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Why Has Gold Turned Into Paper?
One of the most amazing things that has happened in the global capital markets in the past month is that gold and silver have turned into equities. You know, those precious metals that are supposed to be a store of value and a safe haven during troubled times?
They have morphed overnight from hard assets into paper ones, with the barbarous relic nose diving $392 from $1,922, or 20%, in less than four weeks, while the white metal is off nearly $24, or 48% from its April $49.90 top.
It is clear what is happening here. The biggest hedged funds, like the one run by the subprime hero, John Paulson, have gotten into big trouble with ill-advised holdings in financials and are unloading everything else to meet margin calls and expected redemptions. What are their largest remaining profitable positions? Gold and silver.
It’s no good reminding you all that I warned this was going to happen in my piece “Gold: I Told You So” at http://www.madhedgefundtrader.com/september-27-2011-2.html . I was certain that once the “RISK OFF” trade hit, there would be no place to hide and everything would go down together.
If you’re not out now, the damage is already done. At least my Macro Millionaire followers managed to coin it on the downside with some well-timed positions in out of the money puts, which they have already covered profitably.
That’s why the price action has been like a flash fire in a movie theater, frying the gold bugs in the process. The good news in all of this is that a big part of the drop is behind us. The bad news is that we may have three more months of such liquidations before we reach the bottom. Note to Indian subscribers: Will more of you please get married and provide some end user support under the distressed yellow metal? We are in the midst of the fabled Indian wedding season after all.
For those who wish to participate in Macro Millionaire, my highly innovative and successful trade mentoring program, please email John Thomas directly at madhedgefundtrader@yahoo.com . Please put “Macro Millionaire” in the subject line, as we are getting buried in emails.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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uhmm, not really. the price is still above my entry point.
It's funny there's a question like "why has Gold turned Into Paper?" while none of that happened. It's still shiny stuff, with no counterparty risk, and fungible VALUE across the globe.
It strikes me as if someone doesn't see the difference between GLD and physical. ^__^
Just when we thought ZH was an MHFT free zone, John Thomas comes baaaack like a bounced check
How is that one or two day gold short you covered back on 9 September 2011 above 1793.80 working out after 9 consecutive profitable trades in your virtual hedge fund?
Hint: Gold traded to 1535 last week
How are those superior Q3 earnings coming in?
Hint: Operating earnings are down so far
And how was that three course banquet Bloomberg for President fundraiser for Socialized Medicine in Seattle before you met with PRC leadership?
Hint: Obama still running while Christie, Clinton and Bloomberg are not
Oh, and how are those T Bond shorts working out?
Hint: Your TBT long trade down from 59.79 to 17.99
Still amazed at the legend in his own mind
Perhaps people who post on the internet should not exaggerate:
http://www.zerohedge.com/users/madhedgefundtrader/track
Can someone point out a place that has some silver that is actually not high premium AND they have some for sale?
And when is the Mint going to start selling silver again? It's been over a week! Are they out and the "repricing" is the alibi?
You should be able to find some beat up morgans or 'happy birthday' rounds here and there. (kiddin)
http://www.providentmetals.com/bullion/silver/private-slv/1-ozt-rd.html
They have some buffaloes and some indian head stuff..
Don't even look for the good shit. It will re-appear when the price makes some sense. remember summer of '09? The price was a pittance and nobody had nuthin. Same crap. Massive demand, falling prices.
Only in Bizzarro America.
Why not buy the silver crumbs now and trade up for the currently unavailable stuff later?
By all means, buy! buy! buy!.
They hate that.
I bought one of those 10 oz dragons from Perth, took a freakin bath on it so far. But I never sell so it doesn't really matter right now. I'm tryin here.
Gold and silver can only morph into paper in fantasy. Since the populace is dumber than a football bat, the distinction is lost on them. The Bait-And-Switch and the Shell Game are in high gear. The economy will go where gravity takes it.
http://georgesblogforum.wordpress.com/2011/07/19/unnatural-law-fiat-currency-vs-real-money/
MHFT is right.
PMs trade much like stocks. Lots of traders, tight stops. Once meaningful selling pressure hits they drop very quickly. For safe havens this is very unsafe behavior.
But eventually they´ll fall in sympathy with other industrial metals. Gold is trading at about $150 premium to Platinum, which is preposterous. I think they´re heading for par at 12-1300 fairly soon.
