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Guest Post: Gold Crash: What It's Not Telling Us
Submitted by Lance Roberts of Street Talk Live,
The recent plunge in gold prices below $1500 an ounce has suddenly awoken, well, just about everyone. The "gold bugs" are yelling that it is a conspiracy theory by the Fed while the stock market bulls say it is a sign that the Fed has achieved its goal of creating economic growth. Unfortunately, both arguments, while great for headlines, are wrong.
In August of 2011, during the original debt ceiling debate, gold spiked sharply to just a tad over $1800 an ounce. In my weekly missive that month I answered the question of "Should I Buy Gold Now?" stating:
"In a one word answer…Are you kidding me – Gold has never been this overbought before and if you ever want to be the poster child of buying at the top – this is it. Okay, not really a one word answer but here is my point. Gold is currently in what is known as a 'Parabolic Spike'. These do not end well typically as it represents a 'panic' buying spree. Therefore, if you currently OWN gold I would recommend beginning to take some profits in it."
At that time i showed four potential levels of retracement.
The advice at that time fell on deaf ears as investors feared that the government was going to default on its debt and the economy was going to plunged back into a deep recession. Of course, anyone paying attention to the 10-year treasury rate, as it plunged to then record lows, would have understood that a default was not going to be the case.
Of course, the debt ceiling was eventually raised and disaster postponed due to last minute negotiations. The release of that fear, and subsequent interventions by Central Banks globally, led to a rotation out of the fear trade which began the process of a gold price reversion.
Parabolic spikes in asset prices always lead to price reversions. Whether it is gold, oil, or the price of Apple stock - excesses to one extreme lead to excesses in the other. It is often in the final leg of this reversion process that investors "give up" on the previous long held beliefs and throw in the towel. This action is known as "capitulation" and tends to be a buying opportunity for astute investors at some point.
The chart below shows the long term price of gold relative to the percentage deviation in price from gold's 34-week moving average.
As shown - the current deviation is the largest since the early 1980's as Reagan and Volker set out to break the back of inflation and spur economic growth. Deviations of this magnitude are generally met with fairly sharp positive price corrections from such extreme oversold conditions.
I have noted on the chart above the three previous times that negative deviations were roughly 20% or larger. The difference this time, as opposed to the 80-90's, is that the economy is not about to launch into a sustained rate of organic growth driven by falling interest rates and inflation. In fact, all of the recent economic data, as shown by the composite economic index below, shows quite the opposite.
As stated previously - readings below 30 on this composite index have generally been associated with recessions in the past. This is why the idea that the drop in gold prices is due to a burgeoning economic outlook is short sighted. There is no evidence of such being the case. Take a look at the annual rate of change in personal consumption expenditures which makes up 70% of the gross domestic product report.
The economy, along with housing, has been supported by massive interventions by the Federal Reserve, artificially low interest rates and fiscal policies to stabilize the economy. Without these supports there would be no economic growth at all. However, even with all of those supports, economic strength is struggling currently.
Therefore, gold is not selling off due to any belief that an organic economic recovery is underway. That concept is just as far-fetched as the Federal Reserve conspiracy theories that have abounded in the blogosphere as of late. The simple truth is that gold is completing a journey that it began nearly two years ago which can be summed up in four words:
"Reversion To The Mean."
As we have discussed previously using the example of a rubber band - physics state that if we stretch a band as far as possible in one direction, when released, it will travel beyond the mean. The same is true from over extensions in the financial markets.
The chart below shows the price of gold and the times that it has reach 3-standard deviations above the 34-week moving average. Such extensions have always led to reversions in price. The bigger the extension has been on the upside the bigger the reversion has been.
The current correction is well within the normalcy of extreme price movements. It also suggests that the current correction is likely closer to its end than its beginning.
There are plenty of signs that tell us that the global economy is not getting stronger but quite the opposite. Commodities are weak, interest rates are falling and economic activity is slowing. While gold is currently selling off sharply it isn't because the global economic intervention experiment has worked - it is more of a function of tax related selling, margin calls and short term market dynamics. These will pass in fairly short order.
