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Indian Rupee Drops To Record Low Against Dollar, Gold Crash Accelerates

Tyler Durden's picture




 

The unintended consequences of a centrally-planned world continue to peek through at the most unexpected of place, as moments ago the Indian Ruppe just plunged to a new all time record low against the USD, with the USDINR rising over 60 for the first time, triggering stops and overriding any potential USD selling intervention that the RBI may have attempted just below the resistance level which took place 59.985 according to Reuters.

A snapshot of events in India currently via Bloomberg:

  • Rupee drops 0.9% to 60.2250 per dollar; touches record 60.26.
  • USD/INR one-month implied volatility falls 32 bps to 11.60%; level suggests there is 68% chance rupee will drop to 62.2976 per dollar in a month (see that story here)
  • USD/INR risk reversal drops for third successive day, falling 17 bps to 1.80%; gauge of investor sentiment reached 2.23% last week, reflecting biggest pessimism on rupee in a year
  • Yield on nation’s 7.16% sovereign bonds due May 2023 rises 4 bps to 7.542%
  • One-year IRS falls 1 bp to 7.43%

Meanwhile the drubbing of gold and silver continues, with the yellow metal crashing to a three year low of $1224, down $50, silver down to $18.44, and the scramble to liquidate all metals into electronic pieces of "paper" accelerating.

 

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Wed, 06/26/2013 - 05:59 | 3693862 agent default
agent default's picture

So what is driving this move in PMs?  I feels very strange and counter intuitive in this environment.

Wed, 06/26/2013 - 06:08 | 3693877 InspectorBird
InspectorBird's picture

Its easy and logical actually. Everybody who holds paper PM-s knows that the jig is up soon and they dump the paper to buy real physical stuff. But as we all know, spot price is determined solely on paper market so the price drops, but at the same time demand for physical is on record levels. Easy.

 

Wed, 06/26/2013 - 06:13 | 3693889 Supernova Born
Supernova Born's picture

Alchemists tried to turn lead to gold.

Central bankers are trying to turn gold to lead?

A deal with the Devil granted.

War.

Wed, 06/26/2013 - 06:18 | 3693896 NewThor
NewThor's picture

DOOM ON, BITCHEZ!

Gold & Silver disconnect from reality!

Just as Nostradamus predicted!

http://youtu.be/uW19oGhmIuQ

Wed, 06/26/2013 - 06:30 | 3693921 Popo
Popo's picture

Coming soon to the Brazilian Real, Phillipine Peso, Thai Baht and an emerging market currency near you. 

Wed, 06/26/2013 - 06:40 | 3693943 Manthong
Manthong's picture

guess what, mofo’s..

my PM’s do not have an FRN equivalent value.

Wed, 06/26/2013 - 06:49 | 3693956 Supernova Born
Supernova Born's picture

This will in no way contribute to deflationary sentiment.

Nice work, Ben.

Wed, 06/26/2013 - 07:56 | 3694056 Popo
Popo's picture

Huh? Of course they do.

And for the record, they are seriously underperforming.

Wed, 06/26/2013 - 11:44 | 3694162 NidStyles
NidStyles's picture

You're going to tell the man that is holding the PM's what price he should be willing to take for them? You don't understand this whole economics thing do you?

Wed, 06/26/2013 - 08:37 | 3694149 hankwil74
hankwil74's picture

I'm sure you were saying the same thing when gold was trading $1900/oz

Wed, 06/26/2013 - 12:52 | 3695553 TPTB_r_TBTF
TPTB_r_TBTF's picture

Did he sell at $1900? 

 

No?  So then your statement is absolutely correct-

He was indeed saying the same thing at $1900...

 

Wed, 06/26/2013 - 07:10 | 3693987 lakecity55
lakecity55's picture

OK, he is spooky, but you don't know, if he was right, what year he is talking about (I would guess).

I know both Allies and Axis used him for propaganda in WW2, so you can read his predictions in multiple ways.

Wed, 06/26/2013 - 06:14 | 3693890 malikai
malikai's picture

It's all about the "Inflation expectations". Which will soon be suitable enough for the next round of the printfest.

The time between print->lie->print is declining, folks.

Wed, 06/26/2013 - 06:27 | 3693918 Go Tribe
Go Tribe's picture

If demand for physical is up, how come I can buy it much cheaper today, even considering premiums, than I could last week?

Wed, 06/26/2013 - 06:41 | 3693944 j0nx
j0nx's picture

Good luck finding any phyzz for sale anywhere. You might get some bullion but certainly aren't going to find any coins for any price yet alone near spot.

Wed, 06/26/2013 - 07:01 | 3693966 lakecity55
lakecity55's picture

I just went to Provident for a quick look. They seem to have Plenty of US Eagles.

I am seeing a local shortage, but the other vendors I use have plenty, right now.

Now, maybe that will change in 5 days.

Who knowS???

 

And I just checked again, they have Perth Bullion, but I am going to get sum.

Wed, 06/26/2013 - 07:02 | 3693977 cifo
cifo's picture

Right. They paid $1500 per ounce a few weeks ago and will sell to you at $1200.

Wed, 06/26/2013 - 07:03 | 3693979 fonzannoon
fonzannoon's picture

exactly

Wed, 06/26/2013 - 07:08 | 3693984 lakecity55
lakecity55's picture

So, u mean they are willing to take a loss, or are they trying to dump all tehy can for cash?

I agree, they would seem to be taking a loss.

PM is a true source of value/preservation; but the market is long past haywire.

All I know is yellow metal is real vs a piece of paper anyone can print "Legal Tender" on.

