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Morning Gold Fix: July 29
Commentary courtesy of www.fmxconnect.com
Yesterdays’ activity was wild. The range was very tight but violent. This happens often after a big move. People step back to reassess, profit takers and liquidators come in and the result is a choppy range. That I can handle. What was different was the behavior of the Q rollover players. And the behavior is consistent with a market in flux, evolving to the point where the old way of making money for bullion dealers may not be viable going forward. I have seen this before.
Normally, the spread between front month and second month widens as expiration rolls in. speculators are typically long and must roll (ETFs as well) because they are not permitted to take delivery. Dealers bank on this part of the business. Funds are weak hands at expiry, and producers (and their bullion banks) are strong. Shorts are in control. Furthermore, longs HAVE to declare intent before shorts do, so the pressure is on. I personally have played the opposite of this game in silver declaring long when the spread blew out at expiry, in the hopes over the next 2 days, “weak” funds would capitulate and then the spread would collapse before I’d actually have to pony up the cash.
Yesterday was different in that the spread collapsed to almost flat with Oct while the market chopped. These things are infrequent in Gold. So it would seem metal is hard to come by, and the shorts are moving to liquidate BEFORE the longs. Tie this to the GOFO and lease rate rise and you are starting to get some spreading though the term structure of short squeeze fear. Disclosure: I’m all in favor of that with a position in my PA of short the term structure in futures and having taken delivery with the intention of selling more futures to capture the contango, but word to the wise here: at the right price, gold becomes available. And when a large investor with an otherwise non-interest rate bearing asset costing carry gets a call asking him if he will lease his metal out for a month at 5% annualized in this ZIRP environment, they usually take the call. The concept is not unlike a covered call trade in stocks to them. Remember, all the gold ever mined is still available at a price, it is not consumed or destroyed. That is the other side of the stability equation. So do not be surprised if the spreads snaps back hard today when someone “finds” their metal under a sheet in the vault. If this happens, then you have a new game for the dealers, squeezing the shorts (unless it is they who are getting squeezed). Phibro did it with Silver for buffet, why can’t the big banks get their shorts covered with swaps and loans and then push on the weaker hand, which is now smaller dealers without Fed access?
Personally I believe the central banks bail out the bullion dealers with under market lease rates, and have done that for years going back to when (I think) Rubin hatched the gold carry trade ideas at Goldman. Do not be surprised if the smarter Bullion Banks (BBs)see the writing that central banks have turned buyer and that lease rates will go up because they are no longer giving it up so cheaply. And then don’t be surprised if these smarter banks starting buying in front of central banks, and making recommendations to their customers to buy. And then watch the smaller dealers and other unfortunate saps get crushed under the wave of fear by BBs buying in front of and alongside a central bank and their own sheep clients.
Not saying I think this will happen, but don’t be surprised. The BBs are agnostic at the heart of it. The big ones will cover and get long before we have a major squeeze. It’s what they do.
Good luck
-Elizabeth Thawne
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Seems the metal is hard to come by!
How true, metaphorically, literally and otherwise.
By the way, I went buying today and Indian Prices are not dropping in concert.
Everywhere, rigging, like an old tall ship!
ORI
http://aadivaahan.wordpress.com
"Seems the metal is hard to come by"
You know, I keep hearing that from different sources and want to believe it but it's not happening at the retail level. I've been making spot buys of AGE 1 oz with my most recent on Tuesday on the dip. Dealer had stock and made delivery immediately. Furthermore, if supply was getting tight, dealers premiums would be going up as well and that's not happening either.
If either of these things start changing, then I'll know somethings happening.
Please name the dealer who offers 1 oz AGE at spot price with immediatly delivery.
Tulving is running out of various items and premiums are up a bit. Retailers Apmex and Gainesville Coin are also experiencing some interesting moves in physical gold.
I'm buying from Gainesville. You misunderstood me. I didn't say "I'm buying at spot", just making strategic "spot" buys. Sorry for the confusion. Their spreads have not increased and yes, I bought yesterday and its shipping today.
Try Bullion Direct as their premiums are lower than Apmex, and they usually have more inventory.
Idiot,
Lower Prems, on what?.....select Gold Coins ?.
1oz. Mapes, are $10.00oz/ less than BD.
Please advise.............what quanities your talking about.
Thnx
Back in 2009, retail gold dealers had 1 kg-bars in-stock. Not any more. Now, you have to order them in advance.
