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Guest Post: What Could Trip Gold Up?
Submitted by David Galland of The Casey Report
What Could Trip Gold Up?
Can you visualize a possible scenario that could put a sudden end to the secular rise now underway in gold and silver?
In a recent conference call with the research team of The Casey Report, we once again collectively tried to imagine what situation… what scheme… what government manipulation… might finally put a stake through the heart of gold.
Setting the stage, I think it’s safe to assume that in order for the gold bull to decisively reverse direction, the following general conditions would have to be precedent in the economy:
1. The financial crisis will have to have ended. Which is to say that…
1. Unemployment would have to begin falling by significant numbers – with 300,000 jobs or more being added month after month, instead of being lost.
2. The housing markets will be stabilizing. Foreclosure rates would have to fall to more normal levels (and not because banks are forced to postpone the process for legal reasons, which is the case now), and sales would have to accelerate in the right direction.
3. Government deficits would have to be sharply curtailed and heading lower.
4. All quantitative easing will have ended.
5. GDP will have to be on sound footing and rise based on sustainable, private-sector growth – not based on the activities of government, which loom so large today in the calculation.
2. Real interest rates – the yields you earn over the actual rate of inflation (not the fabricated numbers ginned up by the government) – will have to be solidly positive. Which, of course, is a big problem given the sheer magnitude of the outstanding debt. Rising rates will only beget more debt.
3. The monetary base of the country will have to be contracting, not soaring as it has been in recent years. The following chart from The Casey Report a few months ago tells the story of runaway printing, and of why gold is so strong by comparison.
Inherent in the list just above are other conditions that will have to be precedent for gold’s run to end.
For example, politicians around the world will have to find the uncharacteristic courage to act in ways that are deeply unpopular with the very voters that brought them to office. Namely by slashing the scale and cost of government, with all the many cutbacks in subsidies and services that such a Great Downsizing must entail. And this rare new breed of politician would have to retain their jobs long enough to see through the reduction in government that must occur if stability is to be regained.
Of course, for the politicians to retain their jobs despite voting in deeply unpopular cuts to government spending will require that the voting public adopts a long forgotten stoicism and becomes willing to take their licks without running to the government for relief.
Very much not the case with the students in London who last week started tearing things up over a proposed reduction in tuition subsidies. Video here.
In addition, the world’s governments will have to step back from the brink of the full-scale currency wars now darkening the horizon and move to restore confidence by tossing their fiat monetary systems over the side in favor of something more limiting. Absent a return to some semblance of monetary sanity, the purchasing medium that gold has compared so favorably to in recent years will continue to weaken, and gold will continue to rise.
Then there is the matter of energy. Civilization’s ascent into relative prosperity is tightly related to the widespread availability of cheap energy. In the current context – as opposed to the perfect-world vision of a green energy future – we need the dirty stuff, and lots of it, if we are going to avoid serious economic pressure that in turn keeps the Treasury and the Fed throwing money into the furnace.
Like them or not, there’s no denying that coal, oil, and nuclear are the proven sources of base load power. Sure, implement the latest technologies to mitigate negative side effects, but don’t let that stop us from fully embracing their development and production. Which means the government needs to stick the many new “green” regulations back on the shelf for a day in the future when we can actually afford them. With oil stubbornly pushing back toward $100 per bbl, now is not that time.
Even that incomplete list of the hurdles to be climbed before the crisis can end, and before gold’s run ends as well, begins to communicate the challenge in finding a scenario where the world’s governments don’t opt for currency debasement. Or, put another way, where governments turn their backs on the default practice of using counterfeit money to buy their way through the next day, the next month, and the next election.
That’s the “easy” way out… versus the really, really hard work required to essentially turn back the clock on decades of expanding government and the currency debasement that expansion has required.
And so, as hard as we try – and we try very hard – we inevitably come back to the conclusion that the government is now tightly caught between a rock and a hard place. And that, as a result, the loss of confidence in government and its fiat money, which is now evident in gold’s rise, is very likely to continue and grow even more extreme.
This scenario is not a pretty one, and even those of us who have taken measures to protect our assets won’t like what the world looks like once gold hits $3,000 an ounce… or who knows how much.
Germany’s hyperinflation, even after burning out, helped set the stage for Hitler’s rise. In other words, anything is possible.
So, What Could Make Gold Go Down?
In the late 1970s, then Fed Chairman Paul Volcker, wielding an ax made up of high interest rates, lopped the head off the gold bull. Leading up to Volcker’s draconian solution, I can well remember the broadly held impression that gold could only go higher. His extreme actions changed that impression almost overnight.
That scares me, because there is a similar – albeit not nearly so widespread – meme going around today.
Let me share with you a couple of “out of the box” ideas for how the U.S. government might torpedo gold’s further advance today, in the same way that Volcker did back then. (As for the rest of the world’s governments – sorry, but it’s everyone for themselves at this point.)
- Overt debt default. In this scenario, Uncle Sam rolls out of bed one morning and announces that Treasury debt will henceforth be redeemed at only pennies on the dollar. To lessen the domestic political blowback, perhaps he announces a process whereby domestic holders are redeemed at a higher rate than foreigners… or maybe he most disadvantages debt held by those foreigners labeled as currency manipulators. There is much historic precedent for this extreme action – and, other than some negative consequences over a relatively short initial period of time, countries that have defaulted have suffered no lasting effect. Case in point, both Russia and Argentina now have debt-to-GDP ratios well under 10% – among the lowest in the world. In concert with resolving the debt, the government could promise a new regime of austerity, as well as issue a new dollar with at least some limited backing. Change-o, presto, problems solved, and gold heads into the tank.
