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Morning Gold Fix: July 19, 2010
Commentary courtesy of www.fmxconnect.com
Summary
Gold opened Friday at $1209.0 per 100 troy ounces. After peaking slightly up at 1210.9, it dropped precipitously to its close at 1188.2, the lowest close since mid-May.
What to Watch For/Think About
Looks like I missed some action late last week. The market continued to weaken with some bounces. Persistent rumors that Paulson is liquidating his GLD holdings are in the market. Hungary is the next debt bomb about to explode and a general return to risk is keeping equities buoyant for the most part.
Here is what we are watching/thinking:
- Hungary will not default, it will just be bailed out, Europe cannot handle another round of headline risk
- The IMF is seeking $250bn more for its own bailout fund. Which is hilarious because they are no longer asking for it as needed. They are preemptively getting lines of credit with solvent countries to bail out insolvent countries. “Even when not in a time of crisis, a big fund, likely to intervene massively, is something that can help prevent crises,” Dominique Strauss-Kahn, the IMF managing director told the Financial Times. “Just because the financing role decreases, doesn’t mean we don’t need to have huge firepower ... a $1,000bn fund is a correct forecast.” Who needs QE2 in the U.S. or a second round of ECB measures when the IMF will do the printing for you. These fuckers are laying the groundwork for the New World Order and a destabilizing
- Austria CDS are widening this morning on the perception that its banks may have Hungary risk and its stress test results.
- The first Gold backed Currency was announced last week. This is the road to ruin for the Dollar as global reserve currency: Slow incremental acceptance of alternatives form seemingly meaningless areas of the world. Ranks break first where there is little to lose by change. Last in places that cannot afford it. FULL STORY HERE
- Gold contango continues to shrink disproportionately with the bond market and flat price behavior.- our own spread position has made quite a bit in the last month, so we are watching this closely. At first, our short bond hedge performed as it should, losing us money as the spread made it. But recently, the spread has come in more that the bond market or the underlying price say it should. Still too early, but this is the early tell of short squeezes. E.g. Z 2011/ Z 2013 spread was in the 70’s last time we were here. Now it is in the low 50’s.
- Late week activity saw two things in options that are in my opinion bearish. Hedge funds ceased buying options for the upside, and began spreading their longs to minimize losses. This is bad news, because for every option player there are usually 3 futures players doing the same. Furthermore, the put skew popped nicely late in the day Friday from GLD put buying, not a good sign. And finally, volatility has gone from decreasing on a down move to increasing on one… fear is kicking in. if you are bullish, then a panic selloff may come- get ready to buy cheaply. If you are bearish…. A panic selloff may come- get short
- My NGD got hammered last week! Seems to be a really good predictor of things in my portfolio.
August gold was down 0.2 to $1188.0 per 100 troy ounces as of 7:32 AM EST, this morning. The September U.S. dollar index was up .132 to 82.790. October platinum was up 2.9 to $1515.0 per 50 troy ounces. Silver was down 1.3 cents to 17.775.
-Elizabeth Thawne
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For interesting debates about the early 20th century gold standard, read "The Lords of Finance". A lot of the moves look familiar today
Edit: First ping on a ZH post. I guess that moves me into the professional ranks of obsessive compulsive disorders.
Welcome aboard.
Actually meant first one to ping a post. I rarely post here but been a doomer since July 1998. It has been a long, tedious march.
Hi! Glad you are here. I had a friend in college named Thomas -- hi didn't look a thing like you. Being on the dark side since 1998 has been a long and tiring ride, eh? Do not despair, you'll find a few kindred spirits here.
Sweet I am an professional!
AND THE COMEX IS CLOSED.
OKAY EVERYONE> LET"S HELP JPM KEEP GOLD DOWN....DO NOT BUY!!!
JAMIE DIMON THANKS YOU IN ADVANCE.
China: "Sell Treasuries Buy Gold"
http://www.reuters.com/article/businessNews/idUSTRE66I05U20100719
"Gold is the ENEMY."
- Paul Volcker
An unproven statement based on rumor.
"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
The above was said by Alan Greenspan, 'Gold and Economic Freedom' in 1966.
He was also a disciple of Ayn Rand.
Funny how brilliant men somehow lose their minds when they join the ranks of politicians.
Volcker said letting gold go to 800 in 1980 was a mistake. Of course they're desperately trying to keep the "mistake" from happening again
The anti-gold cabal will immediately jump on the gold standard enthusiasts as "lovers of Islam" or call it "Sharia law" or some such thing; at least if the Malay currency is truly first.