In the meantime - the real concern for investors should not be the fall of gold - but the overall stock market. With investors fully allocated to the markets - the lurking correction therein is potentially far more dangerous to portfolios than the current fall in gold simply due to weighting differences. The decline in interest rates is telling a much different story than what economists and analysts are currently predicting as shown in the chart above.
With earnings season in full swing my suspicion is that even with earnings hurdles moved substantially lower in recent weeks it may not be enough to offset the softening global economy. Of course, then again, maybe this is what gold, commodities and interest rates are really telling us.
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Love how these charts came out after the price dropped, not before. Way to guru.
Find anywhere he says sell gold:
from aug 2011:
http://cc.bingj.com/cache.aspx?q=beware-long-term-investing%26start%3d80++site%3astreettalklive.com+&d=4608964750547154&mkt=en-CA&setlang=en-CA&w=6V10f3BfIqsv6mdVpwXs1GKpcvhdyHIK
Why do we need Larry FUCKIN DINK Fink to say markets are cheap and keep buying...and effin Fed J-bitch Yellen says they on stand by to do more to ensure market operates normally and maintain stability...When was the markets going up every fuckin day NORMAL, thats not fuckin normal....
Yup Gold/Silver goes down 20% and soon to be going down red today also..while fuckin markets rebound after one big down day...everyone forgot that there was a bomb yesterday.
Seems like the great market crash between april 21-april 25 is right on schedule.
I recommend that if you currently own GLD I you should begin to switch to GOLD...
This article would be important if the prices on which the commentary was based reflected actual physical market demand vs supply.
For more than 6 weeks leading up to the price crash over the last couple of days, both the LBMA and Shanghai Gold Exchange were seeing 12 to 20 tonnes per day allocated for delivery. And the spot/cash price was in backwardation vs. the near futures month for weeks on end for gold and silver. So that crashes the price and causes the uniformed to puke up their physical holdings.
That is how manipulated markets work but not how price discovery markets work. We know that manipulation and government intervention will always fail.
With the current price control activity, we now hear about severe physical silver market shortage and gold delivery allocation issues on the LBMA.
It's not about the price chart.
See yesterday's inventory of 100 ozt. silver bars on APMEX graphically. People sure took advantage of the sale!
http://gold-silver.us/forum/showthread.php?27317-GSUS-APMEX-Precious-Met...
The COMEX open interest for gold and silver barely shifted on Monday amidst the price carnage. There is neglible capitulation by longs, the price move is a contrived raid by short-sellers.
I posted this today,,, there is plenty of silver...HAHA
Scroll down
http://www.gainesvillecoins.com/category/467/american-silver-eagles-uncirculated.aspx
Paper and phys are taking a different fork in the road,,,, ETF's Down the sink, see ya fellas!!!
sorry, can't vote you up.
+1
I am guessing that Lance Roberts made a lot of money by shorting gold.
--Conspiracy?
--Love Handles on a "softened Global economy"?
"The "gold bugs" are yelling that it is a conspiracy theory by the Fed"
This statement implies gold bugs are yelling the crash is a conspiracy theory authored by the Fed.
Huh?
Summers wrote a paper in the 80's on the correlation of hjigher gold prices to higher interest rates paid on T-Bills. Gold is the canary in the fiscal coal mine. Hiogher gold prices, risong rappidly scream that there are fundamental problems with a nation's financial affairs. Volcker said hsi one regret in dealing with the 80's financial crisis was 'NOT SUPPRESSING THE PRICE OF GOLD" - a lseeon his successors learned well.
The history of gold price manipulation and suppression by central banks as part of currency control efforts is well documented. LInks to bullion banks are evident and documented. Government 'intervention' in gold markets to help out bullion banks in trouble have also occurred. "Brown's bottom' being the most blatant. Gold has been flying out of London and COMEX, silver stocks are low - the world financial system is continuing its never-ending 'print' cycle with Japan being the latest to go into overdrive..... gold was on the way up, demand was growing and those selling had problems ....