- Tired of dealing with the “gold vigilantes,” Uncle Sam simply outlaws gold ownership. Hey, it’s happened before. But what about the price of gold in this scenario? Our own Terry Coxon comments…
Prohibition would force U.S. holders to sell, which by itself would tend to depress the price. However, I’d bet on the price going up because the prohibition would be a signal to the rest of the world that the dollar’s sponsor had gone completely off the rails.
Still, who knows, maybe an international consortium of nations could agree to ban gold – kind of like how they all now ban heroin? Unlikely, but desperate times call for desperate measures.
- The U.S. adopts a gold standard. In this scenario, Uncle Sam, his back against the wall, agrees to henceforth link the dollar to gold at some fixed price. With concerns over unlimited government spending capped, gold might hold at the fixed price while awaiting further signals. Of course, what that fixed price might be is anyone’s guess – although it would almost certainly be a lot higher than it is today.
Our own Marin Katusa has identified one possible sleight of hand that could be deployed should the U.S. decide to return to a gold standard – and that would be to nationalize all the nation’s gold deposits, then use the inferred resources in the ground as backing for the currency. An interesting thought, as it would greatly reduce the price of gold necessary to reach full backing of the dollar.
While each of those three scenarios carries further implications, they may just pass the test of being politically feasible – which, in this government-dominated world of ours, is all-important.
Unfortunately, only the first – overt default – would actually make a dent in solving the gargantuan overhang of debt that now torments the global economy. As such, only overt default mitigates the need for the government to continue its insane deficit spending or the debt monetization required to support that spending.
In the end, it’s hard to imagine that there’s a way the government could get out of this situation without the country – and the world – going through a crash for the history books.
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Thanks to the self preservation attributes of the 4/6 year re-election political cycle, we can rest assured no difficult decisions will be made in this lifetime.
Other forces will dictate change; change they still won't believe in.
The current "system" (ie. democratic socialism) cannot be "changed". Change requires recognition of what is wrong and agreement on how to fix it. The current system will continue to evolve on its preordained path until it simply sinks ... very soon.
Does the majority of the voting public recognise what the problem is and what the solution should be? No. The majority believes that the red team or the blue team can make some periodic minor adjustments to the deckchairs ("but don't move my chair!") and the Titanic will sail on forever!
Does the current elected captain and crew recognise what the problem is and what the solution should be? No. The captain knows that the first mate has deliberately steered the Titanic INTO the iceberg (on orders from the ship's owners) while his crew are too busy stuffing their pockets from the ship's safe, and bogging into the lobsters and champagne for one last fill, before they all escape, along with the first class passengers, in the lifeboats. The second and third class passengers are all still dancing under the stars while the band plays on...........
Without a visionary leader, and a willing populace to follow him through a massive restructure, the future for the US is a watery grave (prison state). Other western democracies will follow.
Actually...
a visionary leader, and a willing populace to follow him through a massive restructure, may very well end in a prison state.
I Fester
The prison state is already in place! They're just waiting for the right opportunity to slam all the exit gates shut.
An informed and independent-minded populace will not allow themselves to be imprisoned ... only a propagandized and greedy populace will allow that to happen.
very well said !
How is a broke government going to pay for the prisons? No, I say that just the opposite will happen. Government services are going to break down. More people will be released from prisons and there will be fewer police on the streets.
I gather that you also believed in "hope and change"!
How do you think that Hitler, Stalin and Mao paid for their Stalags, Gulags and "re-education camps"? They were ALL broke too, when they started. Hint: the government prints money, controls the food supply and has an absolute monopoly on force in its geographic area.
When S.510 passes shortly, it will be illegal for you to even grow tomatoes to give to your mother. Not long after that, any food that you selfishly grow for your own use will be confiscated by the jackbooted thugs to be distributed by the state to less independently-minded and more socially-acceptable citizens.
Meet your planned new living quarters:
Even if a law is put on the books, who will enforce some stupid rules that nobody will follow anyway? The same people who were suppose to stop Madoff? No, I think the FEDs will have more important problems to deal with than worrying about who is growing their own food. Besides, the government is way more incompetent than you think ... and people more resourceful.
banking on that FED incompetency, you betcha. Waiting for set-up of new Dept. of How to Fuck up a Wet-dream..... probably a cabinet-level post
Firstly, the vast majority of teevee viewers will be convinced that you are a conspiracy theorist that is bucking their system. Watch 'Idiocracy' or 'The Running Man' for a preview of life in a 21st-Century-style police state with a chemically dumbed-down population.
Secondly, if they succeed in shutting the gate before the States can legally dismantle the Federal Government, then the rulers of the new provisional government will have NOTHING ELSE to worry about than who is growing food and who is complaining about anything! The mere fact that you have even visited this site will put you on the list to be moved to one of their "happy camps" ... even though you are too naiive to understand what is going on.
"Mad Max" will not happen. The rulers will not let it happen. It doesn't need to happen ... they have the security apparatus already set up to monitor your every movement and action. The few holdouts with gold, guns and butter will all be divested of their hoards in street-to-street sweeps by Iraq and Afghanistan-trained squads of troops and mercenaries -- many of whom won't even be speaking English -- complete with humvees, drones and backscatter x-ray vans. They'll kick your door in and lob stun grenades on your family in order to keep their ration cards and a share of what they confiscate from you ... else they can't feed their family.
And don't rely on your neighbours. Your fellow slaves will inform on you quicker than any paid spy could find you.