Also if it is touted as Anti-Capitalism that will have a similar effect.
Lots of angles for the spin-meisters to twist the gold story against the masses.
Keynesian alchemists have been trying to spin gold into straw for a long time now.
The anti-gold cabal being all of Wall street and Washington DC, this will be used not only to publicly bash gold and hard currency advocates but also to smear them as you describe; we all knew that eventually gold bugs would be called terrorists, didn't we?
Gold still targets at least 1110.
While the Islamic Gold Dinar still gets headlines,
worth noting it was also a dream of Saddam
Hussein and the Ayatollahs', and is/was
in fact available as Eagles, Maples, Pandas, Pesos, Philharmonics, Sovereigns and other foreign denominations around the world.
Until we see copper, gold, palladium, platinum or silver certificates, we will consign the return to commodity currencies to polemics.
Meanwhile, hyperdeflationary defaults may take care of the excess debt derivative dominated money supply...
I have a 50% retracement level in the low 900s for the move.
Then again, it looks to me from that chart that the good news is that gold has hit it's lower trendline today.
The bad news is that if a top trendline is drawn you have a rising wedge forming over a longer period...
why don't you shut the F up
Oops this is bad. They are trying to stretch the swap spread out on it. Which means this is paper drop and and it's might just break 1300 by end of month. 1280 at the very least.
Oh no no no no no no non no. Haven't you heard? GS is suggesting that miners start up hedge programs again (but please don't ask Ashanti how following their reco's worked out for them).
Very true. "Anti-capitalist, heathen Arabs are out to ruin our precious Dollar."
AUDA: Paper! Paper! There is no gold in Aqaba. No gold! No great box!
LAWRENCE: Did Auda come to Aqaba for gold?
AUDA: For my pleasure as you said, but gold is honourable, and Lawrence promised gold. Lawrence lied.
thanks for showing us both sides of the gold trade.
indeed..sounds like the gold t(i)rade!
Vietnam <Insert 'I've seen way too many Rambo Films' comment here...> never lost its respect for gold.
http://www.buyassociation.co.uk/property/text/vietnam/buyassociation/buying-a-property-in-vietnam.html
"The other major difference in the buying process in Vietnam is that all transactions are carried out in pure gold...any buyer in Vietnam needs to keep a very close eye on the cost of metals for the best time to buy, as the fluctuating markets could make your property suddenly much more expensive."
At least not when it comes to an exchange involving a hard asset like land.
Regards
today's action by JPM is so stunningly blatant that the CTFC should be shut down immediately and the budget returned to the treasury.
tired of subsidizing a bunch of guys sitting around reading porn all day.
++
Look at it on the bright side - if not for them, gold would be north of $50,000.00....could you afford it?
be thankful, for every day they can still utilize control and try to take advantage while the going is still good....the end of the game is near....i can almost see the light at the end of the tunnel....but again, i am about 5 minutes ahead of the crew...
That is a completely baseless assertion. To suggest that manipulation has kept the price from rising 4000% is the kind of thing that I make fun of when I'm in more of a dickish mood.
Still, do you think that ANYBODY would be able to manipulate a price of something that much if market forces truly wanted it to rise 4000%?
Bravo - it is not me putting a number out there...its people like Williams etc. who know and understand it much better....
the 50,000.00 number btw was mentioned on CNBC few months ago, by one of metal traders - i dont think that guy has shown up more than a couple of times in the show...the way he put it, gold will reach $2,500, then revalued in some kind of certificate or whatever...
it could be 4,000 it could be 10,000 times higher, the rules of the game will change and if they do, does it matter if it is 100 or 100,000 times more? i dont think it does...either way the few hunderd thousands dollars most of the middle class has will be worthless....the rest is history
I gotta agree w/ Bravo...all these calls of 10 or 50k are insane.
gold is priced what gold is priced. If gold goes to 50k, gas goes to 100/gal
Not insane at all. Overdue to happen in fact.
Yes, not insane at all.
IF (and thats a big if) the Crimex cartel ever fails and IF it is actually discovered how little physical gold there truly is (see the Russian 999 "rust" story), then all bets are off on the price of gold. No one can accurately predict a fair value price.
Yes, yes, quite expected. Like watching grass grow after a nice rain.
And the sun will probably rise again tomorrow.
These things shouldn't surprise the nature watcher.
Yeah. What did they say in the year 2000 about gold? Mention that it would go to $1,200 and you'd have been strung up on the Court House oak tree as a witch.