Both the bullion banks and central banks had very good reasons to smash down the price of golds - though short term 'fixes' only worsen the long term problems.
His mistake is understandable and obvious, as the kneejerk conformist/'mainstream' analyst and man on the street is automatically programmed to equate "conspiracy" with "conspiracy theory". In THEIR theory (which is wildly naive and historically clueless), there is no such thing in the real world as an actual conspiracy, so therefore all such accusations or implied actions are simply ipso facto "theories", to be ridiculed and dismissed out of hand.
He's warning you about equities. File it.
Here, let me ass ist with this.
Look at all commodities, then look at the 10 / 30 Yr.
Commodity drops of this nature always presage market declines, since in a world of CB largesse, commodities are hedges most of the time.
Any questions?
The dude forgot to write that all this charting game refers to the paper gold market. If he even were right there is no connection to the physical market, which is evolving quite differently. If he had compared recent physical market fundamentals and, particularly the recent volume of buys, he wouldn’t have found any "reversion to the mean"... which, as regards the physical gold market, makes the analysis irrelevant.
All this talk about COMEX, silver, GLD, manipulation is all noise to me. Even I have been caught up in this.
Why should anyone care what is going on in any gold market, paper or physical until something happens in the US and Japanese 33 year bubble bull markets ?
I still maintain as I said 2 years ago, that the onset of freegold happens when there is selling/trouble in the BOND markets mainly in the US and Japan.
$1000 dollar gold, $2000 gold , what is the difference ? Who cares ? I have paid close to both. As long as BOND prices keep rising and the FED can do no wrong, nothing matters. As long as BONDS are the premier store of value for shrimps and giants alike, long or short term, nothing matters.
Nothing matters in GLD, nothing matters at the coin dealers, nothing matters at the bullion banks, nothing matters at King World News et al.
This is like being in late 60's and early 70's yaking about the price of gold as it bounces between $35 and $60. It didn't matter if you bought at $35 or $80 then until there was trouble in the BOND market and it doesn't matter now as it bounces between $1000 and $2000 now.
so... you really think the bond market is without problems? The bit players are already defaulting while the majors are scrambling to keep the ponzi scheme going - opnly who's left to buy all the bonds vbeiong issued. With the Fed buyong MORE than wnhatTreasury issued in 2011, seems to me that we're running out of time in this game of musical chairs. What do you want to be holding when the music stops? besides 12ga 00,, 9mm and Nato standard that is.............
Right, just a brief remark. Unfortunately, there is a difference between $1000 and $2000. You can buy two times more gold for $1000 than for $2000.
The recent looting of Cyprus was the pivotal event that triggered the great flight from European banks who can no longer be considered safe, since money stored there could now be confiscated by the troika - but the same logic also applies to gold (at least at this point in time), hence the present flow of money from Europe to the US, temporarily boosting the USD, which was the goal of this recent manipulation to begin with. Details in our fresh report.
Interesting theory except since Cyprus, the USD has been falling...
This could be how the bond bubble gets pricked. (because that is all that matters anyway)
Creditor nations buy gold with dollars (bonds) from debtor Euro nations, and then the debtor nations spend the dollars they receive. Not only does this put gold in strong hands, it also puts bonds in weak hands because the Euro nations are not going to buy hold the bonds like the creditor nations did. They are going to use the proceeds to fund their their needs.
How can the US government spend the money they get from bond sales while another government in Europe spends it at the same time ?
And imagine how fast the dash to the exit will be when the deficit grows as the rates start climbing and yet more junk needs to be printed to pay off the old junk. Rates will be kept as low as possible and the Fed will keep buying bonds until the last possible second... then KABOOM!
"In a one word answer…Are you kidding me"
Uhh...