The ruling class/oligarchs have been planning this for at least 50 years (that's when most of the onerous Executive Orders granting dictatorial presidental powers were signed ... and when the FAO/WTO started the takeover of control of the global food supply by setting up the Codex Alimentarius Commission that S.510 is compliant with. It's also when the "neocons" started their push for control of both parties.
It's a dark truth you speak.
The Oligarchs love the model. Take China for example the country everybody loves these days. First strip your people of everything - property, law, hope. Enslave them to Lies. To speak the truth is death.
Now hundreds of millions are at 0 income. Starting at 0 makes %10 GDP growth possible and a crushed people make slavery a piece of cake.
It's just too tempting when oh great leader can have a pryamid by built 10 million adoring fans, since you have destroyed truth you can rewrite the rules and say it is God's will. So who can argue with that.
No it won't. S.510 in its current form exempts farms.
"Can you visualize a possible scenario that could put a sudden end to the secular rise now underway in gold and silver?"
No.
After the Idjuts re-elected dimwits such as Nancy Pelosi, Charly Rangel, Maxine Waters, Harry Reid, Lisa MurCOWski, John MCain, and Barney Frank? Sigh, no way in Hell!
The problem is though that this article now gives them an out. We all know that the Fed monitors this site for ideas on what to do next.
We all know that the Fed monitors this site for ideas on what to do next........1 Find a hole, a deep one. 2 Lose the pinstripes.
" We all know that the Fed monitors this site for ideas on what to do next." Really?!! (I'm still learning) .......... well, if they really do monitor this site, then, I have a personal message for them that I hope they read ..... go to hell, you've done enough damage already. & let's hope ROBERT RUBIN goes to prison.
You better start looking out for white vans or black jeeps.
This month I interview Andrew Schiff.
As I high school Econ teacher who uses his book in my classes it was a pleasure...
Link to the interview:
http://thevictoryreport.org/2010/11/19/andrew-schiff-interview/
~MV
reply for the poster: "present in the economy"---not precedent. Illiteracy doesn't encourage me to waste time reading the rest of the "opinionation".
No. Precedent is just fine in this case.
Definition: prior in time, order, arrangement, or significance
These things would have to occur or be in place before, and that is grammatically correct.
the only thing holding back gold is the banks and their shenanigans
Failure of a TBTF will knock gold down a good chunk, for a little while.
+1
We have a winner. Everyone hates the banks now. No politician in their right mind (if there is such a thing) would sign off on another bailout. The public is getting pretty nasty towards the FED too. I think a collapse of the house of cards is more likely to happen next. After that, who knows what rises out of the chaos?
Hm...this may or may not be true. I'm worried about that.
Tyler, I disagree very strongly.
What's needed is not an end to the financial crisis and an upturn in the economy. Gold can be tripped up by the end of profligacy & idiotic bubble-ad-infinitum policies. It can be ended by making cash, worth SOMETHING, ie, immediate & aggresive rate HIKES. Also, dramatic curbing & balancing of Federal Budget. Ie, a "managed recession", and it'll be a DOOZY too.
Awww, what's wrong people? God forbid anybody says no to ANYTHING in this fucking country anymore?! Oh no! Can't have a recession, it'll be the end of the world! *shakes head*
Uhhh, where do we get the interest payments on all the debt if rates are raised? The only thing helping now are the zero interest rates on debt. The budget could not pay the interest at 10%- even if we pay for nothing else.
There is only one way to make cash worth something- stop debasing it and produce goods that cause other people to need dollars to buy them.
The best answer is default. Complete and total default. Haircuts for all the Central banks and bond holders. Ugly, but good for the general population- the ones with the pitchforks and torches...
Being a mere simpleton, default always seemed like the best option to me. Especially since it's all funny money anyway. When the collectors come calling, give 'em a shrug and say, "sorry, we don't got it."
Your comment, is *precisely* my point bud. That's the cascade you WANT to create. THEN, Gold down, US Dollar worth *something.*
"immediate & aggresive rate HIKES"...and...your now mortgaged house GIVEN to you....
otherwise it's "one nation, underwater, with urban riots and u.s. debt implosion, for all" (Volker didn't have THAT one hanging over his head--Nope, i say we Default at some point....but when?)
Ummmm. Mikey likes it.
The Re-Voklerization of the financial landscape. Making dollars scarce, again. Sure would do it. Is what's needed.
Methinks our political class could not abide, and quesitonable whether we've another Volcker in our midst.
I remember the Saturday Night Massacre well and still have the Monday a.m. front section of the NYT with the classic photo.
Mikey likes it.
We collapse with a replay of the Volker. Plug in the numbers. The only way to carry that debt load at that interest rate would be to basically have no other spending, not going to happen. So if we get Volker rates then we see the debt go parabolic, which should send rates even higher, ever feeding the fire.
Probably more politically palatable just to default.
Default now or default later, that is the question.
The follow up (of course) is: what in the world will the international bankers propose to get us and our central government out of this predicament? Last time they bankrupted the good ole U.S.A., the non-sovereigns got branded (SS#) and taxed twice (income and SS).
My guess, this time we get a new national ID card that doubles as an electronic charge card. Or maybe they go straight for the RFID/credit card implant. Can't waiste this crises!
I Fester
Gold is not being affected long term by this financial bullshit.
JFC, look at the price trend since the production peak in 2001 for your clue. Medium term spikes and troughs, sure, but the long term price trend is clear due to falling production.
trav
Do you have any evidence to suggest the primary reason gold prices have risen parabolically is due to falling production?
First, in 2009, gold production increased by over 100 tonnes from 2008 - yet prices increased, too.