Finally, gold dealers do not publish their gold markup rates anymore. Now, it is negotiable.
I expect that very soon Chinese and other will require gold delivery instead of holding it in some London banks. They already know the real "value" of US$ debt obligations.
caco,
I expect that very soon Chinese and other will require gold delivery instead of holding it in some London banks. They already know the real "value" of US$ debt obligations.
They did that 6-9 mos ago, if memory serves, Singapore built their OWN Vaults.
Not just Singapore Europe as well and big banks are joining in. Bullish for POG.
Everywhere, rigging, like an old tall ship!
Ship lost for more than 150 years is recovered
http://news.yahoo.com/s/ap/20100729/ap_on_re_ca/cn_canada_franklin_ship_...
Hey, who junked that. Such things are important to know!
;-)
ORI
http://aadivaahan.wordpress.com
looks like you are correct, the Aug/Oct spread widened a bit this morning. Very interesting.
Gold is down because of Europe. The rally in Gold since February was the result of FEAR in Europe (weak EUR) .... they were buying gold while the EUR was going down. Before February weak dollar meant Gold up, after February the relationship was inverted... strong dollar (weak EUR) = Gold up.... just check this chart of EUR/USD vs GLD for the past couple of months... as soon as FEAR abates in EU then GLD goes down...
If EUR/USD goes to 1.35 GLD will go back to 110... even if the EUR stays around here and European banks stocks stay stable it will be enough to keep putting pressure on Gold.
http://img293.imageshack.us/img293/2825/compareo.jpg
All true, but how long until the next calamity? I wish you well if you're trying to time a bottom. Fear has abated some, but it's just beneath the surface.
I agree about the fear beneath the surface and I am not trying to time any bottom... I just like to try to explain why it moves in the way it does.
The rally in gold was the result in INFLATION in Europe
What Inflation??? What are you talking about??? (EU Inflation Rate chart ---> http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=EUR )
Talking like that you are not going to get any girls....
When the Euro went from 1.5 to 1.2, everything got more expensive for Euro earners which is not demand pull inflation but CURRENCY CRISIS INFLATION.
look at the stock markets ..........they r on Steroids......looks like these archons really love their patterns and their Fibo naci numbers soooo much ....they r gunning the markets out to the moon
.looks like these archons really love their patterns and their Fibo naci numbers soooo much ....they r gunning the markets out to the moon
"Come for the festival, eh?"
http://en.wikipedia.org/wiki/The_Return_of_the_Archons
Debt deflation destroys gold prices and banks...
Amen.....then fear becomes the counterbalance for gold vs. deflation.
no it doesn't.
Too much debt distruction call into question the integrity of the currency. When people sell the currency you get crisis inflation, not deflation.
Gold went down in '08, temporarily. It appears to me that deflation (Debt destruction/financial crisis) has a short term downward effect on gold. That downward pressure will only last until the Gov't makes it clear its intention to print money/inflate the currency.
I would have to think about a scenario in which the gov't refuses to do any monetary or fiscal stimulis. Would gold continue to collapse? It's so unrealistic that it's hard to get my head around that one!
What about when the Euro was in trouble ? Gold made all time highs.
I think we're on the same page here. The Euro crisis this spring was a Sovereign Debt issues. The currency was in doubt. Gold will rise immediately in these cases. Our Financial crises was one rung down from the Sovereign debt crisis. The U.S. will get to the sovereign crisis in due time.
Maybe there some type of inverted laffer curve for gold across the deflation/inflation spectrum. On either extremes, you have gold rising rapidly and in the middle, low or no inflation, the price of gold is flat.
Just throwing stuff out there to see if it sticks. :)
Bingo,
hyperinflation-inflation-deflation-default
BUY- MEH-MEH-BUY
what? no trolls today, not even one?
These fools above think that debt debt destruction is bad for gold.
most of them don't even understand that the stock markets are rigged to go higher right now..and the govt is doing everything to knock gold down...yet market is 10,500 from 14,300 and gold has gone from 250 to 1165 as of today...and the real fire works have not even hit yet..anyone who thinks the problems are over...will be living alot lower standard of living due to these assupmtions..
DOW daily chart posted at blog, showing two megaphone wedges . . .
http://stockmarket618.wordpress.com
All the gold...
http://www.youtube.com/watch?v=B0HIjCsljyo