Short UGLD since Friday .... I am so happy. Thanks Suckers!
You suck at being a troll. Any sane person around here would be fine with shorting the worthless paper.
Hey OddLot Dog, Did you short 3 shares like you usually do?
I have to laugh at those calling for $800 gold when it costs $1200 to produce. Can the US artificially push gold lower? Probably by selling gold it doesn't have. But how long can the US keep this up? 3 years?
Source please!
http://www.hindecapital.com/blog/message-to-all-gold-mining-ceos-a-gold-...
And Kitco as 2nd source as well ..
Too lazy to do your own DD ?
At these prices, I expect more seismic activity, avalanches, landslides, cave-ins, floods, diseases, rainstorms, storm surges, frog plagues, and bad clams in the mining industry.
The shutdowns will continue until the prices improve. It's Thugs vs. Galt time!!!
From Harvey Organ's report
If the OI for silver remains elevated again tomorrow despite the huge loss in price today, one must believe that only a sovereign (maybe China) could withstand that much pain. The price of silver has declined from $35.00 to $ 23.00 with open interest rising. The loss has to be gigantic and only a sovereign could be that stoic."
Cost of production (ie. mining) is irrelevant, gold isn't a consumable. Existing gold doesn't disappear if mines go away.
I see. Cost don't make a difference like deficits, right?
We'll just have to disagree on that one.
Most existing gold is not for sale at any FIAT price.
Only an ignorant blockhead would down-arrow you for that. Who does not realize that the VAST majority of gold stocks is simply not on the market? Not in the registered category, not in the available category--it's simply not for sale for paper money.
"Irrelevant"? "Isn't consumable"? What star cluster do you come from? Aah, a Ferengi. Of course.
It is relevant to real demand. Whether that demand comes from CB's, industry (for consumption!), jewelry or hoarders/stackers.
e.g. I just 'demanded' that my PM provider convert my Unallocated Pool Account holdings into my Allocated Bullion Account. I can now visit it or take it out. If someone else wants my non-hypothecated PM, they'll just have to get someone else's -- while they can -- or get more from the miners (via minters).
<insert obvious comment about silver>
silver gold and and bitcoin bitchez
At the current level, i would be very careful being long bitcoins. wait for the end of the correction.
I did see the bottom today in Bitcoin, and it does have a history of bouncing back...and collapsing again. Still if you want to gamble, probably a bit safer than the average one armed bandit.
Well it did bounce back for about 2 hours.
Yeah I'd like me some of those bitcoin bitchez.
Well Done Mr Roberts!
Despite the correct comment of billsykes. If Roberts knew price movements before, he wouldn't be writing.
Knowing where there market will be in 5 minutes took me more than 8 years. Knowing where there market will be in 5 months is extremely difficult... nobody knows for sure.
The metals are being" BIG TIME", manipulated. The dollar sells off and the metals continue to sell off? WTF?
Nice charts, big rubbish, move on.
It takes a hell of a lot of effort and $$ for TPTB to paint those charts....... it's not easy manipulating maerkets to create the patterns so sought by the chartists. It's easy to bang closes now and then but th paint long term chartts - that'takes skill.
Why 34 weeks? What's magical about that time frame?
In the meantime - the real concern for investors should not be the fall of gold - but the overall stock market.
yup
Not one word about Mining Costs .- $1100 - $1200 / Oz. all lín costs - according to Hinde Capital and Kitco IIRC.
Miners were barely making profts on a $1600 Gold Oz.
'both arguments, while great for headlines, are wrong.'
Package the lie in a half truth and then wave it away dismissively. Think we cannot see through that old trick?
This Twat leaves out how in Aug 2011 we had waterfall margin increases and how on Friday we had a 500 ton paper gold sale while Londons LBMA was unexpectedly closed for physical delivery. Conspiracy fact, not theory you stupid cunt
+1 for uncensored foul language.
Women hate that word. Thats why I use it.
He did capitalize it...