Second, production of gold has decreased about 10% from the peak in 2001, while the price has increased by nearly 500%. Why would there be such an out-sized, gaping disparity in production versus price if the rise of gold is primarily a function of falling production, as you claim?
Third, I was under the impression that gold began to rise in 2001 due to the chaos of the terrorist attacks, wild reckless spending by the Bush administration (and Congress), the massive amount of credit and money that was made available after 9/11 (Bush quote: Go shopping), and the subsequent 40%decline in the US dollar - all during the Bush years.
The gold trade - once again - became the chaos trade when the world began to wobble off its axis over the past 3 years. With regard to gold prices, world-wide financial chaos seemed to trump the contraction of credit and money that began in 2007.
Now, price seems to be driven by fear of future inflation coupled with financial chaos in nearly every corner of the world. That has given gold prices more booster fuel.
Why would one ignore all these events and suggest the parabolic rise in prices is driven by falling production?
Respectfully (and just trying to learn)....
"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
"There is no bubble to burst,"
- Jim Folkman, VP of the Home Builders Association of Central New Mexico
"When I hear [about a housing bubble] I get the sense that people aren't connecting the dots.”
- James Glassman, JP Morgan Chase Economist
"We are really on track for a soft landing. There are no balloons popping.”
- David Lereah, NAR’s chief economist, December 2005
The supply of Gold is down, whats been discovered will not cover the expansion needs of the PacRim,Indians, Russians, etc,etc.
China wants 7000 Tons more NOW.
But,to answer your question(Not Tavis but allow me), is because the MANIA phase has not hit.
Less than 95% of Americans alone hold ONE ounce, of Physical Gold, or Silver.
As this nightmare progresses, and J6P, ACTUALLY starts running to buy,the parabloic rise will take place.
Its inevitable.When the PIIGS start going down THIS time, I see no way to hold them.
That means Europeans will emtpy the shelves again, for the last time, for a LONG time.
The talking heads keep saying BUBBLE.............I say BS.
Its been said here 10,000x's, when your neighbors, and the guy next to you at 7-11 is talking PM's.
Thats when the SWHHTF.
The second(and to this point main reason for no Rocket launch), is the PTB have been manipulating the hell out of it.
When Phase 3 begins, they will not be able to stop it, period.
DosZap,
I think that when you wrote this: "Less than 95% of Americans alone hold ONE ounce, of Physical Gold, or Silver." , you probably meant : less than 5%. Or 95% do not own - yes?
ok, you want evidence?
Helium peaked in 2002...look at its price since.
Against rising or even level demand, a peak production condition suggests a steady rise in prices. Perhaps the 2000 trough was artificially low; I believe it probably was due to central bank and ultimately Gordon Brown sales.
So, against that backdrop, the price escalation had there not been a set of steady sales *in volume* into the markets, would have been much more tepid.
The current lack of gold sales by large holders has merely exposed the supply/demand realities. That's all I'm saying.
I don't subscribe to the whole apocalypse or conspiracy theories of pricing. Nor with the oil spikes. Nothing has occurred which is outside of the realm of the foreseeable given known data.
If current gold price is driven by "inflation," then gold price hasn't changed, has it? You can look across the commodity spectrum for evidence of that. Gold hasn't *truly* gone up in value if that is the case. It's clear that supply on the market fell a LOT MORE than the decrease in the production figures because the CBs stopped selling.
A giant asteroid the size of ten earths smashing into earth would also end the gold bull.
Bingo. Nothing else is on the horizon...
+1
+1358
dup.
Or some technology breakthrough like cold fusion, which aint happening this century.
That would screw up oil, but not gold.
Disagree. With basically free and infinite energy I expect gold prices to really go down. With free/infinite energy this ponzi gets a whole new set of legs. Though odds are against this happening.
yes
here's a curveball for ya: WHAT IF ? gold is the key to 'free' energy?
"When the gold nuclei, traveling at 99.999% of the speed of light, smashed together, the plasma that resulted was so energetic that a tiny cube of it with sides measuring about a quarter of the width of a human hair would contain enough energy to power the entire United States for a year."
http://opac.yale.edu/news/article.aspx?id=7358
p.s. i would also argue that when 'infinite' energy is finally discovered [cough] revealed, the ponzi is immediately and irrevocably rendered moot. this is why it will most likely not be revealed before a massive phase change occurs sociopolitically.
JFC...give UP the fantasies about perpetual motion and violation of the laws of physics.
There is no fucking secret unlimited energy source, ok? That's goddamned fantasy and science FICTION.
The simple resting energy in matter as described by e=mc^2 means that a freaking penny contains enough energy to power the US for a year...so what?
Yeah, dummy and everyone with a pair of eyes can see that the earth is flat and the sun rises and falls so it must be rotating around the earth and man cant fly and even if he could, he could never go faster than sound and going into space...are you going full retard now????
i'm as free to believe in my fictions as much as you're free to believe in yours mate. the only difference between you & i is that you seem to be absolutely certain that yours are real.
funny how arguments on this topic always revolve around determinism.
Ok, loving this. gold has been money for most of history. Its appeal has been universal across cultures and unrelated continents. If, we share a common ancestry, and those ancestors used gold for energy production, it would explain the universal appeal.
this may provide a clue as to possibly WHY gold has been valued above all other materials since the beginning of what we consider recorded civilization, yes.
I remember the Navy announcing last year that they thought they had proven cold fusion, so I Googled it and found the headline. http://www.foxnews.com/story/0,2933,510589,00.htm
I have my fingers crossed...have long said that we need some kind of revolutionary new growable power source.