Wed, 06/26/2013 - 07:31 | 3694022 disabledvet
disabledvet's picture

the DEBT is what is selling off not the currency. as the interest rate rises the time value of money increases...but again different paper assets have different values so you have to do your homework. "discounted cash flow" is very valuable as is "enterprise value." gold does not offer this. of course the interest rate must be paid..."enter zee gold" as a proxy for outright default risk. the price might be declining but the damage in the market place has been extraordinary. one look at the mining stocks says to me they won' be getting off the mat anytime soon. "demand payment in product in lieu of holding said paper." in other words "I'll buy a thousand shares of Barrick provided your dividend is paid in gold." silver of course is even more interesting.

Wed, 06/26/2013 - 11:13 | 3694923 Possible Impact
Possible Impact's picture

This is "side effects" of deleveraging?

Wed, 06/26/2013 - 07:37 | 3694025 lakecity55
lakecity55's picture

Thanks!!

Where do they set up the accounts for their Futures contracts??

Since bid and ask are not usually too far apart, it would seem to impart a smaller risk, good for them.

Wed, 06/26/2013 - 07:20 | 3694003 rogeliokh
rogeliokh's picture

If that was true they would go out of biz in 3 days. When they buying the metal they immediately selling appropriate amount of

future contracts to hedge the metal they have, so they only exposed to spread between bid and ask. That's it.

Wed, 06/26/2013 - 07:37 | 3694031 disabledvet
disabledvet's picture

out of business it is then. "with all creditors eating the loss." again for the record I am pro QE in order to incentivize "demand" (in the sense that product is produced and comes to market. this si especially true when it comes to gold...yes, yes?) obviously no one benefits when the mine is shuttered.

Wed, 06/26/2013 - 07:42 | 3694038 lakecity55
lakecity55's picture

So, they buy X amount of Au, take out a short contract on X in case it goes down, then make profit opn the premium.

If price goes down, the short covers them on the spot price loss.

But! If the price of X amount of Au goes up, how do they handle the short contract they bought??

Thanks.

Wed, 06/26/2013 - 09:33 | 3694350 BigJim
BigJim's picture

The 'contract' is an option.

So if the price of Au goes up, they lose the amount they paid for the option, but gain on the price difference between what they paid and what they sell the Au for. They build the cost of the option into their bid/ask spread to ensure they still make a profit.

Which raises an interesting question - if ALL physical sellers are doing this, might this (at least partly) explain why shorts are high, despite high physical demand?

Wed, 06/26/2013 - 09:46 | 3694391 konputa
konputa's picture

Ding ding ding! We have a winner. You can see who has the better hedge strategy by watching premiums and shipping costs spike during these price dives.

Wed, 06/26/2013 - 10:55 | 3694821 DoChenRollingBearing
DoChenRollingBearing's picture

Great observation, BigJim.  That would be my guess as to what is happening as well re the LCSs and other physical sellers.

Wed, 06/26/2013 - 07:14 | 3693992 lakecity55
lakecity55's picture

Provident was showing about 50$ cash price over spot for the 1 OZ Eagles

Wed, 06/26/2013 - 08:11 | 3694082 new game
new game's picture

oh it can be had. but liquidity driving al this. so are we at the bottom? clueless on that question, but I do know it is time to start adding.  we continue to blow through each support 1250 and 19 like there zero resist. true freefall. i say watch the corp bonds.

then we will see the signal of stabilty...

Wed, 06/26/2013 - 08:54 | 3694215 Widowmaker
Widowmaker's picture

Misperception and misinformation is driving the yellow bus.

Bottom is likely to be around $780 (ish), but could easily be much lower.   Gold back in the $500's is very much possible as the confidence racket deflates.

How does Widowmaker know this?   That is when exhuberance not only took over but acceleration increased.

One simply has to know what (not who) to trust.   If you are looking at words you are the sucker.   Most people ignore truth in plain sight because "bankers" say otherwise.   First lie is about "shortage"  there is no shortage in the USA, whatsoever.

END THE FED.

Wed, 06/26/2013 - 08:39 | 3694155 hankwil74
hankwil74's picture

If you want bullion, open up a COMEX account... when is the last time they missed a delivery?  As for coins, they're plentiful... just go to Tulving... they've got all you can eat

Wed, 06/26/2013 - 09:06 | 3694263 Scro
Scro's picture

Tulving is a scam. They lie.

I wouldn't order from them, nope, never again.

There are much better company's that are honest and have integrity.

Wed, 06/26/2013 - 09:19 | 3694311 Bastiat
Bastiat's picture

Why do you say that?

Wed, 06/26/2013 - 09:27 | 3694335 hankwil74
hankwil74's picture

You're the first I've heard that from. I've never had a problem.

Wed, 06/26/2013 - 09:08 | 3694275 Blano
Blano's picture

I gotta disagree, and I'm a silver buyer so don't flame me for being a troll.  My little insignificant coin shop had plenty last weekend.  Even had Gold Eagles, which I hadn't seen there before.

Wed, 06/26/2013 - 07:40 | 3694034 geewhiz
geewhiz's picture

Because....

Print paper iou's and drive gold price down>create fiat currency and buy gold bullion with it>sell bullion to those cynics who know the game is rigged, just to keep those premium spreads at bay finally pull a Volcker, save the dollar, starve the govt to shrink and slowly inflate away the debt.