And yet the ax wounds have no problem slinging around the words "prick" and "cock" with casual disregard.
ax wounds...I'm 55 and this was the first time I've heard that...and I thought I'd heard 'em all. Well done. With your permission I too will use the term.
"ax wounds"---Whoa, dude! That's semantic overkill and then some.
After all, even Shakespeare used "prick" and a lot of other words that today would only be used by, uh, by someone in a Robert de Niro mobster movie.
How did we get onto swearology?
nice charts
Cheap physical gold is a problem because...?
Duh, its been 5 yrs back to another ression/depression thing again.
But if it does or doesn't happen I would say put your wealth building in something with your own hands, not clicking the buy or sell button on your trading account. build something (business, aprtment building, fish farm) or buy something and sell it for more (opium, slaves, etc)
Don't listen to these 2 and 20 guys looking to position themselves as gods of investments- they are cheap salesmen nothing more. Bet his audited returns mimic govt bonds at best over the last decade, otherwise he would not be trolling for punters writing his own shit.
was that opium or hopium? slaves pay to be slaves these days, no need to purchase them, they're called Amerikan citizens. in any case i agree.
interchangeable with Hopium (like the author of the article), or the real thing.
Slaves- could be real, tons of this still don't even have to leave america, could be just or assuming student loan debt for mandatory employment traditionally called apprenticeship. If you have a kind heart, you could assume their student debt and just employ them as apprentices to build you a multifamily structure to house them and then have them work off this old debt and then the new one they got into when they are living in your apartment building, they could supervise the building of a new complex for the new slaves you bought at auction. The unfit ones can be sold for parts and the debt extracted from their offspring.
The Real Thing - http://youtu.be/5_NuVA1-vas
Lance, you are contradicting yourself a bit....you did tell a TV audience within the past 6 months that you believe investors should own gold...and here is the video clip to prove it....starts around the 9 min mark...AND you said to buy the gold ETF! I did not hear you say....Gold peaked and you should get out....
Nothing like driving while looking in the rear view mirror ay Lance?
http://www.youtube.com/watch?v=biCCMjjWeF4
Ding Dong!
Yeah... so fuck this guy and his Monday morning quarterbacking with those old charts and comparisons. This ain't yo momma's 1984. Everything is controlled now. Even the bigshot mainstream people are admitting it now. We are living in Western countries that are staggering around like the old Soviet Union and Ottoman Empires did right before they collapsed and fell apart.
The little people who survived and prospered were/are always the ones who know what is going on and acquire assets that can be universally accepted and useful. Gold is always at the top of the list in uncertain times.
I hate pieces that start off with an "I told you so" meme.
There are only two reasons for that. A big ego (1) that thinks it gains credibility (2) if it can convince you that it is some type of Gold Nostradamus.
Reversion to the mean. Hardly rocket science. You are a master of the obvious.
If your neighboring supermarket offered Coke at 20% off people would flock to buy it. We should think of gold the same way. It's now on sale.
Except the fact, that you would get your coke physical, no matter what.
Failing that, you'd settle for diet coke.
Not if overall market sentiment was to start drinking water due to the price of coke. Thats the problem. No one wants to buy when they think they can get it cheaper. And when anything free falls like gold/silver have, you have outsiders waiting until capitulation. We havent reached capitulation yet. That hits at 1150. It will be a slow bleed until then. You'll know when we have hit the capitulation phase....because the DOW/S&P will be part of it. Then, gold/silver will start going up again during the equity market sell-off. At 950 an ounce it will be a great buy. But not until then.
There are several examples from HK & India where the paper price & physical "delivery" price are spreading far apart. Today the paper price really means nothing. It is just the manipulated price that never has to delivery on the physical.
shit you ain't got to go to india to see that.
sure it's on sale, but mebbe the sale could intensify.
some are waiting for it to get even cheaper. It's easier to pick a bottom than a top because prices hardly ever stay below cost of production.
when silver was at $27/ozt i found a nice kilo bar for $900, didn't buy it, and now they're hard to find unless you know someone.