There will be no fusion 'breakthrough' while the ITER cash-cow blackhole continues to suck away all the good research money, in a distracting display of death-star-like project managment, huge grants and no practical end.
Case in point: Brussard's polywell prototypes (pity he's now deceased as well as poor)
Since the asteroid is 10x the size of Earth, then technically Earth would be smashing into it. But that would do it.
The asteroid does not have to be the size of 10 earths.
It does not even need to be the size of 1 earth.
It only needs to be about the size of the state of Rhode Island.
Finito.
Unless it were a giant asteroid composed of fiat currencies... just sayin.
Actually, I've seen many days of "dollar strengthening" which have provided (temporary) setbacks for gold. Paradoxically, if the Euro sinks faster in purchasing power terms than the Dollar sinks -- but both sink -- you wierdly get a negative effect on gold prices. These events probably represent buying opportunities, but I worry about a total EU meltdown dragging gold into the cellar as "flight to safety" occurs. Of course, this is kind of like moving into the central bunker at Waco; the Dollar dies anyway, but before it does, it is buoyed by the vain hope of safety.
A giant asteroid the size of Mount Saint Helens made out of pure gold could also crush the guld bulls.
so basically for the gold bull to die, we need to find a cure for financial herpes.
silver jumping AH - just like last night
My father is a mutual fund manager. Whenever I mentioned gold to him in the past few years, he always rolled his eyes, gave me the Buffett line about how all the gold in the world would only be the size of a city block, and yet it could buy the whole world. But guess what? Last night he called me; wants to put 20% of his net worth into gold. AND he wants to buy some agricultural land. This is a guy who laughed forever at this kind of survivalist stuff. Things are changing. People are waking up.
That is a great sell signal, Thanks for the confirm.
You want a Fist Full Of Dollars? Go ahead punk! Make that trade!
Edit; Call me first. Spot less 2%, done deal.
you're offering to sell gold for spot -2%?
Ah, but perhaps this time is different because the "this time it's different" people are actually right ... ? Perhaps.
The way I see it : this is not your normal market fluctuation kind of thing. We've effectively never seen a situation like this. I like the Titanic analogy, we hit the iceburg in 2008. Everyone heard the impact then. Some of the guests are just noticing the tilt. Very few are edging towards the life rafts at this stage.
And some Titanic stewards were rearanging the deck chairs so the passengers could get a better view of the life rafts being lowered.
It must have been thrilling for the passengers until they heard from Capt Smith that the ship was going down.
The passengers in America have not heard from the President that the ship of state is going down.
Captains of ocean liners past had integrity. Smith went down with the Titanic. Will Obama fall on his dagger?
I have found no account more interesting that Walter Lord's 'A Night To Remember'.
Terrific movie "A Night To Remember" too.
I hope you are being flippant with this comment TwoMan, not talking your book. Because if your strategy includes selling assets deliberately prior to the masses moving into them in huge quantities, then you'll be hurtin for certain.
And I have seen exactly this same awakening over the last month in people I know: big-government loving father-in-law suddenly deciding to buy physical, my "we don't own a TV" Aunt, even college kids I work with. I can see why some might say this is indicative of a bubble ready to burst. I would counter that it is only ready to burst if there is no rational reason underlying it, but frankly I think there are very sound, rational reasons for people to be worried about the future stability of our currency. Personally I don't see a bubble, I see a tidal-wave just starting to build. Dare I say it? FOFOA's 55,000$ per OZ anyone?
Yeah, I'm with ya but when those who never wanted something only want it because it has already performed well. I don't think i need to finish the thought. It is a trade, what ever your timeframe. Chart wise, we are looking at forming the right Shoulder of a potential top, will be fortunate if Gold will make it over 1380 on the bounce (1358 now). And if 1320 gives, its straight to 1220. Also, what money do people have to put into Gold? The equity outflows are going to bills and IPads. Best of Luck.
And best of luck to you, TR- if my holdings tank, I hope whatever you're holding does well.
I'm not worried, though- my stone-cold MFing genius of a financial advisor says gold to 1500 by 12/10/10, so I'm holding fast. And if you can't trust a complete stranger on the internet named "Turd", well then who the hell can you trust?
That's funny shit!
Thanks, S- by the way, your avatar is outstanding. I find it hypnotic, and strangely soothing...
Pine,
If your trading, be cautious. Gold is still within it's 2 year trading range, right in the middle actually. Yes it had a good three months, but the fall season is normally a good one. 1300-1500 for Jan 1. No evidence of a slope change...yet.
If your investing, who the fuck cares about trading ranges. This bull market will not stop until DOW = 1-2 ounces (historical perspective).
I Fester
LOL... Best comment of the day!
Turd is the word.
And what would be the percentage of people in the USA that own physical gold at present?
Ummm . . . would that be north of 4%? No? I thought not.
Therefore, it MUST be a bubble.
What are they going to buy the Gold with? When you can use SNAP or whatever to buy Gold, then i'll believ you. no one has any money. Just ask any cabbie or waitress and he/she will tell no different. Who is going to buy Gold and with what? thanks.
TwoRiver,
There are plenty of people with savings out there who just may want to convert some of it into metal - dontcha think? Not everyone is flat broke... yet!
Tworiver: My dad isn't buying because of its performance history. Word for word, he said to me: "I'll take that 20% and just know that I have something to live on when I retire, even if I risk the value going to zero." It's a desperate move of someone who is afraid some fucked up shit is gonna go down in his lifetime. He's not in it as an investment.
