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Morning Gold Fix: June 21, 2010
Courtesy of www.fmxconnect.com
Gold closed Friday at 1258.3 and
has continued its advance in early Asian & European trading. Over
the weekend, China announced that it would remove the Yuan’s peg to the
Dollar and allow it to appreciate gradually. The Yuan rose to record
strength against the dollar on the news and will continue to increase
under China’s central bank measured management. Gold has gained from
the subsequent losses to the Dollar and treasuries, with the August
contract trading as high as 1266.5 this morning. A stronger Yuan has
also led some speculators to believe China may use its increased
purchasing power for gold, a contention we remain skeptical of given
the quantity of domestic producers.
Someone likes gold: Gold spikes to a new record on heavy buying Friday.
BRIC SQUEEZE
There was plenty to be happy about if you are a Gold bull this weekend.
The
stalking horse behind last week’s strength showed its hand in the gold
markets. China made the announcement they'd be ending their peg to the
dollar.
The Saudis revised their gold holdings up from 143 to 322 tons, a small (+125%) rounding error perhaps.
What's more, among the most read stories on Bloomberg was something from July 10 last year titled: Medvedev Shows Off Sample Coin of New ‘World Currency’ at G-8. The dollar barbarians are closing on the gates it would seem.
Last
week, the IMF released a whitepaper of sorts discussing a new global
currency. Most likely a red herring to get the conversation going at
the upcoming G-20 meeting, but a sign of gathering momentum nonetheless.
Which
brings us to the point. We think there is a greater chance than many
that gold will be a factor in currency backing in the not too distant
future.
Why a gold backed currency is more likely than you think:
1-
Russia and Germany are working towards forming an alternative to the
dollar as medium for exchange between their two economies. Most likely
this will have some weighting of commodities in it. Natural Gas would
be an obvious choice, since Russia exports to western Europe through
the region.
2- China is decoupling, their buying power will soar
3-
One thing the West still has more of than BRICS is gold. As a
percentage of GDP and reserve holdings the U.S. Germany, France and
England dwarf the BRICS.
4- throughout history, powerful people do what they have to preserve their incumbent status.
If
it were me, and I wanted to stay in economic power, I’d buy all the
Gold I could and then devalue the cash I used to buy it. Then I’d
create a new currency backed by Gold. If I were stressing about budget
deficits and weak partners in the ECB and I had a decent Gold hoard to
begin with, I’d be thinking about that.
If
I were all ready long gold and knew there was pent up demand out there
coming from the BRIC countries and I had the ability to print money to
buy more gold forcing the other buyers to pay up I might consider doing
that.. Just saying….
August
gold was up 3.8 to $1262.1 per 100 troy ounces as of 8:20 AM EDT, this
morning. The September U.S. dollar index was down .076 to 85.9. July
platinum was up 18.7 to $1597.8 per 50 troy ounces. Silver was up 18.6
cents to 19.37.
-Elizabeth Thawne
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Well, I would like to announce MY new Reserve Currency: The Douchinger
It is PAPER...PURPLE...backed by THREATS that if you don't accept it, you will be BANNED!
On the PAPER COIN is Denninger's raging face superimposed on the Kool-Aid decanter, with OBSCENTITIES on the periphery of the coin.
He has presented credible analysis on so many other topics, yet when it comes to bullion, not only does he not get it with continually bearishly wrong calls, you'll never hear him acknowledge he was wrong. Always a reason why he's going to be right, one day. He totally self-destructs by refusing to acknowledge a clear move to bullion by large reserve holders seeking to diversify holdings. Gold is money. Not understanding this in the face of obvious price behaviour evidence really hurts his credibility.
She.
"He" is a "she" in this case.
Usually, you'll notice, the gold analyses are articles from other authors, for us to compare.
Stu -
precisely right about Denniger....the fact that he disparages 1 of the only 2 forms of real money has caused me to ignore his analysis & delete his site from my bookmarks...there is something wrong with him....
hahahaha
i just shorted the piziss out of silver (ZSL) ultra short etf...to hedge my stack.
silver never stays above $19.30 for more than a day or two. either way i feel like i 'll win here.
I think those days are over, or very close to it. But that's what you get for shorting silver. Unless I'm wrong, of course.
So far, I'm totally wrong.
Hey, everybody, see how wrong I was?
Like a fly hitting a window...
No, I'm not being too hard on myself.
Volatility exists to be played. Today I win big, tomorrow who knows.
Keep stacking physical. Daytrade the rest.
It makes me think, even if the commercials like JPMorgan aren't intentionally driving the price down or if they stop, the pattern would persists because of trader expectations, exactly what you're doing. Maybe? You guys go short when you think it should drop, so it drops, then buy the dip, so of course, it rises....