Yes. Most of the manipulation has been by keeping the public out of the market and a century of training them it is not money. Very very few people see gold as wealth to bid up the price now. The manipulation of perception is more important than direct price manipulation. Gold is money between nations. For little people it is jewelry.
actually, over the past year i've slowly been converting my kids college funds into hard silver....going out to the coin shop today....this is too good to miss. put another 10K in the hard stuff.....and take it directly to the safe deposit box.
i wish i was as smart and forward looking.......good for you....am sure it will pay off big time very soon....it is simply amazing to me how people do not see it....i wonder what it is probably compliance, crowd/herd behaviour...CD should know and understand this much better...
quite honestly, i think JPM should be indicted for treason.....no one seems to consider what a national security risk these gold and silver positions pose......
that our markets are so blatantly corrupt and manipulated is infuriating. i can't do anything but try to capitalize when they pull stunts like today. but.....how many truly big players are getting royally fed up with this crap??????
and when will they turn on JPM? and us, the peasantry, who is going to suffer mightily when this all unravels on JPM .....
Unwashed,
Bro, you do not get it...........WHO do you think allows them to do it?,without repercussions.............the Fed, and/or the Treasury.
quite honestly, i think JPM should be indicted for treason.....no one seems to consider what a national security risk these gold and silver positions pose......
that our markets are so blatantly corrupt and manipulated is infuriating. i can't do anything but try to capitalize when they pull stunts like today. but.....how many truly big players are getting royally fed up with this crap??????
and when will they turn on JPM? and us, the peasantry, who is going to suffer mightily when this all unravels on JPM .....
"Pay" off?? In what!?!
You guys are hoping for a BUBBLE?
a bubble.....
ah, a CNBC viewer. good luck to you......how you do as well as all the CNBC viewers over the years.
Unwashed,
IF your smart, and figure you are, you should NEVER keep any cash, or PM's in YOUR BANK!.
Some banks rules disallow it, and what happens if your bank is CLOSED?.
Also,unless you insure it, if it dissapears(not an unusual thing that happens).what proof do you have it wwas ever there?.
The IRS can seize all our accounts for any reason........just with a word from the Man.
Unwashed,
I second what DosZap has said. And it's already been happening for a while now...
See:
http://abcnews.go.com/GMA/story?id=4832471&page=1
... converting my kids college funds into hard silver....going out to the coin shop today.
Big thumbs up!
Keep stuffin' that safe deposit box. Worse place in the world to store anything precious. Why? They lock the doors of the bank for a "holiday"...good luck getting in. If there is government confiscation, as boxes are open under the watchful eyes of the agents for Uncle Sugar, they will thank you for your contribution to the new Federal Welfare system, Komerade. Bank safe deposit boxes are a joke. You ought to come up with something better than that!
Manipulation is not control. If they had control gold would not be at or near $1200.
"Manipulation is not control. If they had control gold would not be at or near $1200."
I hope you are right, but what you assert is assumption.
If they had kept the price fixed at $400, and saw demand for physical start to soar, should they
a) absurdly keep the price at $400, in a situation where supply dries up?
b) deter purchases through a higher price, and hope that a rising price doesn't inspire a net increase in physical demand in ounces,
c) put fear into potential purchasers, by constantly slamming down the price, creating ad-hoc crashes, and once reaching a notional high (say $1262), then torture everybody by arranging a long term decline from there.
I am not saying that this is happening, I am just saying that how would we know? All they have to do is ensure that the paper price movements (which they do control) causes maximum damage to physical investor sentiment, whatever it takes.
We'll also be heading to the coin shop today. I love a good sale!
Have a blast!
Make some haste. It won't last. Look at the 6 month chart of this. You'll see the smash down compress everything into nearly one price. Then it started seperating out and rising. This take down was much more severe. So it's going to march rapidly up.
http://www.goldprice.org/gold-prices/1003-Gold-Coins/1003-Krugerrand.htm
Haste was made. I am content!
The first Gold backed Currency was announced last week.
After the events of the last three years why would anyone trust the state to back anything anymore, especially with gold? Gold is money already. Who needs the biggest criminal gang to broker the first, last and forever after store of value? Tits on a bull. And probably tungsten tits at that.
+1 can't imagine the bra that can hold tungsten tits.
From my reading, I got the impression that the gold dinar was going to be a coin rather than a note. As such, little trust is required, just a few spot assays every now and again.
when correlation turns negative once again (because the USD is not a currency either) nobody will sell gold anymore...