I have been telling him this for two years now since the 2008 crash, when I woke up to gold. He never listened. The guy made his living on value investing principles. He thought gold was total BS. Honestly it was a profound conversation to have had with him, to hear him volunteering straight up, pure gold-bug mantra.
I have nothing to say about your Dad, he followed what most did concerning Gold for a long time. I just look at charts and try to figure it out from there. The chart is at a dangerous point where 1320 is paramount for bulls. First problem will be if it can't hold 1345 overnight, now at 1357. And if 26.5 gives on Silver(27.2 now), watchout. Prob a good spot to SS the Nikkei at 10100 as well.
I'm not a financial guy. I'm an engineer. I never paid much attention to economics until a couple years ago. I didn't want to. I wanted to do almost anything else with my time. So, yes, I'm coming at this from a position of relative ignorance that I freely acknowledge.
But the belief that some people have in how charts look just stuns me. Yes, there may be some history of various financial instruments performing in certain ways as expressed by various patterns. But a lot of talk about charts comes across as though the speaker actually believes that the chain of causality runs from the chart as catalyst through actual equities or commodities performing a certain way because of the pattern displayed on the chart. And to attach fealty to expectations of how different financial instruments will perform based on patterns manifested in dramatically different economic conditions in the past also seems crazy to me.
I'm not trying to pick on TR. He undoubtedly knows more than me. But from a layman's perspective, this emphasis seems a bit crazy.
From one engineer to another.... well said Fred. Charting is just another way of predicting the future by looking backwards.... I am quite convinced that this will not work for shit given the uncharted waters we are heading into.
Think back to just before the crisis, and consider what reaction you would have gotten from any reasonably intelligent, economically savvy person if you told them that by late 2010, Bernanke would be buying up about 3/4's of all US sovereign debt with printed, thin air money. They would have branded you a lunatic.
Have at it with those charts... I will stick with common sense here.
Exactly ... these are dramatically different economic conditions, and I dont believe that TR or any chartist know more than you, or I. Show me one clearly defined method of interpretation and empirical evidence that it works. Maybe charts along with considering fundaments give you a slight probabilistic advantage. But to depend solely on charts is foolish.
Nassim Taleb, when interviewed about chart-tech his mimics went absolutely sour.
Also check out "The Black Swan", and that guy knows what he is talking about.
Actually, you shouldn't get nervous until a close below $1280 here, see above. Silver's a wild ride, gotta be fast and loose with that one. The recent (3 months) move in the ratio is positive for the PMs to continue advancing, but awaiting confirmation of a slope change for this bull run.
UF
@Uber - perhaps he's been appalled watching the GM-shilling on CNBS and Bloomberg. And how the volume of the lies have been turned up over and over. Hard to do any hard-core value investing these days - what does one believe? GAAP earnings - hahahahaha....
Throw your charts out the window. We are in uncharted territory now.
When the Central Banks begin to sell gold again I will believe that we have a returned to a stable monetary system.
Printing more debt to solve an enormous economic collapse caused by too much debt in all sectors is not a solution, but simply more can kicking.
Gold buying is not limited to America and I am getting very tired of posters not realizing that the market for gold is world wide.
If fools want to spend their funds on treasuries and I pads I believe it is they that need the 'good luck'.
The IRS is looking for you, Wesley Snipes! This one's for you:
UF
Think outside the fiat box. Gold is not to be traded. It is to be revalued.
everyone and his mother sees that H&S formation, just like we all saw 2 or 3 of them on the SPX in the past 2 years....what happened?
Just be sure to get your shit together before too many people wake up...
20% ehhh you better move fast...if these guys move in with their 10-20% might not be nothing left by end of this year.....
sell signal? a money manager finally seeing the light? well in my book he is long way from the regular guy in the street (who will never be in the market anyway...because there will be nothing left for him....)
I am continually amazed at the depth of concern in the general population. Many are starting to stockpile food and supplies....but most are not thinking about gold or silver at this time. This is so quiet that it has until recently gone unnoticed. One example...only this week I learned that two of my secretaries have been saving food and supplies for a year. I spoke to a financial advisor last night who told me he went out and bought a gun for personal protection if things get bad. He also plans to buy food. Two little kids and and a wife at home made him think. He is not a Glenn Beck fan. So despite the rah rah on CNBC many are not buying it. When they move from food to gold and silver --I think the launch in pm prices will begin if it had not started already. The great unknown in all of this is if Iran actually is successful in launching a somethng off the east coast. The west coast "contrail" was clearly a missle launch. There is a lot of quiet buzz on the hill about EMPs.
the futures market is used to control the price of a political commodity called gold. gold is money while dollars marks francs are debt. the more the paper price of gold rises the less faith people have in paper currency. ordinary citizens are starting to figure it out. loss of confidence creates dissension and leads to revolt. $3000 gold will be mad max money. i need a drink.
Me likes thought experiments. Thanks TD, above and beyond as usual.
tonight....gold and silver will spread their wings out wide and soar!
Is this a direct result of Harry Potter opening?
tonight....gold and silver will spread their wings out wide and soar!
John Ashcroft wrote a song for that....
"Let the Eagles Soar"
http://www.youtube.com/watch?v=MW2cPr0fQ7Y&playnext=1&list=PLC30BBD7350A...
and for the psychedelically inclined...
http://www.youtube.com/watch?v=5sMDG_bpBAk
Now that's funny!
truly hilarious
The idea I rarely hear discussed is scarcity. In a hyperinflation scenario- you do not sell gold and you cannot buy it. Ask the good people of Zimbabwe. Bad money runs good money to ground-and it won't come back out until it is safe to do so.
