So what?
how about some piece of paper you call stock certificate, thats pays no dividends, doesn't give you any rights to anything? at least gold you can wear - stock you can't even wipe you ass with, paper not soft enough.
So now gold pays dividends, too?
Suppose I put two gold coins in a sock for three years. When I come back, do I have a whole family of coins? What happens? Does it breed?
If gold is such a ridiculous "asset" and unworthy of consideration why are you reading this post and commenting? Why waste your time trying to convince the gold crowd that you are right? Are you not preaching to the already condemned? I don't get your ardent argument in the face of your anti-gold stance. Something just doesn't click.
Let's say you don't own any physical PM's. You don't intend to. Why not just shrug your shoulders and move on? Why joust with those who advocate its ownership? As long as one holds a narrow dollar-centric view of mercantile exchange, precious metals will never be a part of the portfolio.
Maybe you are weighing the advantages/disadvantages of PM ownership. If so, I propose that you buy an ounce of gold and a roll of silver eagles. Give each of them a good heft. Come back and let us know your thoughts.
Here is a little piece of eye-candy for you:
http://goldmoney.com/images/commentary-images/commentary-charts/alert_20...
Rock, that was my point to Mr. Shameful earlier: eye-candy. Eye-candy, he says! Point being, if it weren't so "pretty," would you care? I don' believe you would. Somehow the basic and refined beauty of gold has spooked your rational mind and given you an emotional response to something that should be thought of in an unattached frame of mind.
No one is condemning anyone to anything. It is a simple matter of opinion and I do not begrudge anyone of their opinions; not even the anonymous asshole from up the thread who likens me to a six-year-old girl. I mean, when I am enlightened enough to see it his way, then we can talk? Wow, I am blessed. I can't wait for that day!
My stance is not anti-gold or precious metals at all. My problem is with people who call me stupid because I don't have an hypnotic fascination with looking at my "investments." Mr. Shameful, above, has the right attitude about it: he is not vehement is his pursuit of a convert, nor is he dismissive of someone who disagrees. I can respect that.
The interest I have in the gold trade has to do with keen observation of the foreign exchange market. Forex is all about risk aversion right now and, frankly, gold is just another asset-class that is getting overbought thanks to the Fed's incredible QE and zero-rate policies. I am here to tell you that, in this cycle at least, gold is being bought by retail investors hand-over-fist, while intitutional investors are net short. It is mentioned in the article above. Now, if that doesn't scare the hell out of you, then I don't know what will.
Sorry. I hate to burst your bubble but all I see is a giant set-up for risk-greedy trades stamping on the US Dollar while we all party on, dudes! Well, when that trade reverses- oh, and it will in a most dramatic fashion- I would hate to be the one who has a check in the mail for $2000/oz. physical gold. When the snail turns, look for all "risky" asset classes to be brought right back down to earth where they belong- gold included. There will be a much better buying opportunity in the medium-term future.
Long live the US Dollar! The ramp up in other currencies has been orchestrated since March, when the Fed traded very strong dollars for very weak Euros and Cables. That is what Alan Grayson was grandstanding about when he called out Uncle Ben in the committee. FX swaps. The fact of the matter is that that move was entirely necessary to prevent the Europeans from dumpig everything dollar-denominated, including our Treasury certificates because of the thin availibility of USD.
That trade won't last forever, either. No one across the pond was given anything. Currency was traded, make no mistake. The Fed can call those markers in any time it wants to. And when they do, watch out below.
Frankly, if I can prevent one person from going overboard on this whole gold deal right now and getting burned, then I am happy to spend a few hours arguing my points with my good friends at ZeroHedge. It will have been well worth it.
orly the dollar lost 17% of its purchasing power this year, so much for a stable currency. it doesn't matter if its in your wallet, or in the bank. they are slowly stealing part of it. the problem for them, is as they debase the currency, the value of gold goes up relatively. I guess that would be a problem for you too, if you don't have any gold.when I bought silver 13 years ago, it was $4.95 an oz.now it is $18.40 it has gone up, more than the dollar has gone down.its insurance, you should get a little. there are people whose very life, was spared, because they had a little gold to barter with. its late in the game, if things don't go to hell, you can always find someone to sell to later. If you had 200 lbs of gold, believe me, someone else will be happy to get you a sandwhich. its like buying emergency food, you can always eat it later, and lower your food budget, if the emergency threat abates.
nah it doesn't but at least you OWN it and.. Read right of shareholders - you have NO rights, you OWN nothing... NOTHING, you dear Citi or Enron or Bear or Lehman goes bust and what?