The way the price dramatically falls within a few days of each and every options expiry is a bit more than random chance universe IMHO. No question JPM has 75% of the total shorts either. As for silver unable to hold above $19 for any period of time...i'm sure it's what you've said - profit taking by some...a chance to buy low for others - all on low volume. When the volume comes in heavy before expiry - we all know who's to blame.
Gold is the sure thing in shiny metals - if there was such a thing.
http://israelfinancialexpert.blogspot.com/2010/06/how-to-profit-from-com... I agree with this articel the yuan could just a seasily collapse
from dec 24 '09...
http://beforeitsnews.com/story/1/762/UN_to_produce_bullion_coins_as_world_currency.html
This item was a hoax that was discredited almost immediately after it came out.
I emailed the author and he was rather red-faced about it in his reply.
Other than an emergency stash, right about now is a good time to sell. The gap down will be ugly (July '08).
http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=12906:the-real-truth-about-the-imfs-gold-sale&catid=48:gold-commentary&Itemid=131
The IMF is screwed Gold gone Bye-Bye, and Gold WILL SHINE.............
NKorean sub?
http://www.palmbeachpost.com/news/state/boater-chases-mysterious-perisco...
Isn't most of our navy in the Middle East and Central Asia and our Coast Guard is in the Gulf of Mexico. West coast is wide open for debt collectors to come check out what will soon be theirs.
I think this incident was off of Florida, Fort Lauderdale/Palm Beach area. I would think it much more likely to be one of our own. We have way too much ASW training going on off the coast of Florida to not catch a foreign sub lurking.
Same guy who spotted the UFO?
http://www.ufoinfo.com/sightings/usa/080221.shtml
Promises for the future are being discounted vis a vis things in existence now. Real bills are coming back. Life is proceeding into backwardation.
what do others make of divergence in mining index? failed to place new high, and is down now.
http://www.google.com/finance?client=ob&q=NYSE:GDX
Your explanation from Dan Norcini:
With both gold and silver moving higher alongside the HUI, metals bulls are pleased to see the train carrying all the passengers in the same direction for a change. I might add here that the HUI is outperforming gold on a percentage basis today but pretty much in sync with silver on that same percentage basis. It looks like some of those ratio spreads are being lifted off of the gold/gold shares trade which is encouraging particularly since the S&P 500 is not especially strong today. We might just be seeing some preliminary signs that the profitability of that trade is coming to an end for the hedgies. From looking at the chart, it does appear that the HUI will need to take out 500 – 502 in a big way to see a much larger unwinding of those trades. If it does, and that is going to be tough resistance, the shares will more than likely see much sharper gains as a goodly amount of those short legs are going to be in deep trouble.
See the ratio chart below to get a view of the performance of that trade.
Click chart to enlarge today’s HUI-Gold Ratio chart in PDF format
Any central bank launching a gold-backed currency will be breaking an IMF rule against doing so. It really would be throwing down the gauntlet.
Which IMF rule? Do you have anything substantive to back this quite surprising assertion?
As far as I am concerned, launching a gold-backed currency is equivalent to economic suicide right now, unless very strong controls are put into place: everyone would want some of that currency, which would then madly appreciate, destroying the economic base of the country.
Once that economic base is destroyed, foreigners would demand payment in Gold and drain the coffers of the poor nation dry.
But hey, that's just me. Make of that what you will.
IMF Articles of Agreement, Article 4, Section 2(b):
...exchange agreements may include (i) the maintenance by a member of a value for its currency in terms of the special drawing right or another denominator, other than gold [my emphasis]...
A gold-backed currency can't appreciate faster than gold. If gold (and the currency) appreciated, the country's consumers would benefit through increased buying power. This would hardly destroy the economic base. Under a gold standard, trade surpluses and deficits cannot persist. Read the recent contribution by smartknowledgeu, Global Financial Crisis for Dummies: Why the Abandonment of the Gold Standard is Responsible for the World's Sovereign Debt Crises.
Interesting. Thanks for this information.
Has anyone figured out how much gold needs to be mined (annually) to cover the expansion of the world economy going forward? Or is debasement/inflation the only game in town?
Is the game plan of the gold standard to lock those into poverty who don't have gold, or any means of getting gold?
Has anyone looked into the crystal ball and speculated what the world economy would be like "when" gold hits $2,000 per ounce? How about $3,500 per ounce?
We are all watching the game unfold. There are players on the field and there are cheerleaders at the sidelines. Ask yourself "At what price do I stop buying gold?" Or ask yourself "Should I buy gold or pay down my debts?"
To answer your questions:
- Yes, debasement is the only game left in town.