I think the likes of G.Celente are wrong for being dismissive of 'Conspiracy Theories' as if somehow the opposite of theory is fact. Well, I prefer to side with the likes of Newton and Gallileo rather than the Papal cosmology that was edicted 'fact' at the time. Theory has no pretences that is nothing more than structured guess work. If structured guess work is good enough to create the field of molecular biology, it is good enough for me.
this is the tuesday humour? The markets have fuck all to do with the charts, and even less to do with the real world. What we have seen last few days is the giveaway sales, and I am sure russian and chinese version of "thank you" are being said as the physical stocks are bought ( and silver will run out much sooner )
We have charts and they have gold.
it makes sense that people like Bernanke who have spend all their lives pushing paper around the offices would appreciate paper most. or digital version, as that requires even less movement.
Can the markets be telling us something and manipulated at the same time?
"The medium is the message."
"With earnings season in full swing my suspicion is that even with earnings hurdles moved substantially lower in recent weeks it may not be enough to offset the softening global economy. Of course, then again, maybe this is what gold, commodities and interest rates are really telling us."
My suspicion is the markets are being manipulated to the downside to try and minimize inflation and monetary Armeggedon. My knowledge is the inventories on PM's Natty Gas, and Oil are declining percipitously because of demand and because profits are inferior to NIL. I am sick of the proverbial BS that a, soft economy should have and will further reduce prices and thus profits. The market pricing at these levels will continue to reduce supply in excess of demand slippage. Unless perhaps the catostraphic scenario unwinds. That narrow minds like this continue to shovel this tripe when money can and is being wished into existance in quantum quantities begs the question why do I even bother to scan this tripe other than to feed my continued disbelief in the ignorance of the financial press. "Reversion to the mean" Give me a freaking break, say dumbass what if you use monetary supply as your measurement metric. What does the mean look like then. I say ignorance with all due defference to willing deceptions on their part. Trying to continually jam the square peg of manipulated markets into the round hole of statistical regressions is laughable to say the least. Someone wake the poor bastard up.
This article by Lance is totally B.S. It is full of meaningless information, & does not address the short selling of magnitude porportions, OR THE DIVERGENCE between paper & physical gold prices...... PLZ ZH, put publish something worthwhile, & dump Lance.
I see this "crash" as a gift. A substantial amount of small derivative players, speculating on the physical gold just got slapped in the face. I LIKE THAT. At a certain point in time, I'm sure gold price will surge again to a realistic level. COMEX is slowly being disconnected from physical gold and it's happening as we speak. Franctional reserve lending (and -banking) is coming DOWN. It should have happened earlier. I'd love to see how this story unfolds in the next weeks. GRTZ from a 100% indebted BELGIUM ;-)
PS; I own physical
realistic level is between $1000 and $1200
Let's see what happens when suddenly physical delivery cannot take place. 1000-1200? Way too low. Now taking a snapshot of this thread. ROFL
Not that realistic. What was the pre-bubble price? Like $700? Figure $800, then.
Many are trying to catch the falling chain saw and smiling. I will wait patiently until I see the whites in the eyes. More markdown/slapdown ahead.
I agree with you on moar smackdown, the FED hates competition from other 'currencies'.
First BitCoin, now PMs
Sounds like you don't need gold, only paper gold.
Good luck with it. Even if you make a paper "profit", you might not be able to exchange it for real gold by then.