Gekko: Where the hell are you? I am losing MILLIONS! You got me into this company and sure as hell better get me out or the only job you'll have on the Street is SWEEPING IT! You hear me, Fox?
Bud:You once told me, don't get emotional about stock. Don't! The bid is 16 1/2 and going down. As your broker, I advise you to take it.
Gekko: Yeah. Well you TAKE IT! Right in the ass you frakking scumbag cocksucker!
Bud: It's two minutes to closing, Gordon. What do you want to do? Decide.
Gekko: Dump it.
I hear they grow really pretty flowers in the State of Denial.
All right, Rock, let me put it to you this way:
Say you have two hundred pounds of gold. All of your life's savings, let's say. You're feeling good and proud and you like to put gold coins on the bed and look at it. Nice.
Then, you try to take a gold coin to the store and buy a sandwich for your girlfriend. Ooops. No change. So you just paid $4000 for a sandwich.
Then the government says, "Hey, we've been getting reports of raccoons running around buying sandwiches with gold. We find this utterly irresponsible. We cannot allow this to go on. From now on, no one is allowed to use gold as barter."
You don't believe it, so you do it anyway. You get arrested for breaking the new law. When you get out of jail, you find another new law already on the books: all physical gold will be hereby confiscated by the Federal government. Imminent domain or some such shit. You will be paid what the government says it is worth: $40 an ounce.
So now, you have to lug two hundred pounds of gold to the bank and they give you paper money for it. Or not...
You hide it in your back yard, knowing that it will be actually worth something some day. But on that day when everyone has forgotten, you're old and feeble. You can't lug two hundred pounds of gold to the hospital. Your grandson helps you do that. The lady at the check-in looks at you in a funny way and asks, "So, Mr. Raccoon, do you have health insurance, or not?"
Really, now. Is it worth it?
"Imminent domain"
I can't and won't argue with you, because there isn't enough mind there yet to try and change. As your knowledge increases, may your opinions evolve.
Gee, thankth, enonimouth. When I grow a brain, you'll be the first to know!
So your arguments are 1."You can't get change" and 2."A tyrant can take it from you".
As to 1 if you make that trade then you were either really desperate or stupid. Gold is soft enough I would clip the coin before sacrificing the whole thing for a sandwich. So that pretty much leaves "You were stupid" as the argument.
As for the government argument. Guess what the gov can do what it wants to you when it wants to you, because it has the guns. They could confiscate all houses and force everyone to pay rent. Does that mean only a fool would own a home or property? They could confiscate all stock, does that mean anyone who holds stock is a fool? What asset can we hold that they cannot take from us if they decide they want it? We cannot even hold onto our very lives should they desire them!
Discounting that the gold holder is not foolish then his concern is the actions of the government. If you can predict where the gov will loot next can you please tell me and we'll go into the market and make a bundle! I know there has been talk in congress about nationalizing the 401k plans. This was back burnered months ago but it was discussed. Nationalization much like they did in Argentina, but in Argentina they are still allowed gold. Why is this? The answer is simple, many people have 401k and retirement plans but few have gold. It was simply easier and more profitable for the gov to steal the pensions then try to track down a few scrapes of yellow metal.
Gold is worth what people think it's worth. Most people have no idea what the spot price of gold is, so to most people it is worthless or far below it's market value. However to some it holds a great deal of value. Value is subjective, we use the market to seek a price on an object or service
Now, there's arguments I can relate to. I appreciate that.
Basically, my point is that the government can do anything it wants to do, until it can't. All this talk about owning gold in an ETF as the most foolish thing you can do because, "I own physical," is simpy irrational to me. Smacks too much of pride for my taste.
Sure, gold is malleable enough and soft enough to break off a piece for a sandwich. The value of that chunk, though will vary from minute to minute. (Down twelve-buck-fifty already this morning...) At least with a paper currency, I know that the dollar is worth a dollar because my purchasing power parity does not change from the time I leave my driveway until I can get to the store. It remains relatively constant in real terms, while I do understand that the "value" of my dollar relative to other currencies, including gold, does change pip-to-pip. Having a stable currency is very helpful in avoiding economic chaos.
Frankly, I can't even remember the last time I paid for something in cash. I use debit cards to buy a piece of gum. They don't mind, it doesn't really cost me anything extra and it is all just numbers anyway. So and therefore, I have a piece of plastic as my "currency," if you really think about it. Numbers at the bank get transferred to the numbers at the store.
My point here is that it is not necessary to hold gold or silver or wheat or anything else that has objective or subjective value as long as I have numbers at the bank. Why go through the hassle of paying premia, waiting by the mailbox, having a safe or safe-deposit box to hold the stuff if it is just numbers anyway?
