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Is The "Smart Money" Ready To Bet On Gold?
For the last three weeks, gold has experienced something that has never happened before - hedge funds aggregate net position has been short for the first time in history.
However, as Dana Lyons notes, this week saw another 'historic' shift in gold positioning as commercial hedgers shifted to the least hedged since 2001... so the 'fast' money is chasing momentum and the 'smart' money is lifting hedges into them.
It’s no secret that commodities have taken a drubbing during the deflationary spiral over the past year. And precious metals have been right up front in this beating. This includes gold, which has lost over 40% of its value the past 4 years. So needless to say, there has not been much good news on that front. However, as we touched on in a piece two weeks ago, there are signs beginning to pop up that may provide a glimmer of hope for gold bugs. In dollar terms, the price of gold continues to leak, offering very little evidence of any impending stability or bounce. On the other hand, in Euro terms, gold prices reached a key juncture a few weeks ago, as outlined in that previous post. And while no bounce has materialized as of yet, gold has at least held at the level we noted.
Today’s Chart Of The Day offers another hopeful data point for gold bulls. The CFTC tracks the net positioning of various groups of traders in the futures market in a report called the Commitment Of Traders (COT). One such group is called Commercial Hedgers. As their name implies, their main function in the futures market is to hedge. And while the Non-Commercial Speculators tend to be trend-following funds, the Commercial Hedgers’ postions tend to move contrary to price trends. Thus, it is almost always the case that these Hedgers will be correctly positioned – and to an extreme – at major turning points in a market.
How is that relevant for gold? As of this week, Commercial Hedgers are holding the lowest net short position in gold futures since the launch of the gold bull market in 2001.
Does this mean that a reversal higher is imminent in gold? Not necessarily. The thing with COT analysis is that it is difficult to correctly determine when an “extreme” in Hedgers’ positioning will actually result in a price reversal. As is said regarding all sorts of market metrics, an extreme in COT positioning can always get more extreme. Plus, the COT positioning can peak well in advance of the turn. Consider the Hedgers’ maximum net short positioning in gold futures which occurred in December 2009, 21 months – and another 50% gold rally – before prices topped.
Thus, it is tough to time trades with accuracy based on the COT report. However, one thing we can say in the gold bugs’ favor: what had mostly been a headwind for gold for the past decade or so is no longer the case. While it may not make an immediate impact, the “smart money” Commercial Hedgers are now more aligned with them than at any point since the bull market began in 2001.
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More from Dana Lyons, JLFMI and My401kPro.
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"It's nothing but a gamble - just like everything else. One that many morons are attracted to because of their beliefs. One that many con artists are also attracted to, and even a few rational people."
- Germans
- Ukrainians
- Libyans
- Iraqis
- Chinese
- Saudi Arabians
- Russians
- Venezuelans (gone, thanks Citibank)
- Citibank (see above reference)
- Etc., ad-infinitum
--------------------------------
They're:
- All 'morons'.
- All con artists
- All attracted to gold because of their beliefs.
- All irrational people - and even a few rational ones.
Yawn...
That all persons of the above nationality are attracted to gold is plainly wrong. Try again.
Your belief system view is spot on per my belief. The trick is in the timing of riding the belief wave of anything/anygoup to get the most out of it while it is a source and off it as it changes to a sink. Not something I'm good at yet but still trying.
It's a gamble based on history.
While systems of exchanges, banks, countries and civilizations, crumbled, gold and silver always retained its value due to its scarcity. -
As far as I know, Gold is still the only substance that doesn't rust, rot, burn, oxidize, dissolve, transmute, get eaten by insects or animals (the four legged kind), require a printing press, or can otherwise be falsified (Tungsten inlays excluded). That is what makes it unique and rare and thus qualifies it as money.
The primary difference between a gold coin and a Furby is that gold coins spent thousands of years in the spotlight and hence arrived at a legendary status where speculators predict that they will ALWAYS be valued for their shininess by animals.
Reality appears to contract this, as we see more and more animals turning against tradition, treating gold as worthless, and instead treating ephemeral and less-rare gadgets like iPhones as valuable.
Humans have advanced to the point where we are now more interested in social media than in shiny metal objects. :-)
Gold can already be made in a lab, it's called Nuclear Fission. It means starting with an element that is denser and spliting its nuclei and stoping when you reach gold.
This is very very expensive, and it is much cheaper to just conventionally mine the stuff than to pay for all the inputs to artificially make it.
When we get this sort of technology that allows us to just make the elements we want from denser materials using untold amounts of energy cheaply, you will most likely have much bigger issues at hand then what the price of gold is at your local stock market.