But like you all I am a mere mortal guessing and extrapolating at the edges, I obediently commend my (diminishing) wealth to our money masters

Wed, 06/26/2013 - 06:29 | 3693919 holgerdanske
holgerdanske's picture

While I would tend to agree to a large extent, then this move should be manifestly observable in the market. IOW there should open a gulf between physical gold and paper contracts and spot prices should reflect that.
I am not aware at the moment, how much physical gold is being sold. For what it is worth, it could be nil! Then again it might not be.
When, however, there appears a difference, it will be game over, as only the real stuff will be accepted.
So, in a convoluted way, the price of physical gold might well be several times the official price, and the price of paper close to nil. What you see is an average of something truly worthless in large quantities and something irreplaceable in very limited doses.
Simply put, paper gold might be going worthless!
The authority on this would perhaps be Antal Fekete.

Wed, 06/26/2013 - 09:06 | 3694265 draug
draug's picture

So in other words - gold has been wildly overpriced in a speculative paper bubble?

Which is exactly what gold-bugs have denied up until now. But we have always been at war with Eurasia .. I mean speculative gold prices.

Wed, 06/26/2013 - 06:08 | 3693879 Debugas
Debugas's picture

post bubble return to average

Wed, 06/26/2013 - 06:20 | 3693900 NewThor
NewThor's picture

Oil is still in fantasy land?

How does that work?

Wed, 06/26/2013 - 07:26 | 3694005 Seize Mars
Seize Mars's picture

The way it works is this:

evidence of paper money being worthless = either / or: gold high, oil low.

If oil is really rare, hard to find, damaging to Mother Earth, and is about to run out, then you get to print lots of little green claimchecks.

If gold is really low, the serfs have no where to hide from all the claimchecks.

Got it?

Wed, 06/26/2013 - 06:25 | 3693910 Anasteus
Anasteus's picture

This is the copy of my previous comment. I think this article is a more appropriate place for the comment.

* * *

I think the situation requires some deliberation on the topic.

In my opinion the current plunge already goes beyond the necessary scope to preserve the perception of dollar being the world reserve currency. Also the incentive to deteriorate the general public sentiment toward physical gold seems to be insufficient to explain the plunge; after all, the Westerners are already almost discouraged and Easterners don't mind anyway. There must be something else in play.

The Western central banks know very well that each new plunge just encourages new massive physical buys managed by central banks or by the public in the East. Yet they don't mind! Are they so tightly collaborating with the East that there is practically no difference between the West and the East? I strongly doubt, the West-East dichotomy is still present. Some possible scenarios that come to my mind:

a) The Western banks and politicians are cooking something so important that they cannot afford any sort of interruption. The gold can only skyrocket (revalue) after the work is done. Is it a final preparation for the world government? I personally doubt, it's still too soon for that.

b) The Western banks desperately need to buy physical to cover swap losses piled up during decades, especially, when facing gold repatriation requests from more and more countries. Likely but insufficient to explain such a massive plunge.

c) The Western banks buy enormous amount of physical behind the scenes operating in a super-secret mode at the same pace as those in the East. There is a wild race with Eastern banks to grab as much remaining dominance as possible; a renewed 'divide and conquer' scenario. The suppressed price is convenient for both parties. Once the resource is divided gold can be revalued in terms of debt wipe-out. Although I find this possibility most probable there is not enough evidence to support this; we can barely notice any mention that the Western central banks are buying physical. We urgently need BIS and/or central bank (anonymous) whistleblowers here to help us shed more light on it.

d) The US already lost the battle and are openly blackmailed by China. China demands low prices in exchange for keeping calm on the US treasury bill market until it piles up enough gold to support the new world currency. Likely.

The current price is below production costs of many mines; the situation is thus highly unsustainable. Want they continue exploiting the remaining reserves and eventually buy bankrupt mines worldwide? This scenario is dangerous; the nations could nationalize their mines and thus completely cut off bankers and governments from the source. The situation around production costs will most likely be the primary driver for the turn of events.

Something big is in the air and we are literally in the eye of hurricane.

Wed, 06/26/2013 - 06:48 | 3693952 Zwelgje
Zwelgje's picture

e) The MIC needs more and more PM for weapon systems like Tomahawk cruise missiles.

Wed, 06/26/2013 - 06:53 | 3693957 slaughterer
slaughterer's picture

1.) covering of legacy short PM positions (JPM)

2.) covering of losing swap positions

3.) reduce cash settlement costs for bullion banks upon impossible physical delivery

4.) margin calls, forced liquidation

5.) PM carry trade and large short positioning

6.) deflation concerns due to tapering

7.) technical breakdown of PM charts

8.) manipulation (large contract trade during low-vol. hours)

9.) severance of physical and paper market--arbitrage trade between two

10.) negative momo trade

11.) interest of TBTF in picking up EM miners at pennies on the dollar (already evident in their ramping investments in miners a year ago)

Wed, 06/26/2013 - 07:00 | 3693963 fonzannoon
fonzannoon's picture

Put me down for #2. someone is getting roasted on an interest rate derivative.

Scratch that.

Here is a possibility

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/25/did-obama-leave-himself-some-wiggle-room-to-approve-keystone-xl/

rumor it may get approved. Revenue increase, deficit decrease.

Wed, 06/26/2013 - 07:13 | 3693991 Dr. Engali
Dr. Engali's picture

That's interesting but it hasn't been approved yet. I wouldn't think that would smash the metals prices until then. Plus we aren't seeing any movement in oil.

I tend to think we are making China happy by lowering the price so they don't dump a bunch of bonds. We gave them all the technology in the world to get them to buy them , now they want us to compensate them for zirp.

Wed, 06/26/2013 - 07:16 | 3693995 fonzannoon
fonzannoon's picture

If it were to get approved, I have a feeling there would be an early distribution list for that information as well.

But I can't even walk out my door without tripping over a tin foil hat these days.....

Wed, 06/26/2013 - 07:17 | 3693999 Dr. Engali
Dr. Engali's picture

Yeah me neither.