Gold is the only recognized money in Zimbabwe among the poor. They spend all day panning the rivers for a pinch of it just to get some food.
Question - what about the paper "drag".
Argentina is a better example. Gold works there. You just buy enough script to get what you need. There has always been a market for gold and silver on the streets.
"In concert with resolving the debt, the government could promise a new regime of austerity, as well as issue a new dollar with at least some limited backing."
There's the key line, fiats are easy to change.
If the "new" USD went to a gold standard, it would be automatically become the strongest reserve currency (if the Gold holdings are to be believed).
It would also be a strategic play against China, Russia,India and other low gold holding potential future superpower nation states.
The problem is, Germany is already a head of the game ......
'It would also be a strategic play against ..... and other low gold holding potential future superpower nation states.
Such as the UK after marxist fuhrer Gordon Brown sold off over half of its reserves at $250 an ounce in the late nineties.
The uk is totally foobarred - there's been decades of dumb politicians like him.
And the uk will end up in civil war because of it.
I seriously doubt that China, Russia and other members of the SCO report their actual gold holdings.
China is now the worlds biggest gold producer and Russia has even more gold potential.
I see no compelling reason for SCO member states and observer states to report their real gold holdings.
etrader,
Dude where you been?Even iof they DO have it(which they do not). Supposedly its in FOUR facilities, Ft Know,West Point, and FED NYC,(forgot #4).
Hasn't been audited since, when?, 1952.
My money says the TBTF Banstas have ferretted this off LONG ago.
If the US went to a Gold Std?.
Not with a (yet to be audited measly 8100 tons),at $42.00 an oz.
Reserve currency or no, there is no way to revalue Gold to the amount of fiat FRN's floating around the globe, or even in the US for that matter.(not without revaluing),think the rest of the world is going along with that move, for our spoiled ass benefit?,
Over 2/3rds of every PRINTED $, is outside the US.
We're back to Gold $56,000 oz., and to be honest, I still think that would not even get it to par.
DosZap,
Whether they are still there or not...does Treasury still price their reserves at $42/oz on the books. I've heard mixed messages on this. Can someone get the comptroller of the currency on the batphone for me, thanks.
UF
Gold & Silver r going to do exactly what they r supposed to do (rise, reasserting their roles as the only 2 forms of real money) as a result of the depravity of the bankers and their debt coupon currencies doing what they have always done - financially rape & pillage the citizenry in an attempt to maintain their worthess paper based plutocracy...
there will be no other outcome....
there's a rumor that 2,000,000,000 tonnes of gold were found in a cave in the middle east. If confirmed this could seriously trip up the gold bull.
there's video of that...
http://www.youtube.com/watch?v=fu92wc7IQl0&feature=related
I'll have to come up with a new scare tactic then... I mean...errr...it may not be true, but sell all your gold just in case OK?
Roger...
I had to borrow a page from your book JonNadler. My cousin is thinking of buying a 50 oz bar of platinum. I advised him not to do it. Because he would then have more than me...
Pt to $60 bitchez...
50oz bars are just dumb...gotta have smaller denominations. I guess if you already have a couple hundred oz, but sheesh.
I have found out that the New Alchemists have discovered a way to turn Pb into Au.
Unfortunately, due to increasing environmental regulations, the process is being prohibited.
Lucky Goldbugs!
The end of manipulation. THat might do it.
If Glass-Steagall were enacted. If the derivatives were cancelled away. If the bailouts were rescinded, not to mention backstops for freddie and fannie, if the bush tax cuts were allowed to lapse, if all these things happened, the amount our dollar would soar (especially against the symphony of Ben-lite's around the world) would be amazing and crush gold and other pm's. So doing what's right will do it. But do we really think that will happen without serious political and social pressure being applied? No.
We can hope for sanity, just like passengers of the Titanic hoped for a rescue boat.
Basically a return from sheer lunacy will do it. It could also be aided by a european collapse, with a possibility for dollar strength via lunatics thinking the dollar is a safe haven.
Now of course we also have the short selling in the pm markets and paper pm's to deal with, but if that is continued to be kept under wraps then it's a non-issue.
But of course, unless the people call for a real change, and not Rand 'fascist fuck' Paul or Barack 'Nero' Obama versions of idiot 'opposite' change, then it won't happen.
Unless you change that, then the fed won't change, and pm's will go sky high.
This also means that if this continues a bit longer and higher, than all the people believing in the crash, will be beholden to make sure it happens, or they lose big. It's kind of weird when you think the biggest skeptics, might financially become the biggest supporters of Big Ben.
So if we did Glass-Steagall and changed to a credit system, where the U.S. cuts out the banks as middle men, and we wrote off all the fantasy paper, yes we could have much reduction.
It WILL HAPPEN. When? After reaching what level? After how much civil unrest around the world? I don't know.
But it will happen. Get out before then enough to withstand a huge loss. You don't want to be all in gold forever. Ride the wave, and enjoy. But accept reduced returns for the greater good.
Gold will go up until the insanity stops. It could be sudden, it could be unexpected, but it will happen. Don't get TOO greedy rofl. Enjoy the ride up.
Eventually the games over. But it's still 1st inning now, but don't forget, it can rain ANYTIME.
Rand Paul's a fascist?
Please explain.
Well, fascism's an economic system in which there's nominal private property but in which the government makes all significant decisions.
Rand Paul seems to support a real right to private property and doesn't want the government making all significant decisions.