Unwashed... When they declare a bank holiday and clean out the safe deposit boxes you can lose all that silver. It will be up to you to prove it wasn't bought with dirty money. They will say with a straight face there is no legitimate reason to hold metal like that.
bag...got it covered. live near border...have safe deposit there.
"live near border"
I sincerely hope that is our Northern border!
For all the "deflationistas", understand this or ignore it at your peril:
Explained Time and Time Again: Currency Induced Cost Push HyperinflationPosted: Jul 19 2010 By: Jim Sinclair Post Edited: July 19, 2010 at 12:47 pm
Filed under: General Editorial
Dear CIGAs,
If gold market participants were all tank drivers their machine would have but one gear – reverse. The smallest book in the world is the book of confirmed gold price visionaries.
Someone says deflation and the long gold positions hit the fan. Gold banks make their short covers even though the fuel in Bernanke’s Helicopter Money Drop is founded in the dreaded use of the “D” word.
People are so fixed in present time that they cannot picture a euro back towards its high and the dollar back towards its low because the financial condition of the USA dwarfs the problems of the USA.
Hyperinflation is always the product of a loss of confidence in currency resulting in a “Currency Produced Cost-Push Hyperinflation.”
No one with a synapse talking to another synapse expects a “Demand-Pull Inflation.”
All hyperinflation in modern history has occurred for one reason, and one reason only. That is loss of confidence in currency.
Loss of confidence in a currency can be brought about by many reasons, but there is one constant factor. When hyperinflation has occurred in modern history EVERY economy involved was decimated as and when it occurred.
It has never been caused by “Demand-Pull,” but always and without exception caused by “Currency Induced Cost Push Hyperinflation.”
The nonsense being spread by the F-TV taking heads is that the Fed is out of ammunition to fight deflation. That is raving BS. The Fed can and will do QE to infinity which is restricted as a tool by nothing whatsoever. The ECB will not be far behind the Fed.
Argue all you want, but this is exactly what is going to happen starting now. Stop being glib. Study hyperinflation in modern times listed below before you ask me to explain it one more time.
What is out there today QE wise is enough to result in hyperinflation as confidence falls in currencies due to two characteristics, QE and volatility.
Try meditating on the concept of “Currency Induced Cost Push Hyperinflation,” rather than loading your pants over gold banks manipulation full of sound and fury, but meaningless in the great scheme of things.
Ferguson,
I agree with most of what you are saying. I think that the daily intervention by certain Central Banks, now including BIS along with the UK and a handful of Primary dealers in for the Fed is a key factor in seeing just how leverage there is for Gold and Silver as real money to move much higher relative to dollars, euros and many other connected and indebted country/currencies. The neat accounting tricks which enable these banks to show more available in the vault than the swaps and leases would indicate tells me one of several reasons why central banks have turned net buyers from once being a principle supplier in the market.
Whatever happened to Jimmy boys call for the usd to become shit paper end of last year?
Last year, this year, next year - does it really make any difference? The basic call is 100% correct. When the US Dollar breaks down completely, people will move to a replacement - silver coins most likely.
Very interesting that Kelantan in Malaysia will be issuing a Gold Currency unit the Dirham.The only problem I can see is that they may find it drains away out of the local economy.Also when you buy goods will this be on the spot Gold price v the item price or will the Gold be valued on a daily or hourly price,same goes for getting paid will it be on the Gold price on payday.Let it not be forgotten that Kelantan is one of the Malay States of the Malay Federation of Malay States that form Malaysia so it will not be a national currency.It will be interesting to see how this developes.
The gold is a currency, like dollars or euros. This means that the goods will be priced in gold, and the gold will trade like a currency. You don't see euros flying out of Europe or any such thing. More than likely, with a stable currency, they will attract more businesses and their economy will grow. We'll see.
What is Gold worth?
Over the last 100 years its reported the US Dollar has lost about 98% of its value, So 2% X 50 = 100% 100 years ago gold was $20 a troy ounce so X 50 = todays fair estimate of $1000 per troy ounce.
Gold has gone up about 400% in 10 years and is trading at or above its basic valuation as above, This point shows gold has a real downside risk not only short term but also longterm,
One mother of a black swan for gold is the fact so much gold is held by central banks and the IMF maybe 30 to 50 thousand tonnes just an announcement they will sell 5000 or 10000 or more tonnes of gold for whatever reason would half golds price quickfire, Will they do this? I dont know but the will and tools are their so it can not be ruled out,
Gold may be contraband again in the US
Gold trading sub $500 is very possible just as higher than $5000 in a few years,
Gold carrys risk but so does everything else including cash so a small physical hording for life insurance purpose type of play is a must at whatevr price but silver thats an undervalued play little or no central bank hordings and probably wont be contraband.
silver looks like a no brainer storage of value over the longterm because silver should be sub 20 to 1 gold silver ratio but who knows I dont.