Wed, 06/26/2013 - 07:25 | 3694011 overmedicatedun...
overmedicatedundersexed's picture

a random walk in gold and PM's ...note to self, are those who bought PM's selling? are banks rushing germany it's gold? is the comex and london trading gold bars from seller to buyer? did the etf's unload gold and silver(if they had any)?, we do not know who is selling and who is buying..hard to make a bet when there is no information to the ave investor. Miners selling into the drop? somebody is painting a picture and it's (to me) about see there is no effects of printing and monitizing debt.

Wed, 06/26/2013 - 07:28 | 3694019 RSloane
RSloane's picture

Please return my tin foil hats at your earliest convenience. Thanking you in advance....

Wed, 06/26/2013 - 07:50 | 3694047 tip e. canoe
tip e. canoe's picture

it's raining tinfoil!

Wed, 06/26/2013 - 06:09 | 3693881 Capitalist
Capitalist's picture

Rising treasury yields and dollar strength. Until Bernanke says he was kidding about taper, the trend continues!

Wed, 06/26/2013 - 06:49 | 3693950 RideTheWalrus
RideTheWalrus's picture

This is a big psych-out. Has the stink of one final big illusion to scare people. They are getting into postions to give up with this ponzy, start the next war and crash everything out. Expect a false flag, expect a market crash, expect the war machine to roar, expect mega-propaganda via the presstitutes.

Big money is dumping it's paper. They are making their big move.

This American summer will be like no other.

BTFD

Wed, 06/26/2013 - 06:11 | 3693882 RSloane
RSloane's picture

Surrealism is not confined to the canvass. Global manipulation is designed to 'steer' people towards buying into the stocks/bond market in an attempt to allow central banks to ease their foot off the gas pedal. People, however, know what's going on. Price of gold plummets while people line up by the thousands [as they did in China] to buy gold. Suppy and demand cannot operate in a totally manipulated environment.

Wed, 06/26/2013 - 06:12 | 3693887 fonzannoon
fonzannoon's picture

It's hysterical to watch stocks pretend nothing is going on while everyone whistles past the graveyard right now.

Hope you had fun camping, you made it back just in time for the fireworks.

Wed, 06/26/2013 - 06:32 | 3693927 Dr. Engali
Dr. Engali's picture

Come on Fonz stawks are forward looking. They are telling us we have a bright and sunny future ahead of this. Now if you'll excuse me I'm going to grab a bowl of unicorn skittle shit for breakfast to start my day.

Wed, 06/26/2013 - 06:41 | 3693942 RSloane
RSloane's picture

Good morning Fonz and Doc.

We had to pack up. Storms kept us up most of the night and more on the way. I love camping but not in downpours and heavy winds. More storms on the way today. I'm a wuss.

Speaking of violent storms, and fireworks, I was doing some reading on the health of the stock market in the months prior to Black Thursday 1929. The markets then belied the fact that the consumer base in the US had increasingly little income [a wave of wage suppression despite the roaring 20's] with which to purchase anything other than items for basic needs. The markets ignored that fact and continued to grow in a disjointed manner from the rest of the economy until they fell. If the economists then had bothered to ask any average guy on Main Street how he viewed the economy, they might have prevented the  crash. Deja Vu all over again.

 

 

 

Wed, 06/26/2013 - 06:54 | 3693955 Dr. Engali
Dr. Engali's picture

Good morning Sloan

Your rainstorm story made me think of the first and last time I got my wife to go camping with my sisters and their families. We had good weather during the day, but it stormed every night making the camp site a mosquito ridden mud pit. To top it off our very energetic two year old son couldn't stay away from the nearby river so he had to be constantly monitored. On the third night if this the storm rolled in again and my wife said " we are getting the fuck out of here" the first time I ever heard he cuss. She just started picking things up and throwing them in the truck and didn't even bother to roll up the tent. I was laughing hysterically on the inside, but I was not about to let her see that for fear of my life.We drove off without stopping to say good by to my sisters. Just gave them a wave. Ahhhhh good times.

Wed, 06/26/2013 - 07:01 | 3693964 fonzannoon
fonzannoon's picture

the key to camping is finding a good hotel near the campground and staying there.

See my edit to slaughterer.

Wed, 06/26/2013 - 07:16 | 3693998 Dr. Engali
Dr. Engali's picture

Ten years later and I still don't utter the word camp around her. It's nothing but hotels for her for the rest of our lives.

I saw your post to slaughterer and responded with my thoughts. Who the hell knows?

Wed, 06/26/2013 - 11:23 | 3694976 MachoMan
MachoMan's picture

Of course, that isn't necessarily a bad thing...  I know plenty of guys who pick the worst possible conditions to take wives hunting simply to ensure they're miserable and never again demand to partake in bro-time or mancations...  I'm sure you can make the time up watching the bachlorette or the voice or dancing with stars...

Wed, 06/26/2013 - 11:30 | 3695030 zerozulu
zerozulu's picture

I had few practice run in my backyard and find out it not worth.

Wed, 06/26/2013 - 07:22 | 3694007 RSloane
RSloane's picture

Mosquitos, mud, and storms can break the backs of the most seasoned campers. Good story, Doc. I can empathize with your wife; my words were not very different than hers.

Wed, 06/26/2013 - 07:00 | 3693973 SmallerGovNow2
SmallerGovNow2's picture

Damn Fonz, this shit's getting scary...

Wed, 06/26/2013 - 07:01 | 3693976 fonzannoon
fonzannoon's picture

I threw in a new theory up top to slaughterer.

