A little over two years ago, in the middle of April 2013, there was a gold crash that came seemingly out of nowhere. Worse, for gold investors anyway, that crash was repeated just a few months later. Where gold had stood just shy of $1,800 an ounce at the start of QE3, those cascades had brought the metal price down to just $1,200. For many, especially orthodox economists, it heralded the end of the “fear trade” and meant, unambiguously, that the recovery had finally at long last arrived. However, gold price activity since QE3 has been a warning, and a big one, not cause for victory celebrations.
As a frequent contributor to Bloomberg, I would welcome the opportunity to debate this with Barry.
What say you @ritholtz ? : )
“... I am a hard working taxpayer who is getting pretty fed up with having my savings earning no interest and possibly being devalued (see Japan) and of not being able to find any sensible place to invest my hard earned due to central bank policies making it impossible to make any return anywhere without taking crazy risks.”
"When a social construct (gold as money) survives for 6,000 years I would expect curious people to inquire as to whether it is tied to some immutable underlying law... [instead], our court economists prefer to write this off as a 6,000 year old delusion. That says a lot about the sorry state of the economics discipline today.”
2014 has not been kind to Barclays: first, the UK bank proved countless goldbugs right when it was first caught rigging the gold market (the first documented case, not the last) and a few short weeks later, the New York Attorney General crucified the bank for misleading its Dark Pool clients, and letting their order flow be, quite lucratively, front run by "aggressive" predatory algos - something it explicitly had stated it won't allow. So with one after another revenue stream crashing before its eyes, what is the Chairman of the scrambling bank to do? Why beg to at least keep the FX manipulation going. What follows is not from The Onion.
Now that everyone is breathing down the PBOC's neck to finally reveal - with a five year delay - just how much gold it does hold, the Chinese central bank has done a U-turn on its indirect transparency and, as Reuters reports, has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, "in a move that would help keep purchases by the world's top bullion buyer discreet at a time when it might be boosting official reserves."
The last time the FT penned an article on the topic of gold manipulation, titled "Gold price rigging fears put investors on alert" it was promptly taken down without much (any) of an explanation. Luckily, we recorded the article for posterity here. Earlier today, another article on the topic appears to have slipped through the cracks of the distinguished editors of the financial journal that enjoys the ad spend of the status quo, when it reported that "Gold pricing scrutiny widens", hardly an update that will take the world by storm, however it is notable that "even" the FT, where for years goldbugs claiming gold manipulation had been ridiculed, is finally start to admit the glaringly obvious.
It's been one of the worst years for gold in a generation. A flood of outflows from gold ETFs, endless tax increases on gold imports in India, and the mirage (albeit a convincing one in the eyes of many) of a supposedly improving economy in the US have all contributed to the constant hammering gold took in 2013. Perhaps worse has been the onslaught of negative press our favorite metal has suffered. It's felt overwhelming at times and has pushed even some die-hard goldbugs to question their beliefs... not a bad thing, by the way. To us, a lot of it felt like piling on, especially as the negative rhetoric ratcheted up. This is why it's important to balance the one-sided message typically heard in the mainstream media with other views. Here are some of those contrarian voices, all of which have put their money where their mouth is...
I know why someone who is so wrong can get so much media attention. My big question is why do so many "so-called" smart people actually believe him! We need a new, new media outlet, no?
Goldbugs the world over may not know it, but the one catalyst they are all waiting for, is for the PBOC to throw in the towel to Bernanke's and Kuroda's liquidity tsunami and join in the global reflation effort. Alas, those hoping the Chinese central bank would do just this on Friday were disappointed. Moments ago the 21st Century Business Herald, via MNI, reported that the People's Bank of China "decided to shelve plans to inject short-term liquidity into the market late Friday because of concerns it would be sending the wrong signal in light of the government's ongoing commitment to its "prudent" monetary policy stance. Rumors hit the market mid-afternoon about an injection in the region of CNY150 bln via the PBOC's rarely-used short-term liquidity operation (SLO) tool. But how much longer can it avoid the inevitable: what happens when overnight loan yields soar to 20% or 30% or more, and when the repo and SHIBOR markets lock up and no overnight unsecured wholesale funding is available? Because when China finally does join what is already an historic liquidity tsunami then deflation will be the last thing the world will have to worry about. In the meantime, we welcome every chance to dollar cost average lower on physical hard assets, the same hard assets that none other than 1 billion concerned Chinese will direct their attention to when inflation makes it long overdue comeback to the world's most populous country.
