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Guest Post: Yves On Gold Panic
Submitted by Planet Yelnick
I don't follow gold much, not being a goldbug and finding a lot of the gold commentary at the fringe of financial sensibility. And the ads for buying gold on talk radio are almost as annoying as the Technorati 'teeth' ads you see on a lot of low-traffic web/blog sites.
Sure, a return to a gold-back currency would right a lot of what is wrong with the economic ship of state, but it is not in the cards right now, despite a push by China and the BRIC nations for it, and the rumors of a November deadline looming for China to continue to buy Treasuries. (If I were Bernanke, I would call their bluff on that.)
But sometimes gold as a trade gets interesting, and we may be at such a moment. Yves sent me the attached chart with a few comments. His fundamental view is gold should drop due to deflation. If you doubt deflation is with us, check out the second chart in this recent post.
Yves' chart suggests a wave 3 UP is upon us, gold having run up a bit already today. Similarly, the Prechter view is a serious drop in gold as deflation picks up, but their wave count also suggest an UP wave right now. The STU on Monday showed a chart of an ABC correction in gold with an alt count of ending a triangle B wave, and now starting a sharp spike up in wave C. A break of $972 confirms that gold will run fast towards $1050-1100/oz. We got to $955 spot today, but over $978 in Dec gold futures. Neely has had his aggressive traders in gold, and is now lightening up a bit, but also expects the run to continue in a gold panic, a "feeding frenzy" as the goldbugs rush in to avoid missing the big move.
(Note: in markets, there is not fear and greed, only fear; greed is fear of falling behind. A buying panic is a moment of fear.)
Now, normally the USD and Gold are inversely related, and the USD has been in a bottoming process rather than a fall, with an upwards bias; yet gold is spiking. Question is where is it coming from? Sentiment for gold remains essentially neutral.
Let me speculate that it is coming out of Asia. The China Bubble has burst and the SSEE is down around 25% in a month, with apparently more to go (at least below 2000 if not down to 1000, where the parabolic rise began). The Chinese government has been buying gold for the past six months (at least), and I suspect the middle class in China is rushing in for a safe haven against the equities collapse and likely real estate crash to follow. The recent rise in Copper may also have the same roots, of China rolling its long-term Treasuries into shorter terms, and then stockpiling commodities, including gold.
Whatever the cause, the wave structure is predicting a gold buying panic that will drive gold over $1000. Watch and see if it is correctly gauging the psychology of a buying panic.
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Conspiracy theories are common here. It's a magnet for TRUE BELIEVERS. I'm just amused.
Confidence is failing the public sector, and flagging in the private sector. Both push all excess accumulation into the final safe haven. The only harbour left in a horrific hell of a storm, will be the one Tutankhamen, Darius, William of Hesse, Suleiman, Genghis Khan, and Ming accepted universally by weight and purity.
Same be said of men, guage them by gravity and purity, all else is dross or counterfeit. This is an age of counterfeit or counterfiat.
I am glad to see Elliott Wave analysis mocked and demeaned earlier in this thread. The fewer people using it the better.
It's a peculiar gold breakout -- a dollar breakdown should have coincided. Instead, the dollar seems steady.
That's strange for a gold breakout, if that's what this is.
As a kid growing up in the late 70's to early 80's I can remember all the gold and silver cockroaches coming out of the woodwork and setting up shop in the malls and elsewhere to cash in on the recession.
And today, same as then, history is repeating itself with a new generation of these cockroaches scrambling about and looting everything in sight with their hype and panic.
Mark my words, in a couple of years they'll be out of sight back in the sewers, and gold will return to $400 per ounce... and down the road, we'll play the game again, because even nuclear weapons can't kill these roaches.
So Volcker effectively repealing our nation's usury laws and raising rates to 20% wasn't the problem, it was people trading in our constitutionally proscribed currencies, gold and silver.
Sounds like an apologist for the usury to me. Those laws were put in place for a reason. Go troll on CNBC.com.
And you think we will bubble our way out yet again? Your memory may be accurate, but your macro-history and math skills are wanting.
Have you ever met a Wall Street shill who doesn't proclaim: "you need gold in your portfolio to protect against inflation."
It's right up there with: "there's a ton of money on the sidelines waiting to get in," or "buy (a house) now or forever be priced out of the market."