Wed, 06/26/2013 - 07:15 | 3693993 slaughterer
slaughterer's picture

Hey Fonz, the Keystone dev. seems like a trigger for some vol. on WTI not so much PMs.  Some recent technical calls for WTI to go below $70 in high summer season--would be a major feather in the recovery hat. 

Wed, 06/26/2013 - 07:41 | 3694036 fonzannoon
fonzannoon's picture

I hear you. If it gets announced get ready for CNBC to have multiple orgasms. Think the supposed revenue increase smashing down the deficit.  Larry Kudlow will pass out on air.

Wed, 06/26/2013 - 06:11 | 3693885 Central Wanker
Central Wanker's picture

There's blood on the PM street. That means BUY! Even, if some of the blood is yours.  

Wed, 06/26/2013 - 06:14 | 3693891 andrewp111
andrewp111's picture

What was that about catching falling knives?

Wed, 06/26/2013 - 06:18 | 3693898 NewThor
NewThor's picture

It's most impressive when you do it with your mouth.

Wed, 06/26/2013 - 06:22 | 3693904 Supernova Born
Supernova Born's picture

Gold is too soft and malleable to hold an edge.

Physical properties will matter again, as always, so catch away.

Wed, 06/26/2013 - 06:34 | 3693930 sleepyguy007
sleepyguy007's picture

i would be buying now if i hadn't already spent all the cash i had available buying at $24-25 ish.  I am not particularly worried as I'm about 99% sure at some point in the next 2-3 years silver will be in the 30+ range and gold will be 1600+.   great time to buy .   I would say there is a bigger chance (the 1%) that an asteroid shower made of gold and silver hits the planet, than the print fest ending in the next decade.

Wed, 06/26/2013 - 07:01 | 3693975 Non Passaran
Non Passaran's picture

I'm in exactly the same situation, but I manage to buy a little every month (unfortunately no money for big purchases, though).

 

Wed, 06/26/2013 - 07:20 | 3694002 dark pools of soros
dark pools of soros's picture

But you are not going to sell anyway unless silver goes to $80 or more right?

Isn't that the levels everyone dreamed about?

Wed, 06/26/2013 - 06:16 | 3693894 Mr. Hudson
Mr. Hudson's picture

Investors are dumping gold because a severe credit crunch is coming. In other words, FRNs will be scarce. There will be no money. Before hyper-inflation sets in, "cash will be King". At some point in the near future, investors know they will have to sell their gold for cash, and it's better to do it now than later when gold is at $750-$800 an ounce.

Wed, 06/26/2013 - 06:31 | 3693925 Go Tribe
Go Tribe's picture

Wait a minute.  A severe credit crunch is coming? If that's the case gold will go higher and so why would people be selling now?

Wed, 06/26/2013 - 06:39 | 3693940 Mr. Hudson
Mr. Hudson's picture

No...historically, when there is a credit crunch, gold is sold for cash, because during a credit crunch there is no cash. Cash becomes scarce, so investors sell assets, including gold, for cash.

Also, if interest rates go up (which they will), the price of gold will go down even further because investors will sell their gold and buy bonds.

Wed, 06/26/2013 - 06:47 | 3693951 Chief Falling Knife
Chief Falling Knife's picture

If trillions of $ are printed(digitally created), but never make it out of TBTF bank reserves(or select derivative markets) into the economy, will they create inflation?

Money velocity is at record lows.

Wed, 06/26/2013 - 07:24 | 3694009 dark pools of soros
dark pools of soros's picture

Ding ding ding

So many here don't understand velocity

Wed, 06/26/2013 - 11:27 | 3695012 MachoMan
MachoMan's picture

True, but it's more of a sand in an hour glass type of thing than a water spigot that's turned off...  there is some that trickles through, regardless of statements to the contrary.  So money creation IS inflation, it's just that the consequences may be mitigated due to velocity...

Wed, 06/26/2013 - 14:12 | 3696045 buyingsterling
buyingsterling's picture

But what happens to inflation if the printed money is spent into the economy because it is being used to cover deficits? That's what is happening; to the tune of $1 trillion/year. So why wouldn't prices of goods and services be affected?

Wed, 06/26/2013 - 14:50 | 3696224 MachoMan
MachoMan's picture

Lot of ways to mask inflation...  outsourcing is/was one of them...  changing the way we calculate our measurements is another (e.g. CPI)...  hell, even managing perception (MSM) might be the same as managing inflation...  for a little while.

I'll also challenge your basis for the premise that the prices of goods and services aren't affected...  That depends on the party you're viewing...  is this at the consumer level, the wholesaler level, or the producer level?  Prices might not increase for consumers, but margins get crushed for the other guys...  (aside from the fact that prices are increasing for virtually everything consumers need).  There are also supply/demand issues...  It's really an incredibly complicated statement that warrants a lengthy foundation...  so, I'll shit on it until proven otherwise...  see generally, your last 3 gas receipts.    

Wed, 06/26/2013 - 06:58 | 3693967 SmallerGovNow2
SmallerGovNow2's picture

Then why are they not also selling equities Mr. Hudson if you please?

Wed, 06/26/2013 - 07:25 | 3694017 seek
seek's picture

They normally sell their AU early in the margin call phase. The exact same thing happened in 2008, it was a leading indicator of what was to come for the equities market.

Wed, 06/26/2013 - 09:31 | 3694345 Bastiat
Bastiat's picture

Who is this "they" who sells gold to meet margin calls?

Wed, 06/26/2013 - 12:29 | 3695424 seek
seek's picture

Banks and investment firms holding AU in addition to other investments.