I find it funny that only n00bs and/or sock-puppets agree with MHFT.
But eventually they´ll fall in sympathy with other ill-informed opinions.
As for your prediction about gold; what's a dollar?
There is no need to be so sullen.
Since gold is almost totally useless I think it should trade at just about average extraction cost. Silver has some industrial uses so it probably should be trading at a little premium to extraction cost. Ten bucks seems about right.
It is rather rare to see anyone so proudly and so obviously display their complete and utter ignorance of a subject.
Thank you for taking the time and effort to do so.
Imminent Crucible is right. Gold Bugs keep gold. "They love GOLD!" says Gold Member.
"They love the touch of it, the feel of it."
I know, I know, you can't eat gold..."it's a stupid investment" Charlie Munger said:
http://finance.yahoo.com/q/ta?s=BRK-A&t=5y&l=on&z=l&q=l&p=&a=&c=gld
Dollar bug.
He's even dumber than a dollar bug. Mad Self-Promoter said "frying the gold bugs in the process".
Only a total maroon thinks that gold bugs bought gold at $1922 and bailed at $1600. Gold bugs (and there aren't that many) don't attempt to trade gold, either physical or paper. They just accumulate gold. Gold bugs NEVER have enough gold.
And Mad Name-Dropper never has anything worth while to say.
I agree, it's a one way trade. Only buy, never sell. Sort of like heroin addicts, they buy to sell, but end up consuming it all themselves.
MHT, you are full of sh*t. You were calling the top for PMs at the end of last year. Gold is way up since then. As with all other "newsletters", you are selective regarding past calls and non-prescriptive regarding current calls.
*looks at GLD chart ytd*
*looks at SPY chart ytd*
/giggles @ MHFT
Gold is still gold, silver is still silver, paper is still paper.
The value of gold and silver rose compared to paper because of the massive issuance of unbacked currency. When the the QE, Twist, etc paper dumps ended the rise ended, temporarily.
So now we have a situation where gold went from $600 to $1600 in 5 years, then blasted to $1900 in 2 months, and has now reacted back to $1600. Big deal.
When governments around the world stop printing, end all the Ponzi games and put themselves on a sound financial footing the inflation in PMs will end.
Until then the market will fluctuate but the trend will be mostly up.
Sorry, but in point of fact operation twist does not print (much) money, instead exchanging maturing short positions for medium term ones, and some selling in the same spirit. This is why everything tanked. But be careful, as others have pointed out on this blog, the Fed had to spank the Republicans to get them to ignore their tea party brethren and get on board another QE. They will be screaming uncle soon, then the printing can continue.
Now, what if I told you that there is a liquidity trap set? would you think differently? I have cause they are herding the sheep into DXY, then they will turn off the lights and bar the door then pull the trap door lever. Have fun with your exchanges, I'm steadfast to PM's, haven't been wrong yet and it's going to be the only value in the near future, don't forget Weimar republic and Zimbabwe, didn't turn out so good during a collapse.
The only thing you have to realize is, they are going to try to leave you broke and dependant, nuff said.
Speaking as a past subscriber to MHT (not the Macro Millionaire service), I can say that he is highly selective in drawing attention to his "successful" calls. When you check his track record, you find that he makes dozens of calls, many of them ambiguous, and then he draws attention to the so-called succesfull calls once he realises they have been succesfull.
I stopped subscribing and would advise others to avoid MHT
Couldn't of said any better.
Yes, you could have!
Look for gold to go no lower than November, and no later than Thanksgiving, worst case. The fact that gold is recovering during the continued rally in the dollar serves notice that gold has become real money. So it is no surprise that the markets have created a type of fiat gold in the ETF's.
Why Has Gold Turned Into Paper?
Unlike physical PM, "paper" can be manipulated, bankster's favored type of looting.
If You don't hold it You don't own it.
Yes, we know most of the gold and silver traded out there is paper (or electrons on a hard drive), and we've known it for a long time.
It would be nice if CFTC would do something about the situation instead of providing official cover.
Physical gold and silver prices have had significant disconnects from the prices in the highly leveraged paper commodities markets. There are a million guesses as to why. All we need to understand about that is that futures contracts are not the gold and silver market but only approximations of where the paper market believes the physical market to be.
You have to love a cheap suit that tells a story that has already been written. If I had an ounce of silver for every crapbag rag story like this I would be a billionaire.