In that case, if you wanted to make money on gold, just buy ETFs. You may say it is just paper but I never received my ten thousand certificates for NanoBac Pharaceuticals and I bet I won't receive certificates for my ETF in the GLD, either. It is just numbers in my trading account.
I suppose what sticks in my craw about the "gold people" is that they call us land-lubbers fools for not sharing their fascination with seeing shiny metal coins in their hands. That is really all it is. The numbers are the same and the only difference is that you are holding the gold in your hand. It doesn't do anyone any good to actually have it; it can be quite dangerous to your person if the thug druggie next door found out about it and the thug government can come and take it from you any damned time they want to.
I don't mean to trash gold as a trade (no, it is not an "investment"...), I just mean to point out the self-righteous and narcissistic manner in which true "gold-bugs" speak of the stuff.
It is not magical. It is metal, like nickel and iron. There is no reason to be all high-fallutin' about it.
hold up...the dollar is fucking stable?
Since when??? It is constantly losing its value in terms of EVERYTHING
Ah okay I understand the point about the constantly shifting value. However you do touch on but the fact the dollar is constantly shifting to. We don't see prices on the shelves change to match the current shifts because they don't have to right now. There is a time in the life cycle of fiat currency when this does happen. In the extreme cases prices will increase wildly throughout the day, and the clerk will be forced to change the prices. I read a story about Wiemar Germany where a man sat down and ordered a cup of coffee, he paid, drank the coffee and ordered another. To his surprise the prise had massively increased. When he complained he was told that if he had wanted two cups of coffee when he sat down then he should have ordered two cups of coffee. What I'm trying to get at is we see the swings in PMs far more but all currencies and commodities have these swings. Indeed I would expect them more in the PM market because the PM market is quite tiny compared to other markets, so pressure built up on one side or the other will force greater moves. On the Forex ,if memory serves, I think 4+ trillion dollars get traded every day, which would be basically the entire above ground accessible stock of gold and silver, every day.
Stable currency is important, no argument there. But to me gold is a hedge against the currency. If Volker was Fed Chairman, or if the dollar was still very strong I wouldn't be interested that much in gold. Why? Because I would be able to trust the strong dollar. Who is hailing a strong dollar now? Tiny Tim and Zimbabwe Ben! I wouldn't trust these guys to wash my car! Speaking as a "gold bug" I buy gold because I fear we don't have a stable currency.
Most people including myself use plastic for most every transaction. It's incredibly convenient. I'm not looking forward to a breakdown of this system, my concern falls in the value of those electrons floating around in the bank's computer. Every time Uncle Ben wizards up more of them the ones already in existence lose a bit of value. And that is our disagreement, these numbers at the bank are not secure. Example, in Argentina the banks closed for a while and even when open would only allow a certain amount of devalued currency out, people were wiped out. Could it happen here? Sure, America is not immune to economic law. We have crooked leaders and thieves abound so of course it could happen here. Will it? I can't answer that, I hope it doesn't. But gold/silver is my insurance in case those numbers in the bank are devalued or inaccessible.
Onto ETFs vs physical. The rational behind going physical is because to stay with the ETF you have to trust the ETF. We have had enough accounting fraud this decade to last a century, but doubtlessly more is in the pipe. I buy physical because I don't trust the ETFs. After all if they lie and defraud me then go bankrupt then what do I do? Sure I could pursue legal action, but they are wiped out, what could I get? In physical gold and silver there is no risk the ETF will fold on me. I know that I have it in my hand, I know it's real.
I'm not going to tell you that only gold has value and your a fool not to have it. There are other ways to preserve wealth and value. I happen to think that most commodities will do extremely well. Granted we are back to the ETF issue, but I think that is one route of wealth preservation. Real estate can be a good bet if purchased at the right time. Hell you mention other metals and I think that base metals will do fantastic. I think copper is a little over bought right now but there are other options. Gold and silver are commodities. They were/are used for money because of properties they have, but as a store of value there are options. I have chosen gold/silver because they are small and have been historic stores of value...that and I can't store barrels of oil, or build a grain silo at my house. I think my roommate would lose his mind :)
I think a lot of long time gold bugs have a bit of a persecution complex like its them against the world. So when you attack gold they feel like you are attacking them. I don't care, I've said it before I want gold to go down, I want a strong dollar. Gold is my insurance policy against the Federal Reserve. So I won't tell you to buy gold and silver, but what I will recommend is you look to a way to protect yourself from Zimbabwe Ben and his printing machine or you might be kicking yourself in the future.
yeh yeh.. All of your life's savings, let's say. You're feeling good and proud and you like to buy this great company stock, call Citibank or Enron or Worldcom. You buying it and feeling good, company goes busted, you go broke and you don't have paper to even wipe you sorry ass with... "Really, now. Is it worth it?"