Wed, 06/26/2013 - 10:24 | 3694559 tarsubil
tarsubil's picture

These drops are like the tide going out before the tsunami. Gold going down is like the boats that are sitting on dry land that people no longer seem to want. My advice is to buy and get on board (take delivery).

Wed, 06/26/2013 - 07:20 | 3694004 agent default
agent default's picture

When REAL interest rates become positive, as in the printing rate is lower than the interest rate, then yes gold will crash.  This happened back in 1984 when gold crashed to $400/oz.  But... the US was  a net creditor back then and could afford real positive interest rates.  If by rising interest rates you mean 5% rates and 10% QE rate gold will have to go up.

Wed, 06/26/2013 - 07:34 | 3694024 Acet
Acet's picture

In the West people have already been selling their gold for cash: hence all those "We buy Gold" stores that poped-up out there.

I would say we're already in the credit crunch stage of the debt economic supercycle, but due central bank intervention this has been mostly disguised.

Also note that people do not necessarilly sell their gold for bonds when interest rates go up:

  • They might not trust that the bonds will ever be repayed (and at the moment, a significant rise in interest rates would severelly increase the rete of default, including for sovereigns)
  • Inflation might be higher than the interest rates (i.e. negative real interest rates) in which case it's best to preserve one's wealth in something that cannot be devaluated.

 

Wed, 06/26/2013 - 11:28 | 3695017 Bananamerican
Bananamerican's picture

"if interest rates go up (which they will), the price of gold will go down even further"

u.s. debt implodes

Wed, 06/26/2013 - 10:04 | 3694463 Boston
Boston's picture

I said something similar 3-5 months ago, here, when I used 2008 as an analogue. And I got lots of down arrows for it.

 

a. Back then gold fell ~36%. If history rhymed, then gold could hit 1240 or so. Check.

    Silver then fell ~60%. This would point to sub 22 silver. Check.

b. Back then, the meltdown in pm's PRECEDED a meltdown in other risk assets by 3-4 months, and a surge in the USD. Check????????

Wed, 06/26/2013 - 06:37 | 3693933 Headbanger
Headbanger's picture

Two words:    Margin calls

Wed, 06/26/2013 - 11:32 | 3695043 Bananamerican
Bananamerican's picture

and add to that list: margin hikes

Wed, 06/26/2013 - 06:52 | 3693959 slaughterer
slaughterer's picture

We see silver hitting a support level at $16 later this year.  Not buying any until then.

 

Wed, 06/26/2013 - 07:16 | 3693994 seek
seek's picture

We're in the early stages of a banking crisis. One or more banks is unloading AU for USD due to margin cals or has to put up collateral.

This exact same pattern happened around the Lehman event.

There are probably several secondary positive feedback loops to the downside getting triggered as well, amplifying the decline.

Based on what happened in 2008, we're within two weeks or so of a very large cat being let out of the bag and the contagion mode of the crisis.

 

Wed, 06/26/2013 - 07:36 | 3694029 No Euros please...
No Euros please we're British's picture

Anyone who doesn't believe in manipulation of PM prices should look at the great job they're making with platinum. This is mainly an industrial use pm and currently the miners are having big problems with supply. So one might expect the price of platinum to rocket upwards as industrials start to stockpile (especially at this price) to offset any future shortages.

An alternative explanation is that demand for platinum has died and hence the "great economic recovery" must be bullshit.

 

Wed, 06/26/2013 - 06:04 | 3693865 KashNCarry
KashNCarry's picture

TPTB are insistent that GLD go below a thousand/oz.

Wed, 06/26/2013 - 06:03 | 3693866 Aknownymouse
Aknownymouse's picture

The big rotation into the S&P from bonds and metals. We are looking at the start of the euphoria phase in the us market. The rise will become exponential in july.

Wed, 06/26/2013 - 06:04 | 3693870 highcapacity
highcapacity's picture

I wonder will there ever be a physical shortage? Dont see any signs yet..... ( here in switzerland ). Shops fully stocked and open.

Wed, 06/26/2013 - 06:08 | 3693880 agent default
agent default's picture

Look, the physical shortage is a bit of a conspiracy theory.

Wed, 06/26/2013 - 06:31 | 3693923 e-recep
e-recep's picture

it's a myth these days. shops refrain from keeping too much gold in store when the price falling like knife, not because they can't find any. premiums rise during high volatility but return to normal later on. there is no rush from banks to coin shops so far, not one bit.

Wed, 06/26/2013 - 09:02 | 3694250 YC2
YC2's picture

Exactly, I am not sure people understand the functioning of premiums and the coin market doesnt seem to have a direct intersection with the bullion/commercial markets.

 

If you are buying for tin foil hat reasons, you have to realize you are playing the looong game and not, in any sense, trading.

Wed, 06/26/2013 - 09:07 | 3694270 agent default
agent default's picture

It doesn't.  The coin market has always carried a premium depending on many artistic and collectible aspects of the coin.  The high premium means that this particular form of gold is in high demand, but this doesn't mean much for the metal itself. 

Wed, 06/26/2013 - 09:21 | 3694317 e-recep
e-recep's picture

we are talking about the volatility premiums, that go up and down during times of stress. we are not talking about the historic or artistic premiums, those remain pretty constant over time.

Wed, 06/26/2013 - 06:04 | 3693872 tocointhephrase
tocointhephrase's picture

Gold and Silver price going to zero and beyond.

"somewhere over the rainbow" Dorothy x

Wed, 06/26/2013 - 06:05 | 3693874 The_Small_Lebowski
The_Small_Lebowski's picture

ive said on here before. give a bankster an oz of gold and feed him for a day. give a bankster a gold mine and feed him for life. 

its my opinion they want the miners, and when they feel they have been smashed jsut enough to be affordable - then well see the fireworks!