So wonderboy, now that all the arrows are pointing green you are saying it is going up. Or was it red and down? I forgot or lost interest.
I have some advice. A new job that is even more sophisticated than the snake oil snort you hawk in your rape job, back ally, 3am hustle joints.
School crossing attentant.
You get to wear the flashy vest, hold the stop sign, and point in the right direction. You can't get that wrong. It is about as accurate and useful as your shitty gold and silver articles.
It is that, or go work as elevator attendant. The buttons there just go up or down.
You can't get that wrong.
"frying the gold bugs"? Wow. How eager peopl are to find some spec of bad news.
News FLASH: The gold bugs are doing better than anyone else in the past.... Oh, you pick the years. All time frames worked great.
What a great point, why is it that people don't believe in gold, ridicule you for owning it and yet when it falls, they feel vindicated and smug. Bubble, I think not!
F'n Sheeple, Baaa Baaa, you'll be moaning that tune when the s hits the f and you don't have "The Precious"
China should dump a few billion in treasuries and buy gold/silver to really put a knife into BB, JPM and friends.
TPTB trying to make gold look unstable. Their MSM shills and hangers-on are here to help.
At the end of the day justice will be done and some of these corrupt bankers and regulators will dance at the end of a rope, legally, through enforcement of treason law that will be in the hands of the people again.
A name corrupt banksters and corrupt regulators like the CFTC should remember is Robespierre. When the US melts down he will be visiting all of you. So enjoy your games now.
I'm surprised the banks can't hire better trolls, with all the layoffs. This idiot isn't remotely plausible.
MHT...your Pompous Pontifications failed to mention that, despite this recent decline, Gold is still $300 above where it was in Jan 2011, $600 above where it was in Jan 2010 and about $1000 above where it was in 2009.
Can you same the same about NFLX? GS? SPX?
If you're gonna cherry pick your information to make yourself look smart, try to avoid pushing that bullshit on people that actually pay attention to the prices of the things you are talking about.
If we use the base of $250, which is a Real base, then gold Has gone up almost eight times. Can't and won't stay there.
Eight times you say? I got your base right here.
http://research.stlouisfed.org/fred2/series/BASE
Once again, Cumsquat, epic logical fail.
What about $22 to $35 or maybe $35 to your current "base" of $250. Can you please explain those moves as well?
If Gold was paper, it's burning. We are all trading by the dimly flaring lights of the Inferno that has been raging like a Dying star all this year.
Poetic seagull.
From this dude's site:
" Our software can only handle a limited number of subscribers and we are rapidly running out of places. Please put “Macro Millionaire” in the subject line, as we are getting buried in emails"
Really? Do you think we are retarded? Your server is just plum outta space y'all.
Two classic sales techniques
1. Call now! Space is limited.
No it's not this is the internet not a rented hojo's ballroom
2. So many people are calling we maynotbe able to answer! If everyone is doing it it mustbea good idea.
And the final telltale sign: you are conducting business from an @yahoo address. Are you my grandma selling beanie babies on the computernet?
But I always take advice from people who use a pseudonym instead of a real name. Is that a problem?
Even worse than that: selling paper certificates in lieu of physical beanie babies --- because they are so risky and dangerous to hold yourself, of course.
I hadn't noticed that; but that's a real indicator, alright. @yahoo; real serious financial advisor. right up there with "fifteen penny stocks that could make you a millionaire next week".
What makes anyone thing the bulk of the drop is behind us? If gold and silver are now paper then the bulk of the drop is just beginning.
Gold being sold off as you describe is a clear indication that this is going to be worse than the 2008 crash.
In 2008 it went down 235 bucks, it went down 300 this time and it may be going down more now.
now compare the % of drop
mufti you will get your ass kicked in the coming disaster when that paper gold and silver begin to once again play their time tested jingle jangle, clinking, clanking performances that they coined over 6000 years ago. how does one convince you that you don't make wagers that oppose the success secrets of the ancients, you will lose every time you try.
Wrong wrong wrong. The world Is fundamentally different at this point in history. We move everything via bits and bytes. While very pretty, put a few gold coins in your pocket and try to use them to purchase anything. Just because it has always been that way, doesn't mean it will "always be that way". There are times in history when fundamentals actually change, to wit: electricity, computers, cars, all these things fundamentally changed the world.
Gold is prolific in the world, and once new methods of extraction are found (as they will be) we can use it for our coffee cups it will be so cheap.