Buy PHYSICAL Gold. NOW: The Discount of a Lifetime: Or Why You Must Abandon the Fake Paper Gold MarketSubmitted by Gordon_Gekko on 04/17/2013 07:00 -0400
It's time to go in for the kill. Buy as much physical Gold as you can.
I recently received the following question from a friend of mine and wanted to share my thoughts with my market pals, and throw this out for feedback. I would be particularly interested in hearing from my derivatives friends who are much more technically informed than I am on the subject.
“I was looking at something today that I thought you would probably have some comment on: have you noticed how wide the out months on the VIX are versus the one or two month? How are you interpreting this?”
From my viewpoint this has been a key debate/driver in the equity derivatives world for a good while now (I started having this discussion in early 2011 with some market pals and the situation has only grown more extreme since then).
Health Tip for Paper Money Users
Back in February, shortly before the big sell off in gold we warned that we have some "Horrible News For Goldbugs - Paulson Is Bullish On Gold Again." We may have some bad news again, as the 'bullish' sentiment this time comes from none other than the muppet master, after Goldman released a note overnight saying that "gold is set to glimmer as growth tarnishes." To wit: "We reiterate our constructive outlook for gold prices in 2012 and our 3, 6-and 12-mo forecasts of $1,785/toz, $1,840/toz and $1,940/toz, respectively. We acknowledge, however, that continued strong US economic data poses growing risk to our forecast for rising gold prices. Net, we reiterate our view that at current price levels gold remains a compelling trade but not a long-term investment, and we continue to recommend a long position in Dec-12 COMEX gold futures." Yes, that's great - we have only one word: Stolper That said, the only saving grace to an all out wipeout is that Goldman appears quite set on getting QE at all costs, potentially as soon as April - a move which would send the metal soaring as the Chairman can not have his cake and eat it too, absent a few helping hands from the CME of course.
In Don Coxe's latest and typically excellent letter, "All Clear?", he highlights the opportunity in precious metals mining companies: "If there were one over-arching theme at the BMO Global Metals & Mining Conference, it was that the gold miners are upset and even embarrassed that their shares have so dramatically underperformed bullion... "On the one hand, they were delighted in 2011 when it was reported that since Nixon closed the gold window, a bar of bullion had delivered higher investment returns than the S&P 500 for forty years-- with dividends reinvested. But some gold mining CEOs find it an insult that what they mine is more respected than their companies' shares... "In our view, we have entered the most favourable era for gold prices in our lifetime, and the share prices of the great mining companies will eventually outperform bullion prices." As Don Coxe makes clear, governments are running deficits "beyond the forecasts of all but the hardiest goldbugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid goldbugs a year ago." The choice for the saver is essentially binary: hold money in ever-depreciating paper, or in a tangible vehicle that has the potential to rise dramatically as expressed in paper money terms.
There are those who voraciously, and blindly, read any and all hedge fund reports, allowing the already useless information to enter one brain hemisphere and exit the other, just so they can brag that they read such and such's monthly or year end letter. Frankly, we pity them, especially when in their attempt to ape success they confuse luck (which is responsible for 99% of hedge fund outliers) for skill, and in doing so constrain their minds even more. At least hopefully they don't spend money on self-improvement books. As for trading recommendations, by the time an idea is in writing, the time to implement it is long gone. Anyway, for precisely this subet of people we provide the Paulson 2011 year end letter. Which is 102 pages. It is amazing how when one is printing money, one can get away with two paragraphs of year end ruminations and the LPs will be delighted. When, however one has brought AUM from $32 billion to under $20 billion net of redemptions, much more reading material is required to justify the 2 and 20, especially if the proceeds are used to invest in AAPL (and speaking of Apple, we wonder how long before the company starts charging a fee of 2 and 20 from all of its shareholders). We won't spend much time dissecting the letter of a fund which blindly invested nearly half a billion in a company that two kids with an office exposed as fraud, suffice to copy and paste the following gem: "We believe this outperformance demonstrates our superior security analysis and selection due to our research edge." Yup, mmmhmmm. All this and much more in the enclosed paperweight.