Wed, 06/26/2013 - 06:08 | 3693875 The_Small_Lebowski
The_Small_Lebowski's picture

also check JPMs apparent shortage of gold here

http://harveyorgan.blogspot.ie/

very interesting stuff, and another probably reason for the hammerings this month

just two more days ntil we get a real insight into JPMs shenanigans!!!

Wed, 06/26/2013 - 06:07 | 3693876 Debugas
Debugas's picture

what is the point in buying USD ? i do not get it

Wed, 06/26/2013 - 06:14 | 3693893 chubbyjjfong
chubbyjjfong's picture

For many, they think there is no where else to go.  The deflationary hit before all hell breaks loose!

Wed, 06/26/2013 - 06:25 | 3693908 Mr. Hudson
Mr. Hudson's picture

It is the "legal tender"; the "medium of exchange" in the U.S. Just because USDs are worthless paper, Americans are forced by law to use them as money. They have "value" because OPEC sells their oil for USDs, which creates a "demand" for the dollar. Also, the dollar is the world's reserve currency, and there are currencies that are "pegged" to the dollar, or "backed" by the dollar. When the U.S. dollar collapses, the whole global fiat system collapses.

Wed, 06/26/2013 - 06:08 | 3693878 I_Am_
I_Am_'s picture

WTF some serious shit going on - jack be nimble jack be quick..................

Wed, 06/26/2013 - 06:11 | 3693884 LeisureSmith
LeisureSmith's picture

I smell a Rat. Show yourself you foul beast.

Wed, 06/26/2013 - 06:13 | 3693886 chubbyjjfong
chubbyjjfong's picture

+ 1.. I smell a big rat.. Take this paper gold shitstorm to zero already and lets see how that air circulating device holds up.

Wed, 06/26/2013 - 06:24 | 3693907 El Hosel
El Hosel's picture

Its just the Message of "The Market".... BUY US STOCKs. Don't ask questions, it will all makes sense after..... never mind.

Wed, 06/26/2013 - 06:34 | 3693931 Go Tribe
Go Tribe's picture

The premium is the dealer's way of recouping losses from chasing the falling knife. The higher the premium, the faster physical price is falling.

Wed, 06/26/2013 - 09:12 | 3694292 agent default
agent default's picture

Get one thing through your heads all of you:  Dealers are hedged against their inventory to the ears.  They make 2 maybe 4% on the sale and that is it.  Otherwise, what is considered normal  PM volatility,  would bust them within hours.

Wed, 06/26/2013 - 11:37 | 3695092 Bananamerican
Bananamerican's picture

+100

Wed, 06/26/2013 - 06:20 | 3693901 BigInJapan
BigInJapan's picture

Every goddamn time I've written about Indians "shitting the bed" and selling their gold, I've been downvoted.

Fuckit. Eat it.

 

Now since I'm leaving this collection of volcanoes and nonsense, I'll let my secret out of the bag. My gold is in 30g coins with Japanese face values of 100,000Yen. Built in price floor. Stay away from the 20g - most of them are Yakuza copies - pure gold, but the bank won't look at them

THE best gold investment in the world. Google away fuckers and don't say I never help.

 

Wed, 06/26/2013 - 06:26 | 3693917 ohhhhhbaaaaahhh...
ohhhhhbaaaaahhhhhhhhhmaaaaaahhhhh's picture

What?

Wed, 06/26/2013 - 07:05 | 3693974 GuyJeans
GuyJeans's picture

I believe he is talking about the Tenno Heika Akihito commemorative coin (Tenno heika kinen 10 man yen kinka)

Wed, 06/26/2013 - 09:01 | 3694240 NidStyles
NidStyles's picture

Oh so an obscure Japanese BS coin that no one really cares about?

Wed, 06/26/2013 - 09:31 | 3694347 BigInJapan
BigInJapan's picture

No, Rocketlab, it's a 30 g gold coin which can never go below 100,000 Yen in value, no matter the price of gold, which few know about.

That vs $50 in a gold buffalo...

Wed, 06/26/2013 - 11:54 | 3695184 NidStyles
NidStyles's picture

So it's not even a full ounce, and people outside of Japan will carry about it's face value why? It's not a full ounce, so who would want it, especially if it is some obscure coin that no one will recognize with a face value in a currency no one really gives a shit about?

 

Japan might as well collapse already because no one outside of the US government and Otaku's give a shit about the country outside of it's shores.

 

I understand you may have an obseesion with Japan, but outside of that country no one cares about obscure coins that are not full ounces. It's not worth the premium to cover a coin that will never meet it's full melt value.

 

No one buys gold coins for their collectibility unless they plan on flipping them back into paper bills, otherwise you are wasting you time and bennies on useless coins. Even more so if they are not a full ounce. Fractionals are fine, but they are for straight up bartering. If you are buying gold in coin form for investing purposes you are literally buring your money for some stupid emblems.

Wed, 06/26/2013 - 18:33 | 3697094 BigInJapan
BigInJapan's picture

Yeah, sure kid.

Wed, 06/26/2013 - 06:21 | 3693902 andrewp111
andrewp111's picture

As Indians import more gold the Rupee has to go down. You see, the Rupee is a controlled currency as you cannot take Rupees out of India. So all imports have to be paid for with foreign exchange reserves. India's passion for gold is depleting those reserves fast. As those reserves get depleted, India becomes more desperate.

Wed, 06/26/2013 - 06:22 | 3693903 Watson
Watson's picture

>>>
Gold Crash Accelerates
<<<

Just be grateful that the last big buyers were central banks.
At least they are not levered buyers (and thus cannot be forced sellers).