But he has an "R" next to his name so irrespective of any of that, some people will call him fascist.
you're making the same mistake Douchinger and Mish do, this failure to accept and confront that there is an inherent systemic flaw in the monetary regime.
Defaulting on our debt will not make the dollar go up. There is no way to "revoke" bailouts without crashing the system in deflation and making ALL debtors, including uncle sam, go tits up.
Austerity is a solution which forces the nation into default and permits the bankers, the SOURCE of all this bullshit, and the ones who run the regime with the systemic flaw, to take all real production as their own.
We need COMPLETE monetary reset and a new system.
It is not in the USG's interest to continue debasing the currency. If they do, then foreign creditors will force the cost of borrowing much higher. The USG cannot afford short-term interest rates to go up much. That is why I think QE is your run of the mill dissembling. Does anyone believe a word any government official speaks? Its the same old same old. Look at how much criticism the FED received from everywhere (foreign and domestic!) for a measly $600B! No, the USG will continue with QE only as long and as much as our creditors allow. Obviously their tolerance has been seriously tested.
This is bullshit. The price can drop dramatically without any of the "impossibles" from this post. When, for example, China has a slow-down and commodity demand drops. If you don't think China has a few speedbumps ahead read this and tell us why he's wrong.
http://finance.fortune.cnn.com/2010/11/17/chanos-vs-china/
Gold could tumble tomorrow. It's my biggest holding. I will not trade it for any paper currency.
exactly..aint never tradin it...in closing..fuck a bank!
Your mind is right. In the current state there is no reason to confuse gold's price with gold's value. If it gets hammered, it gets more affordable, that's all.
Donut, unum, Bend,
+ $1358
Gold's price goes down, more will buy it, myself included.
Price goes up, it will start getting scarce...
Near the end, all the physical will be gone! At least until we get the real price, and IMO, FOFOA has the right idea. Anyone else note that FOFOA has mentioned $100,000 a couple of times now?
"For example, politicians around the world will have to find the uncharacteristic courage to act in ways that are deeply unpopular with the very voters that brought them to office. Namely by slashing the scale and cost of government, with all the many cutbacks in subsidies and services that such a Great Downsizing must entail."
Where does this myth of 'unpopular' come from? Can't think of a single part of Goobermint worth keeping.
no printer-friendly button, chart not viewable
COURAGE?
What, to GUT everything and PAY BACK those bankers with REAL production for ALL the fictitious capital PLUS interest that they did us the fucking favor of CONJURING from thin air?
FUCK the politicans and FUCK the bankers. If they try this shit they WILL get a Putin and they WILL be fleeing to Israel just as the pre-Putin oligarch austerity vultures did.
This is idiotic. The desperate rantings of a trapped gold short. List a bunch of reason to own gold and call them negatives. No wonder you are stuck.
its really pathetic to come down to this though...
So whats the best way to own gold in a 401k?
TRE- do your DD. Jim " the fucking man" of all the great fucking gold men Sinclair. The boy is sitting on maybe the biggest find ever.
Long time no see
i did not read the whole report - sorry. i just cant see how can one come up with smt to put gold down when EVERYTHING has been tried for 40 years now...unless you discovered perpetum mobile...
oppsss there was the 1 trillion dollars in reserves discovered recently in Afganistan - that could be it...bring these reserves back to life ;-)
or even better, lets claim unlimited gold reserves were discovered in Mars but we cant bring those in Earth - can always account for those on IMF books...hope these ideas help...difficult task though...
I ran out of patience with the second use of the word "precedent". WTF?
The only solid gold truism, is that government is truly caught between a rock and hard place. Put there by the combined policies of the past 60 years. The end game is now nigh. Time to pay. One way or the other.
First rule of economics;
All debt will be paid. Either by the borrower or by the lender. Either with pennies worth dollars or with dollars worth pennies. It will be paid.
Or Jubilee...
That word again...
Actually the first rule of economics is:
I Fester
"In the late 1970s, then Fed Chairman Paul Volcker, wielding an ax made up of high interest rates, lopped the head off the gold bull."
More of this Volcker baloney. Why don't these financial anal-ysts just suck the shit from the mans arse?
Volcker lopped the head off the gold bull by offering more of the same shit to holders of shit? No, Volcker perpetuated the USD (& by extension the worlds obsession with bad debt) bubble. And I don't think he did it all himself.
Agreed. This makes it sound like castrating gold was the clear, diliberate objective of the interest rate manipul--errrr...policy. It may have been a neat by-product. Or it might not. But I know this: interest rates dropped a lot farther and a lot faster then the rebound in gold.
"interest rates dropped a lot farther and a lot faster then the rebound in gold."
True, but don't discount the paper shorts put into place so OPEC could buy cheap spot gold in exchange for oil priced in dollars. Back-door deals bitches. Around and around we go, when it stops SOMEBODY knows.
UF
If they continue bombing Gold&Silver market with Greek effect and latest Irish show, gold will drop further. But this time you can see fewer people buy into story, gold only drop $100 so far. I knew some Chinese are buying physical silver by kilo. World will soon run out of silver. Good luck HSBC and JPM.
Totally disagree on one point and only one point: If the US does re-denominate any new dollar will still be valued in gold. If one has old paper dollars to trade in for Uncle Sam's new buck they will get less than if they have gold to trade in.
Also if they find a way to mine the gold out of the oceans waters gold will tank.
Yeah and if cheap portable fusion power is discovered, oil will tank. As long as we are making up fanciful scenarios why not go nuts :)
Gold could tank, but I don't see how Bernanke could pull a Volker without bankrupting the US. Put in a Volker interest rate on our debt, and see how unpayable it would be.