Harvey thinks we have a long sovereign in tow for May silver deliveries. One that seems impervious to the markdowns by the banksters China perhaps? Other smart Central Bank? IMO if they continue to stand tall for delivery due to the LBMA/SLV being out of inventory then we either get a control signal failure of the Crimex and huge price appreciation or we get to watch the Morgue dancing on the jaws of death. My hope! with +60,000 contracts still open for May who knows, what if just half stand. Thats a 150 million oz. and thats NO WAY the Crimex Crooks can come up with that much silver. I am giving this a 50/50 chance. Some interesting developments in the background say its more than China in the May long crowd now standing. The ahole in the corner is JPM and here's hoping they get pecked to death. I think they see this coming and are desperate to evade it hence another primary reason for the takedown. But the takedown list is getting really long and growning longer by the day with reasons why we got the selloff. Only thing we know for sure is the inventory situation becomes more critical by the day and the desperation matches. IMO anything but scale in buying at these levels is poorly decisioned. Waiting for the absolute bottom is precarious
"My hope! with +60,000 contracts still open for May who knows, what if just half stand. Thats a 150 million oz. and thats NO WAY the Crimex Crooks can come up with that much silver. I am giving this a 50/50 chance." Excellent point.
Reminds me that there is usually a squeeze into options expiry. Suggests that the squeeze will continue because it has to but " what if " like you say there is a huge demand for delivery. ABN-Ambro say sorry no gold here. I can't imagine how a true Comex or LMBA default will look.
Lance would be correct, if it was not for the fact that money printing also went exponential...In other words, if Lance's theory was correct, the Deutsche Mark in the 1920s should have also reversed to the mean, and prices should have corrected to the downside. The same applies to the other dead currencies....
I LOVE how everybody is an "expert" AFTER the fact...
Many are "experts" in future prediction too. It's either going up or down, so whatever prediction you make you've got 50% chance of earning some reputation. And if you screw up, nobody will remember.
All the charts in the world don't compare to a collapse at a major mine in the US. Rio Tintos' Bingham Canyon mine wall collapsed on April 10. Expected gold production as 500,000 oz. Silver production equalled 16% of US supply. Gold sold forward just 10 times is 5,000,000 ounces or 150 ton. The number of tonnes of paper silver based on 16% of total US supply must have been ginormous.
The big boys were just savin their butts.
So it's just a conspiracy theory that the fed did it?
Who else has 500 tons of gold they can sell all at once.........that's 12% of the world's yearly output
Facepalm. Not everything is a conspiracy. People who were levered up got taken out and had to sell other assets to cover the losses. If enough people do this, the markets sell off, and the robots freak out and sell off, and you get a crash. It doesn't require fucking Goldfinger with some devious fucking plot!
Its a gold crunch - the CB's and big investors cornered the market using the excess liquidity available to them via ZIRP and QEX
That doesn't make any sense. They didn't corner the market, they used that excess liquidity to overwhelm all markets and caused a giant bubble. I don't think they're making out on the downside unless they could stick someone with the other side of a short trade. But I don't think there's enough retail out there left to pin it to.
Gold went down because over-leveraged investors got margin calls. Their selling to cover kicked off a shitstorm. It's an over-leveraged world, that's all there is. And when over-leveraged people get into trouble, the crash is not far behind because the whole world is so far out of whack when it comes to leverage. Behold, the deflation tsunami. At least we didn't (yet) have another Bear Stearns because of it.
I could not agree more. I think you clearly point out the core problem of GLD as a COMEX traded commodity: over-leveraging and speculation. This brings us also to fractional reserve lending (of gold). Bullion banks and CB's now see that their ponzi scheme is coming to an end. 7 years for Germany to get their gold back? 'Nuff said. I really think people must not underestimate the direct consequences of this.
These institutions just ignited the spark that might bring their ponzi scheme to a end. These guys got scared they will - unwillingly- be put in a position to deliver significant amounts of gold that they just cannot deliver. In my opinion, that's what's happening.
GRTZ
yet
So if I understand the premise of this story, the gold market was poised to fall. All it needed was someone with one Billion dollars in capital. With that one Billion dollars, they levered it up 20 times and sold the market short within a couple hours. I wonder what the interest rate is for the margin they are using?
let me see... where do megabanks like the Squid and the Morgue go whenever they need leverage for a nice raid on gold? how about... "here, boyz, take as much as you want and it's free, as long as you do a good job"?
