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Morning Gold Fix: June 18, 2010
Courtesy of www.fmxconnect.com
Gold moved higher overnight, pushing past a close of $1248.70 to $1251.50, in striking distance of gold’s all time high (for the August contract). Investors remain jittery about the impending stress tests and while transparency can reassure the market not knowing the specific parameters of the test may actually be creating more nervousness. These stress tests will need to account for the possibility of sovereign default to be taken seriously and may need to be much more versatile than the ones Treasury Secretary Tim Geithner used 2 years ago. A bank failure would seriously undermine confidence but the perception of an inadequate test could be equally damaging.
Contango Crush?
It’s beginning to look like the precious metals markets are getting the hint. If ETFs are filing new shelf offerings in anticipation of demand, and that announcement in and of itself creates the interest for demand, and gold will have to be bought when those secondary offerings are launched, then gold should go higher. ZeroHedge said it well yesterday, “In fact, if those who claim that ETF are among the primary sources of gold demand currently, such reindexing is now creating a positive feedback loop, whereby daily record gold prices are forcing the ETFs to purchase more and more gold to retain a mandated NAV, which in turn is leading to even higher prices on the margin.” Can Giffen Good qualities be far behind?
On top of it, we have heard rumors, unsubstantiated ones mind you, that there are beginning to be issues with ability to make Comex delivery in the Silver and Gold markets. Before you give credence to that look to the market for two distinct “tells”. First is lease rates going up. The second would be a collapse in the contango on Comex. Contango decreases for three reasons. 1- interest rates go down. 2- flat price drops… and 3- someone cannot make delivery on a short and begins to defer that delivery by “rolling” it back, which puts pressure on the spread. Gold spreads came in yesterday in a rally. This was due to the bond rally. More on this Monday. But keep your eyes on the spreads from day to day. Also, do not trust metal being taken out of vaults as a sign of true delivery taking place.
August gold was up 9.2 to $1257.9 per 100 troy ounces as of 7:59 AM EDT, this morning. The June U.S. dollar index was down .022 to 85.960. July platinum was up 3.6 to $1575.6 per 50 troy ounces. Silver was up 14.4 cents to 18.920.
-Elizabeth Thawne
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Gold Beeeeeaaaacchhhs!!!
(with h/t)
What kind of an IDIOT believes and/or relies on these damn Stress Tests?
The ONLY thing that these tests stress is ME!
Richard Russell redeux
A light goes on in brain_-- Driving back from a restaurant last night we were listening to National Public Radio from China. They were interviewing many Chinese who had
lost their jobs in the big cities and were heading back to be
with their families in the country. We noted what terribly hard
lives these Chinese lead. The problem the Chinese leaders have
-- is to keep the populace employed or at least semi-content
and not in a revolutionary mood.
I have been wondering why the Chinese government has been almost pleading with the Chinese people to buy and hold gold and silver. And it suddenly occurred
to me that the Chinese government sincerely believes that gold
and silver are heading substantially higher. The Chinese leaders
want the Chinese people to benefit from any higher prices of
the precious metals.
The idea is that if the people are happy and richer by holding gold and silver, the leaders
will be that much safer. The one thing the leaders of the Communist
party want is a peaceful, contented (and richer) population.
So far, the leaders of China have been very smart, and it occurs to me to tell my subscribers Do likewise.
http://www.321gold.com/editorials/russell/russell091109.html
Most commodities have been trending lower while gold keeps going higher. The market is telling us something, but what? Is it an inflation message, or that a large war is about to breakout?
It's telling you that Gold is not, as the MSM would like you to believe, a commodity. Gold is money.
We are now heading into a deflationary depression. In deflationary times, everything depreciates relative to money. Some misguided souls believe that Fiat currency is true money. To them, this deflationary crash will look like hyperinflation as the value of their paper money declines to the value of, well, paper.
"Gold is Money and nothing else" John Pierpont Morgan testifying to the Pujo Committee in 1913
Straight from the man himself, Jim Sinclair's recent book.... A Pocketbook of Gold
“Gold is no more than a barometer. It indicates the general feeling of
security people have about other asset classes. … If you feel safe, hold
other assets. If you are concerned – and let me tell you most people
in the world are concerned – then you move to Gold… The big-
gest driver of the Gold price is a fundamental lack of con?dence in
government.”
– Peter Munk, 2009
Settle down everyone, I have it from a good authority that gold will be trading below $1,000 real soon.
by Master Bates on Wed, 02/17/2010 - 21:29#234916
How's this for words? Gold is back in a downtrend.
You can save my post for a couple more weeks again, and use it to prove that I'm right again.