Yves is another deflationary knucklehead like Misch. Is the massive money printing and monetization of US debt deflationary? It's really sad that these clowns actually believe this. What a joke, wake the f#$%ck up. I don't care if the currency is not backed by gold. This type of free floating currency is a new experiment thanks to Richard Nixon, and it's doomed to fail.
Think about it. What's worth more - a fiat currency backed by nothing or an actual commodity that you can hold in your hand? When you think about it this entire economic disaster is based on a series of paper Ponzi schemes.
You're witnessing deterioration and destruction not deflation. Precious metals are real money and I'll be laughing my balls off when Yves and Misch lose all their pretty fiat in the next Ponzi disaster (The USD).
Yves is another deflationary knucklehead like Misch. Is the massive money printing and monetization of US debt deflationary? It's really sad that these clowns actually believe this. What a joke, wake the f#$%ck up. I don't care if the currency is not backed by gold. This type of free floating currency is a new experiment thanks to Richard Nixon, and it's doomed to fail.
Think about it. What's worth more - a fiat currency backed by nothing or an actual commodity that you can hold in your hand? When you think about it this entire economic disaster is based on a series of paper Ponzi schemes.
You're witnessing deterioration and destruction not deflation. Precious metals are real money and I'll be laughing my balls off when Yves and Misch lose all their pretty fiat in the next Ponzi disaster (The USD).
Why so aggressive? The force of deflation out there is huge with CBs scrambling to pull out every inflationary trick in the book to counter it. Too many people look at what the CBs are doing and scream "FIRE!" while ignoring the deflationary event that calls for fire. (By the way, asset deterioration and credit destruction are symptoms of deflation, you are confused).
It's a tug of war so let's just wait a little while longer to see who wins shall we? Right now, the edge seems to be pretty clearly with deflation for those who look at the flag and the midpoint with an objective eye.
Ultimately, yes, this will probably end in a gigantic global inflationary shitstorm but we don't know that for sure. I would laugh my ass off if CBs somehow managed to avoid extremes and steady the ship, but then I would also lose a ton of money having bet on extreme market movements, so maybe that wouldn't be so funny.
M2 and the components formerly known as M3, M4 in the UK, are essentially a separate free-floating currency detached from the underlying M1, which itself could break down in an extreme crisis where only small denomination cash is safe.
Broad credit supply is deflating, with whole markets disappearing, think securitized jumbo homeloans. Narrow money supply is being inflated.
The deflation v. inflation debate is sort of like asking a cab driver, where are we, and he replies America. Both sides are technical correct but grossly imprecise.
Moneterist: Hey, I'll trade ya an ounce of gold for that can of spam.
Realist: Nah...can't eat gold.
Gold is coralled into position with matching background transfers to set the price. It will likely go way up then get yanked back down just as dramatically then coralled back and forth into a cone like a compressing spring then repeat.
It doesn't go that way exactly to keep it from being too suspicious but it has to break out of the coral every once in while becasue managing the spread on it becomes too difficult.
New Guy Spouting...
Back in the 1800's the U.S. had to make a larger, silver dollar (called the Trade dollar), as so to trade with China. These Trade dollars were mostly shipped to China and it seems, few ever returned to the U.S.
Am just spouting as believe there is a relationship between the people of China procuring precious metals from us, and the policies and habits in our trade relationship, today.
Comments and thoughts most welcomed.
Posted by: Heraldic Eagle
Scary how many of the above have no clues on what they are posting about.
Peel away the ideology/religion, all that hype n`flations and try to see through all that name calling, then remember BW 1.0., learn about the settlement process and read a prospectus or two while at it (as you have about stock trade execution but not as much on Treasuries` settlement, a?) perhaps glance over Comex rules, look at who performs the custody to whom and what is the zero hour “rule” should such an entity enter into Chapter of your choice. Remember then that congress recently OKed the IMFs “reserve” disposal to be replaced by an QEed one. Throw in competitive devaluations and revalue the »index info«. Then couple it with derivative of your choice (expected default rate) vs. FEDs “QE” effort by »asset class«. Therein hides a thing or two you might consider first - prior to your next post. To cut a long list short: perhaps one might re-think what PMs hedge against.
p.s.
Yves - obviously - did none of the above.