- The gold standard does not lock people into poverty. First of all, because I really don't think the gold standard is coming back anytime soon. Second of all, because the gold standard did not lock people into poverty: it (somewhat) constrained the freedom of issuance of the governments with regard to the amount of currency circulating into the economy. The gold standard was, as far as individual were concerned, a great way to secure savings, since gold bullion pretty much kept its value throughout your life (barring US$ devaluation such as the one ordered by FDR in the 30s).
- Gold at US$ 2,000 per ounce: wait until the end of 2010, early 2011 at the latest. At US$ 3,500 per ounce: end of 2012? Late 2013? Either way, this is going to hurt, and I don't rejoice in that, believe me.
- Pay down your debt, then buy as much Gold as possible. There is a good chance that panic selling will take place when the average investor realizes that the market are headed for a fall. That will be the best, and last, opportunity relatively cheap Gold. If you can't buy Gold anyway, buy Silver, Gold's little brother, which is still very cheap but has great potential. If you tons of debt and tons of Gold, bankers will find a way to seize your Gold because you owe them money.
Full Disclosure: I have zero debt, tons of cash and quite a few ounces of Gold and Silver.
Make of that what you will.
You are correct in the sense that gold at $10K is a scenario that we should all not want to see. If $10K gold is in a person's crystal ball, then ammo should be near the top of the "must have" list!
Under the gold standard, the general trend was gradual deflation (1%-2% per year). This is great for people on fixed incomes, unlike the modest inflation with 0% interest that the banksters are now perpetuating. Gradual deflation occurs because the supply of gold grows by ~1.5% per year (160K tons exist globally, with 2.4K tons being mined annually), whereas the economy grows by maybe 3% per year. There's nothing wrong with having the money supply grow more slowly than the economy.
Under a gold standard, you acquire gold through trade. For your labour, you get paid in gold. This doesn't lock people into poverty any more than a fiat system does. To the contrary, it protects those on fixed incomes far better, since their income is not continually eroded by inflation.
For most people, the importance of owning gold will be in the "you'll find out" category. I would pay down something like credit card debt first, but would buy gold before accelerating payments on low-interest debt like a mortgage.
"One thing the West still has more of than BRICS is gold. As a percentage of GDP and reserve holdings the U.S. Germany, France and England dwarf the BRICS."
...Excellent Smithers, excellent.
Let's see... gold looks ready to move through $1300 and beyond... what to do?
You guessed it. HAL, get busy on the futures... that's better, risk back on the table and, "down goes bullion... down goes bullion... down goes bullion" (sorry, very bad Howard Cosell reference)!
You are absolutely correct.
The Evil Empire will do ANYTHING to keep gold under 1250. It got away from them on the high volume push Friday morning. The Evil Empire has sold, sold, sold into the market ever since. Take a look at a 5-minute chart!
The good news is that the Empire will, eventually, fail. Demand is too great. So great that even their bullshit ETFs will not be able to absorb it all.
1250 will fail. Next line to protect will be around 1290 and then 1350. They'll lose there, as well, but not without a fight and not without fucking as many people as possible in the process.
and there it goes....1247.10
By all means, sell your gold. Anyone was not a believer of central bank gold manipulation needs to look no further than the price action since Friday am for proof that it exists.
$1239.00................
Being played like a fiddle.Traders are booking profits, and selling, and keeping it under $1250.00...........
This to me is the Ponzi scheme, the paper traders are keeping Gold & Slvr from being priced where they should be.
But, on the bright side, gives you a shot at buying the Dips.
"By all means, sell your gold." lmfao, you big sissy.
Perhaps you can't recognize that I was being facetious, you big douchebag.
Oh, and just in case...
fa·ce·tious
[fuh-see-shuhs] Show IPA –adjective
1.
not meant to be taken seriously or literally: a facetiousremark. 2.
amusing; humorous. 3.
lacking serious intent; concerned with somethingnonessential, amusing, or frivolous: a facetious person.
Are you being facetious when you speak of the Evil Empire?...just wondering.
Of course not. The Evil Empire is:
Darth Sidious: Bernanke and his minions at the Fed
Darth Vader: Jamie Dimon and his gang on the JPM pm desk
Darth Maul: Lloyd and the boys at the GS pm desk
Turd, you understand the game being played. People like Mish and Denninger still do not. One likes gold, the other hates it, but NEITHER of them have ANY understanding of what's really going on. Thanks to ZH and it's commentators here to cut through the nonsense. Looks like the OPEX shenanigans came a couple days early this time around. BFD.
I bought @1239...
Me, too. Paid 10.0 for some August 1300 calls.
If she blows that last weekly fib, im out. Got some work tonight, not in the mood to be toyed with.
Keep the faith, bro.
They're gonna have to work really hard to get it down thru 1225. Not sayin they can't/won't but there's gonna be a lot of support there.