Gold sub 1000... :)
I've got a feeling that quote is going to be whipped out on more than one occasion...
good stuff
And who exactly do you think is going to be selling physical at sub $1000? I'll tell you, since you since you don't understand what seems to be happening. Noone. Nobody who owns gold will be selling it for that sort of price. Get a clue.
Thanks for the laugh. Gold, sub US$ 1,000 indeed.
On the other hand, past performance is no future guarantee, so we MAY see sub-$1,000 gold soon. That would be the very last buying opportunity before 'silly season'.
To the two posters above:
your sarcasm meter not working this morning?
1258.3 as I type. Silver cracked 19!
I love the smell of fiat (burning) in the morning.
Karl..... where are you Karl .... its cold and scary in here... help me Karl...
Was at $1260.
Gold seems to have, sometime in the past half-day, begun moving irrespective of the dollar again.
This is European trading time...
1260 nice little rung in the ladder.
After the markets crash again and we get our first sovereign default 1260 will seem quite cheap. And if the Aussie takes a dive at the same time it is a double pay off for me.
Looks like we are playing the same game here in Oz. Pity that as the Aussie dollar strengthened while Gold rose, would have loved to get more.
I am pretty happy about silver too...bought quite a lot of it earlier. And as luck had it bought a bunch of shares in gold miner Lihir a few days ago.
Looking good so far..
Nice to see a concerted effort to run it up through the Evil Empire's resistance at 1254. I wonder how they feel having it stuck up their asses for once.
Reply to thyself: Watch today's action very carefully. The Evil Empire will use any moments of low volume to establish fresh shorts in a vain attempt to jam the price back down.
The latest rise in gold was preceded by a calamitous decline in the discount rate. Its the same programme as in May.
A week before options expiry, you have surreptitious dumping of futures contracts, which merely resulted in positioning the longs for a run-up.
At the same time, gold lease rates have been holding up, which means the face value of gold leases, which are like a currency pegged to the gold price have been incrementally losing ground.
So the artificial supply of 100X leveraged bullion contracts based on a negative lease rate is cut off, that means positive lease rates for gold. At the same time you have declining discount and repo rates which could themselves go negative. Demand for short term money is, at the same time, looking for a store of value with a positive rate of return, which you can no longer get in money markets.
Aggregate demand is huge and almost entirely focussed on the short term money markets. So if even a tiny portion of that goes into bullion, then this will set off a cascade of higher prices.
Anyone in MMkts, has got to totally clueless.
Higher gold price = wider NAV at the ETFs
Wider NAV = ETFs buying physical
ETFs buying physical = Higher gold price
These snakes are starting to eat their tails! Catch 22, they keep chomping away until - poof! Nothing left. Except the last fools standing holding bags of paper gold.
GLD does not own even 1 ounce of gold. Its the 'custodian' who has the physical gold - JP Morgan. Guess who has the largest gold short position in history? Yup. JP Morgan. Now guess who gets the physical if they are forced to cover? Yup. Right again, JP Morgan. And finally guess what GLD gets? You got it! Nothing. Nada. Zip. Zero. Oh! Sorry. They get something - the shaft!
I wonder what the POG will be by Dec. 31...A lot of wild stuff going on all over the world. I think Jim Sinclair's target of $1650 is not that far away now..and maybe even higher if some poo hits the proverbial rotating wind device.
I got in at $720, and I mean *ALL-IN*. I think I'll have a beer or 12 the day it hits $1440, the day I 'double-up'. And still I will NOT sell! Not for fiat anyway. I might trade for some land near a nice stable river...grow me some gnarly buds of purple cush, a nice cash crop. Protected, of course, by Smith & Wesson.
As we near the Fri close, they are doing their best to bust it under $1254.00.........if they do not, I will be very surprised.
OK Goldbugs, I've always been partial to the yellow stuff, bought a little every year for Christmas, but have never bought any in larger quantities. I went for the little subsistence farm first. It was a hard call, but I understand subsistence farming and only feel secure if I am close to the land, deed in my name, no liens. Throughout the next seven month time frame, I will be converting some FRN's to PM's. My questions to you, dear ZH community: First Question- For gold coin, Eagles, Maples or Pesos? I understand the purity difference between the Eagles and Maples, but is there actually a value difference if one trades or sells? I would prefer, for my first purchase, Eagles. Any problem with this? Second Question-By value, not by weight, what percentage split do you suggest between Gold, Silver and Platinum in order to have a properly diversified PM holding. (I put this on the "High Gold" post, but only got one comment, so I decided to put it here as well)