So at a minimum decline will be more orderly, and maybe floor price found sooner.

Usually levered retail is last...and always loses.

Wed, 06/26/2013 - 06:49 | 3693954 lakecity55
lakecity55's picture

I say it crashes moar;

Wed, 06/26/2013 - 09:01 | 3694245 NidStyles
NidStyles's picture

Central Banks aren't levered buyers. LMAO! That's a good one.

Wed, 06/26/2013 - 06:23 | 3693906 e-recep
e-recep's picture

gold is falling like a heavy wet pile of shit from the anus. sorry, i can't be polite now.

Wed, 06/26/2013 - 06:26 | 3693913 fonzannoon
fonzannoon's picture

I feel like we have been here before. I am not so much worried about gold, as I am what usually follows when this happens.

Wed, 06/26/2013 - 06:35 | 3693932 e-recep
e-recep's picture

the stock markets will tank big time but that may be months away.

Wed, 06/26/2013 - 06:25 | 3693911 Investor-1
Investor-1's picture

The bottom should be not too far of. In my opinion this is an excellent buying opportunity for the pm's and for (junior)mining stocks. Look at what the mining stocks did  the 2 yaers following the low in december 2008! I am also thinking about taking a gold position with cfd's

Wed, 06/26/2013 - 06:58 | 3693961 Non Passaran
Non Passaran's picture

Uh-huh... I've heard that one 30% ago...  

I've been buying for a while...  It's not for the faint of heart. At this point I certainly wouldn't suggest anyone to buy (although I'm still buying). 

And please do not tell us not to worry.

 

Wed, 06/26/2013 - 08:33 | 3694131 samcontrol
samcontrol's picture

i have been buying 50k a month in miners for six month now,, down to one last shot.. i am thinking silver at 16 to pull the trigger.

Couldn,t buy physicall , knew i would get fucked and i got my wish.

Wed, 06/26/2013 - 06:26 | 3693915 Bearwagon
Bearwagon's picture

Just two words: Monster Box

Wed, 06/26/2013 - 06:33 | 3693928 Smegley Wanxalot
Smegley Wanxalot's picture

I've known a few women with monster boxes.

Wed, 06/26/2013 - 06:30 | 3693922 El Hosel
El Hosel's picture

The Freakin Ponzi has gotten so big the last few years with Fed Expansion... The Machine can wipe out the entire gold market with their lunch money.  Gold is clearly not too big to fail at this point.

Wed, 06/26/2013 - 06:31 | 3693924 ...out of space
...out of space's picture

looks like we realy gonna see a full blow of a PM market. AG is down 40% just this year. and it dont look it will turn when we hit 15. my bet is they just gonna close physicall PM market, befor the paper go to zero. such a big thing in front of us and a lot of people dont even see that.

 

Wed, 06/26/2013 - 06:38 | 3693938 chubbyjjfong
chubbyjjfong's picture

For most people the words "bank" and "spend" are the only things they know about finance.  the greatest con in history, utterly out of sight and mind of the majority on this planet. Incredible to think really.  asolutely no idea of the parameters of the society in which they live in.  We are so very fucked.

Wed, 06/26/2013 - 07:19 | 3694001 Tenshin Headache
Tenshin Headache's picture

Don't forget "monthly payments."

Wed, 06/26/2013 - 09:19 | 3694310 Blano
Blano's picture

"How much down, how much a month."

Wed, 06/26/2013 - 06:46 | 3693935 Yen Cross
Yen Cross's picture

  QoQ GDP print in 2 hours. I wonder if someone knows something we don't. The takedown in the metals really chaps my hide.

  The 100 month sma is @ 1054.99 in xau.

Wed, 06/26/2013 - 06:52 | 3693958 Non Passaran
Non Passaran's picture

European indexes are up 1.6 to over 2.1 %. What a fucking disgrace!!!

Not that one has to do any thinking to understand is going on here, but let's try to analyze the situation:

1) The (fake) QoQ GPD figures leaked to those in the know 

or....

2) The Fed/BIS/whoever is manipulating the shit out of equity markets

or....

3) Both 1) and 2)

 

And to top it off, we're enjoying another orchestrated smackdown on PMs. 

That is complete and utter bullshit.  By Christmas gold and silver will be free (I'd like that, but it ain't right!).

I can't take this any more. I will have to force myself to go into a 14-day seclusion (according to "ekm", the shit should hit the fan within a week or so so in theory, that should be enough)...

Wed, 06/26/2013 - 06:43 | 3693945 EclecticParrot
EclecticParrot's picture

The chasm between sound philosophical principles and successful investment strategy has never been greater.

Wed, 06/26/2013 - 07:04 | 3693965 sudzee
sudzee's picture

Trillions to come out of bonds worldwide. Where does it go. Whack PM's to force ot into the markets. Nowhere to hide. The big one is niegh.
C/B's are about to raise rates.

Wed, 06/26/2013 - 07:05 | 3693983 wstrub
wstrub's picture

When commodities are down in price......so will go housing.  Housing is collateral for the banks.

Wed, 06/26/2013 - 07:08 | 3693985 Clam McCain
Clam McCain's picture

Dont buy gold here. Remember losers average losers

Wed, 06/26/2013 - 07:42 | 3694039 Quinvarius
Quinvarius's picture

That does nothing to explain my fantastic success rate of averaging into the other side of idiot momo trades.

Wed, 06/26/2013 - 07:17 | 3694000 geewhiz
geewhiz's picture

Print paper iou gold notes and drive gold down>print paper money to buy cheap bullion>sell bullion to those cynical non believers who want bullion, just to keep the spread at bay.

Easy squeezy

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