"But if there really is a stampede, enough to break PM price suppression by Central Banks, then be prepared for Confiscation 2.0. The justification would be that gold bugs are hoarding metal, leading to the price rise and perpetuating the critical shortage of money. It would be true and gold-less sheeple would rally behind the cause being trumpeted on CNBC and try to steal my stash."
It would be true? Care to revise and extend? They own this "technology called a printing press", or are you unaware of the Federal Reserve? For them to say that gold is causing a shortage of money is to capitulate and remonetize gold solely because of a price breakout. You obviously haven't thought about the ramifications of that - especially in conjunction with 1) a confiscation by an unpopular administration, who has already bailed out the fatcat bankers, and 2) the US already having cheated the world once on gold in 1971.
gold is money.
They give US fighter pilots a one oz. gold coin as part of their kit when flying sorties in war. Not 10 FRNs.
News is this morning that Asians are taking all there physical gold out of London and are going to store it themselves in newly constructed vaults.
Do you think they are doing this to save storage fees OR make sure the gold is really there.
Got gold or gold derivative (ETF/IOU) kind of thing.
link to story:
http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03?siteid=rss&rss=1
So I wonder if the Brits will also transfer all the paper that was written on that gold? A tiny light of hope ignites that the Chinese will call bullshit on the whole ETF scam...but wait, what's this?
"Management firm Value Partners planned to launch an ETF gold fund that will use Hong Kong instead of London as a repository for the gold backing the fund, local reports said Thursday."
Pfff, extinguished. No the Chinese just want to play too. Nothing changes and the scam continues. Leads me to expect a brief move on the PMs while the players swap party hats, then it's straight back down again. We'll see.
Another light of hope still burns that the BRICs are going for it, pulling all the physical bullion they can from everywhere they can to call bullshit on all the paper, bust this scam wide open and make a packet as their metal launches into the stratosphere. Call me a pessimist, but I doubt it. More likely that some BIS folk would pay a little educational visit to explain how it's far more profitable to play the game.
I see your point, but wouldn't Value Partners be risking more than a handslap if they were caught writing counterfeit contracts? Chinese bankers get bullets, not bailouts, for shenanigans.
I don't know the exact nature of VP's operations in Hong Kong, but you can bet any actions would have to be signed off by the Chinese govt. VP are primarily a consultancy group so far as I can tell, they'd be smoothing the way for the real player, whoever that is.
My suspicion is that the Chinese govt would be operating that ETF, so they're not going to punish themselves if they run this ETF like the others.
Do you expect Value Partners will be shorting gold at the same time?
I don't think it will be VP, but yes, I think that whoever is the custodian for that ETF will most likely be shorting PMs at the same time (that's how GLD and SLV work).
Not necessarily the case though. There is an outside chance that the real player in this game has an honest agenda, but I don't know how long that would last. The potential for fraud is just too tempting.
They never gave me one of those one oz. coins. Bastards!
"Got gold or gold derivative (ETF/IOU) kind of thing."
Assuming you meant "get", the IOUs will be irredeemable, and will only decrease in value as they increase nominally.
HEY-Hong Kong asked for all it's gold back from London to start it's own exchange. I bet London had to go buy it on the open market!
http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-lo...
1st -just how much bullion exactly does Hong Kong claim? See…
2nd - did someone notice the new vaults in “Arabia” were opened just a few months ago and does one know how much bullion could/was pulled from London towards that direction?
3rd - Has the bullion been leaving the US from 2005 onward? At what annual rate? If none – when was that number last audited?
4th – did the CBs just turn net buyers while signing Washington 2.0?
5th – what gets pulled in phyz must come out of somewhere no? Same happens if delivery – god forbid - is asked for…
6th – how stupid does the BoE look to you as they managed to dispose their “reserves” (for liabilities) back then – right at the turning point?
and last tho not least - which derivatives + their corr. ammounts were defaulted upon recently by Hong Kong s masters?
"China pushes silver and gold investment to the masses"
http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=88452&sn=Detail
"...If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!..."
Say 15% of the US population buys one ounce of gold, and 15% of China's population. How much gold? about 200 million ounces or around 6300 tons. Only about 5.1 billion oz. out there supposedly.
Then what if Europe, Japan, the little tigers want the same? What if everyone wants two or three oz.
You can see where this will go if a currency crisis in the dollar happens.
Whoever bought London's gold at the price nadir, is a shrewd fellow.