I read this:
And this
Conclusion - faulty ability to think on the part of the author.
As soon as you whip out a chart with gold, you lose. Gold has 2 speeds: Equality with the money and credit supply. Intervention.
BTFD = no reason to cry, time to buy and average down.
yappers all of them ... they know squat .. and prove it with this kind of mindless commentary about paper //even the 700 tons thrown on the market in two days
put that in your worthless pipe and smoke
He speaks of the devil, suggesting to ever sell your gold...true gold bugs know to just buy and die with it
Does it make sense to assume, gold will only rise when general markets will be no longer available to speculate and everyone will be worried to protect what they have.
Is this what has to occur for gold to rise to bubble?
USD and/or EUR crash, Stock Market Crash, Real Estate Crash, Gov. Bonds Crash, Banks Crash - nothing of latter is crashing yet?
I think the answer to your question got posted just a few hours ago on silverdoctors.com. Here's the quote
The COMEX will default in the next week or several weeks and people will be “settled” with Dollars, no more metal will be delivered! So, knowing that “game over” has arrived, they are dumping a massive volume of paper contracts with impunity to push the metals prices as low as possible before the “default”. This way the “shorts” do not have to and will not be “covered” when “supply” cannot be obtained because of “an act of God”. They will be settled in cash (at a profit no less) because these “unforeseen” disruptions in supply. “Who could have seen it coming?” will be the mantra. I would suspect that banking stress and “bail ins” will also become prevalent globally. The pricing structure” will now push any and all physical sellers away from the markets and the “door” to safety is effectively being shut. Either you own metal or you don’t.
After the closure of the COMEX and LBMA doors there will be no availability and “price” will be meaningless. Your ability to protect yourself is right now for all intents and purposes being eliminated.
"This way the “shorts” do not have to and will not be “covered”"
You clearly have never traded a day in your life. You cover by 'buying' back the item sold short. For every dollar short it will turn around and be bought back.
Shorting 101 - when you short you are, if not closed prior to delivery period, actually SUPPLYING the market with the good sold short. If you short silver for April delivery, you are entering a contract to bring that unit of silver to market.
However, by buying the contract back, this closes the position. The net effect is zero.
If you sell me your car for delivery next month, you are supply me (the market) with your car.
If there really is a shortage of physical, the price would be skyrocketing up, since a short would only have 1 resort, to buy back the paper and close the position. This sell-off is proof that there is FAR more physical supply in the world right now.
This selling pressure is by people who are long gold and are dumping it, closing their long positions.
And yes, I was short gold at 1650 and just covered, thank you very much... made money on the way and on the way down! ;)
You really should not be posting information that is so far from realty that it's a joke. This is the problem with the internet, any uneducated and ignorant person can pretend they know what they're talking about.
34 week moving average my ass ...
If you cannot directly influence an outcome by manipulating meaningful variables, then any prediction of the future based on past events must necessarily be guesswork. Also, if it really were possible to make any kind of accurate predictions based on technical analysis one would expect that by now (after so many years of "practice" - just as philosophers who still ponder the meaning of life) that someone would have found the formula and would be making stable profits all the time. Since that is obvisously not the case even for the most skilled and professional I believe that technical analysis of the price of gold to predict future price levels is bogus and that it leaves us with the 50/50 chance of getting it right by guesswork.
It is all about beliefs. Do you believe in the monetary and financial system? Do you believe that people will continue to consider gold a storage of value? Do you believe that extracting gold will be cheaper or more expensive in the future? Do you believe that demand will increase or decrease with a growing global population? Do you believe that supply will hold up with demand? The combination of answers to those questions and a few more should determine wether you hold gold or not.
Being a trader in gold is just like playing the lottery and it is a zero sum game of winners and losers. The only ones that always win, are the ones facilitating the trades.
These charts are for paper gold BTW....
Ignorance is a bliss. Embarassing that such an outstanding article is ridiculed here.