Your analysis is oversimplistic.
It doesn't take into account the recent spike in the money supply. Four years ago, $1000 might have been a fair valuation, but today it's off by 50-100%. Remember, it takes a while for monetary inflation to find its way into price inflation, especially in an environment of collapsing credit, as we have had for the last two years.
I agree with Tmos and add that the gold price was controlled so $20 could easily have been $40 or $100 who knows. For 100 years, from 1833 to 1932, gold was kept around $20 then again from 1934 to 1967 it was kept (pegged) around $34.
37FullHedge,
Central Banks probably do not hold as much gold as you think. A lot of it has been leased and swapped out over the years. Many think, and rightfully so, that Greenspan, Rubin and Summmers (among others) put the US gold horde into play back in the 90's with the "strong dollar" mantra. Gold therefore should have NEVER gone as low as $252. Also, the paper claims and leverage being used against every physical of gold is enormous (derivatives). Your arguments and numbers on gold do not appear valid to me. But your view on silver being undervalued in regard to the gold/silver ratio is spot on.
A question...where does everyone get their physical? I can't find anyone who can give me an honest answer. I'm ready to get rid of my "paper" gold and turn those "profits" into the real thing, but how do I know who to trust?
Cars,
There are dozens of reputable dealers and online dealers. I personally like Tulving. That being said, I also like Sprotts new Gold and Silver ETFs for my Ira and as a way to have my metals redeamable in physical metal.
Apmex has always been reliable and fast. I would recommend them.
I would stay away from Rosland Capital; had a friend that did not have a good experience with them!
Also was pleased with apmex.com and they even sent me a big tub of popcorn for the holidays. Unfortunately they don't send a voucher for the dentist but it was tasty popcorn.
Cars,
I too recommend Apmex. Fair/good prices, good supply/selection, excellent service and easy.
I buy locally from a trusted coin dealer. I would have really expected someone to mention the fact that a couple of dealers advertise in the banners here on Zero Hedge. Wouldn't it be nice to patronize those who make this forum possible?
Hey, Car man. I buy from several small dealers with whom I have established relationships over the years. I found the ones I deal with now on eBay from some long ago purchases. Buying eBay is not for everybody -- you have to know what you're doing, but it has been a success for me. I buy all my silver on eBay from a couple of sellers who get their silver Eagles from the folks who buy at those "cash for gold" buying sprees. That leaves a lot of spread for them since they steal the coins from sellers. Let that knowledge be a lesson as well. When it comes time to sell, that will be a topic to consider here at ZH.
^ Ahem...cough, cough
A question...where does everyone get their physical? I can't find anyone who can give me an honest answer. I'm ready to get rid of my "paper" gold and turn those "profits" into the real thing, but how do I know who to trust?
Google global trends using gold and silver:
http://www.google.com/trends?q=gold%2C+silver&ctab=0&geo=all&date=all&so...
Your point is that the search terms haven't increased in search volume except around the Olympics so it isn't even getting deserved attention?
If you change that chart to 30 days you will see that the news volume spike of gold at a record high had no effect on the search term volume. That is opposite the effect the news volume announcement of something like the iphone4 has on searches.
Basically the zombie masses don't even think about PMs...yet.
Did I have a point? I thought it was illuminating, that's all.
Did you notice the difference between countries? Again, no point. Though I was surprised that the english word for gold, which is gold, was so popular in India.
And, yes, the volume hasn't changed much. No sign of a bubble yet, according to Google. Okay, that was a point.
"The first Gold backed Currency was announced last week"
Isn't this a bit misleading? Shouldn't it read:
"a new Gold-backed currency was announced last week"?
The dollar will fail. After the big bailout, the banks are quietly failing anyway. The Fed pays them not to loan because they would fail faster if they did. If more money is poured into the banks, the debt goes up and more countries will shun the dollar. If money is poured into the general economy, that will also cause the value of bank money to decline. The stimulus was wasted on non-productive sectors - health care, education.
The banks whored themselves out to Obama in return for being saved.
When he brings down the system they will help him rebuild his socialist utopia.
I can't believe people keep calling Obama a failure.