I think where gold goes, silver will follow. Right now from a technical point of view, silver has five waves down from the top. As everyone has been talking about, the chart shows a 5 minute time frame. There has been a correlation between silver and the US dollar since the market’s bottom.
Silver has been holding onto the up sloping trend line from its bottom. I believe that this trend line has been extremely useful and accurate up to this point. Since there are 5 waves down, SLV holds the potential for a bounce early next week, but that will depend on how strong the selling is. A strong break of the trend line would confirm that wave 3 of the larger time frame has started. Chart for visual here: http://www.graspthemarket.com/elliottwave/20091206a.php
Strange. US has the single largest stockpile of gold at 8100 tons, or about 260 million ounces. Sounds like a lot, but its a mere 260 billion dollars in gold. I say mere because the US is 12 trillion in debt, over 1 trillion in debt in 2009 alone, and the 260 billion in gold, our total gold reserve, would pay for medicaid for one year, or, pay the interest on the debt for one year.
Either the US doesn't have enough gold or gold is undervalued or both. I say both. The US is so deeply in debt that if the Fed raises rates the interest on the debt is going to start consuming more and more of the budget. It seems rather dire.
I'm not sure how the US or other countries so indebted really get out from under servicing the debt as time goes by. You'd like to be paying off the debt while interest rates are low, but we're issuing trillions more. This can't end well.
I like physical possesion of all the PMs: gold, silver, platinum and even a bit of palladium.
I don't trusts the SOBs running the shop, so I am like many of you, I will not sell my PMs unless forced.
Check out fofoa.blogspot.com, my current favorite gold oriented blog (also jsmineset.com).
Like your Pt avatar there Instant!
Hey DoChenRB,
I haven't checked in on Sinclair in a while now. The last time I read it, he had some million dollar wager with a Canadian hedgie that gold wouldn't crack $1000 or $1100...I can't remember. Did any cheese change hands on that one that you know of?
You are correct that we have to much debt an not enough gold. And yes it will end in tears, I expect the crackup boom with a currency crisis sometime in the next few years, assuming present trends continue. Really no nation owns enough gold, but that's the nature of our fiat world. I have no delusion that any nation will go back to a gold standard, but if a nation did and did so honestly they would have a huge advantage economically. After all people would highly prize their bonds and people would be more willing to invest knowing that their capital investment would not be eroded by inflation. This fiat world has even changed savings, gone are the days when a man could just stockpile money for years for a purchase, money degrades to fast, he is forced into the global casino and spin the wheel of fate.
Also if that 8100 ton number is correct then I will dance naked in the streets to show my joy. There is no way on God's green earth that we have that much gold left. Ignore the tungsten /gold story and just look at the gold leasing program and it will piss you off. I was enraged that I could not get paid to take gold off the govs hands!
rothschild secretary, reported illegal withdrawals of US gold, by her boss. three days later, she fell from her highrise balcony, what a coincidence. lyndon johnson sent most of our gold to england in the 60s, did we get it back? silver lease price way up too
I was unaware of silver leases. I know the US at one point had a silver reserve but to my knowledge we no longer do. Do you have a good link/article that address it? Most of the tings I've come across don't really get into silver, most are more focused on gold.
As for the Rothschild incident I don't know about it. But rich powerful people doing illegal things and then killing to cover it up, that sounds pretty plausible to me. And they don't come much richer than the Rothschild clan. Would be interested in the LBJ story, might also help explain why Nixon had to pull the plug on the gold standard. Other than the war deficits of course.
Check out this link:
http://news.goldseek.com/GoldSeek/1177340640.php
Perhaps more questions than answers, but I think the main take-away is that an "audit" of the reserves means different things to different people!
there is only one outcome, DEFAULT, sooner or later, its not a policy choice, its a mathematical inevitability. we're past the point of no return. our financial team, are like the musicians on the titanic, except, they have an escape plan, at the very end, we get to drown in debt.
Very good article. I have traded gold for years, yet I rarely sell my "core" position. I would not be able to sleep at night knowing that I have to trust our govt. to take care of our dollar and the future of my daughter, at 21.
I find so few who own gold, gold shares, etc. How can they possibly think that what is going on will end well.
When you have barry, benny, timmy, nancy, harry, chris, barney and sheila running amok, how could you possibly own AMZN and not NEM. I just don't get it. Sometime in 2010 IMHO a detonation of unprecedented proportions will rock this planet.
The only thing that might save us is Lloyd of GS, since he is doing Gods work. Makes me want to spit.
Love the sight Tyler, Marla, Travis and gang. A safe port in this continuing storm.
If lloyd is doing gods work, why does he need a glock?
Because God moves in mysterious ways, of course.
I'm glad to see articles like this one. He focuses on the volitility. If, like many people here, you own the physical, it's no problem. But if you're a newbie trying to go long gold futures with your online trading account you can be in for a very rude awakenig. When Bear Sterns blew up, silver futures dove approx. $17,000 per contract that afternoon. I am long the Canadian CEF (yes, I know it's paper) but I trade the futures in gold and silver, too. That's a levered transaction that I have to micro manage with stops just to go to the bathroom. So, in other words, there are many ways to "own" gold and silver and the physical is the best. Most of my futures trading friends have scaled down to trading small size because of this tremendous volitility. Trends are all still up and my opinion is this has not approached bubble status yet. Good luck to the traders. The owners have a head start.
Very good post. Thank you.
I noticed the volume of GLD increased on the first trading day in September, and has remained elevated since as gold has crossed $1000, $1100, and even $1200. So gold was pushed, not pulled to record highs. Manipulated if you will. Maybe India's central bank buying was known in advance. Gold could come back down to pre-manipulation levels in the $900s. No harm in that.
Regarding silver, it's a weird dynamic. It's not expensive enough to stockpile, in a way. In other words, if you have $60,000 to put into a precious metal, you can buy 60, 1 oz. gold coins, or 3000 oz of silver. 3000 oz of silver is just unwieldy. Yet, if silver were more expensive, less of it would be worth more, making it more desirable as portable store of wealth. They say there's much less silver actually above ground than gold, and I anticipate that manipulators will get around to manipulating the silver market in due time.
Yeah, silver is all the way manipulated right now. Both markets are, look at the size of the markets, they are TINY. There is what less then 5 trillion in all gold ever mined? And I think right now the current market for all the available silver is only a few hundred billion, but not 100% on that number, but also way small for a global market. They manipulated to "hide" inflation. Meaning they are a great buy with inflating dollars. Jim Rogers points out that even using gov numbers the all time high for gold is north of 2,000. Hell Volcker even talked about how he regretted not going after gold enough when he was trying to get inflation under control. Right now we have gold screaming inflation and bonds screaming deflation. So you have to ask yourself who is right. I think gold is right since we know the fed is printing new dollars to by new treasuries.
There are a lot of rumors about the India sale. My fav being that it was the gold India already had in their possession as an IMF repository. In the end it doesn't really matter to much, it just highlights the developing world wants gold.
I agree that silver can be unwieldy. I have this vision of me running from my house trying to carry my silver on my back, praying my backpack doesn't break and spill silver goodness everywhere :)
. there was a lot more metal, when the hunts cornered the market. max 10 billion ozs estimated world stockpile in 2008 less than 200 billion total market. much will be used up, never to be recovered.the estimate was between, 1 and 10 billion, so the market, could be closer to 20 billion, thats chump change compared to the budget, derivatives, goldman sachs bonuses.
I stand corrected...even smaller then I thought. See what you made me do now I want to buy even more silver! The next paycheck can't come fast enough, escially with gold/silver opening lower over in Asia. Hear me baby stay down till Friday!
you can order silver at northwest territorial mint, and lock in a price. they give you a week to wire transfer, that lets you commit a little before you have the funds. at least thats how my deal went 1000 ozs
they manipulate it now. there are more shorts, than annual production. and 3000ozs, thats only 200 lbs of silver. you can load that into your car in 15 minutes. I'd like to see someone try to run, with a couple of 100 oz bars, and you definitely don't want to drop one on your foot.
Anything that derives its value based on mutual agreement is not "true" money, or "true" value. PMs are just an old school ponzi, and we are all at the very front of the train traveling time together.(5000 years of history doesn't mean as much as we think)..... Just keep everyone agreeing that it's valuable and things a fine. However, I recommend developing some personal or community skills as a "safe haven" of value.
Shouldn't one develop personal or community skills regardless of what gold or silver does in the market? That makes your view a secondary or backup scenario for a society in anarchy. (Not that I'm discounting that outcome.) Any group of a certain size requires agreed upon exchange methods. Why not one that has shown the test of time?
I gotta get my Zen on and ignore that the prices are dropping on both Silver and Gold.
What I can add to the discussion is that I don't need the money for anything right this second, and some of it I bought in fairly low compared to now, that I can sell it if I had to and feel fine.
Still, ahhhhhhhhhhh, it hurts, ahhhhhh!