There will be no whiskey and bbq sauce to go with the deep fried Earth.
Gold may be the "waste product" from some nuclear reactions. Modern men may take this waste product to the trading posts to trade for furs from the men living in the bush who still live for shiny metal objects. Meanwhile, modern men will be trading amongst each other space ships, interstellar travel, and the likes.
Perhaps, if society collapses and the collapse isn't hard enough to destroy everyone, those men living in the bush will finally be vindicated! With their stash of gold, they can start assembling a new empire to rival the Aztecs.
You are completely right that gold in fact is unneccesary. Though when you have an economy full of cheaters who enrich the very few on behalf of rest of the world, then gold is neccesary. One day we just may come to the point when men and women will stop taking advantage of eachother and will instead help eachother. When that day comes, your statement about space ships, interstellar travel etc may hold water. Until that time, PM are the only thing giving the regular Joe a chance to stand against the imbeciles called banks and governments.
Possibly, but its I believe its actually produced through fusion. Gold and Carbon both need fusion in starts to create them. Thats why we are made of stardust
Do you know what metal it at the tip of the Washington Monument? They tipped it with and extremely rare metal. Total US production that year was under 50kg.
That metal?
Aluminum.
Just becasue something isn't possible today, doesn't' mean it won't be possible in the future.
Maybe you caught the Twilihght zone episode and thinking thats what will happen?
Full Episode (The Rip Van Winkle Caper)http://www.imdb.com/video/hulu/vi2782635801
Maybe one day but not in my lifetime
The definition of Smart Money?
People who have foreign bank accounts in many countries.
Preferable through foreign shell corporations.
Who pay little or no tax.
Gold is a small piece of the definition.
You have my vote Chuck. These things you speak of should be a basic human right of all people everywhere put in law and enforced.
Never, ever go full Barrons.
Soon, young Padawans...
Jedi are gold bugs. Everyone knows that... right?
-----
From my perspective, the reason to convert all financial assets to gold and silver is because you cannot predict the day the predators-that-be will close the banks (and brokerage accounts), then steal ("bail-in") all your funds (probably by converting your funds to 30-year government bonds you are not allowed to sell for years... which will have the same result, as they will become worthless).
Even the smart folks here in ZH seem to think they are clever enough and observant enough to wait until the last minute. A very few even might be correct or lucky that way. But the risk involved in that is vastly too high. Which is why I marvel that so many plan to attempt this foolish move.
Buy and hide physical.
Convert half now.
Note: It is entirely possible gold will momentary down-spike to $900 or so when the next collapse happens (quite possibly this fall). Normally I'd say "that's the time to go all in". But this time, I would fear all my funds get trapped in the banks, generating a 100% loss. Thus the prudent action this time, I estimate, is to have converted much to most now, and only risk the remaining in any attempt to catch the liquidity crunch caused low point when the wheels come off the financial markets.
Disclaimer: All the above is just my current thinking for everyone else. I went 100% into physical many years ago in the $400 to $900 range. Then in 2011 I converted 95% of my physical into my current self-sufficient digs in the boonies. BTW, my exist in 2011 to generate funds for my digs was pure luck, not smarts!
@honestann... i doubled down on Physical on Friday... I bought a stack of 5g karatbars cards and with a bit of system manlipuation and discount because of large quantity worked out at just under €40 a gram delivered and in my hand... (that price includes delivery and fees) ---
now for all your haters out there.. thats not bad!!!
www.teamramgold.com dont buy without contacting me first for info on how to work the system to your advantage
Don't you pay a lot more premium per gram when you buy such tiny increments? To be sure, they are extremely convenient, but... I was never confident I'd be able to recover the large premium when I sold.
Seem like I see a price discount on 20 Grams of almost $150 today from last year.
I was seeing $41 a gram May 2014, and $43 a gram Jun 2014 for full oz.
Now $36 a Gram for oz.
But maybe I don't know how to buy in bulk, or get to places where the premium is low without 2-3 tanks of gas and a whole day of driving.
From what I see online seems like 1 oz is best price per gram even compared to next step heavier weight.
I would say wait on the gold price... it has been coming down for a long long time. And last June it went up just like a tease or like bait.
They only crash the economy when they are ready... even the FED Auction Facility start in 2007 to increase liquidity. Maybe a Crash in October, but could be put off till October 2016.
Yeah, I think the price will fall for a while. But to completely ignore the risk of waiting (the predators steal all or most of your fiat) seems very irresponsible to me. Yet that seems to be the default approach, even of smart people.
BTW, I posted another reply to our "where to relocate" thread of a few days ago.
The ATB's are where it is at right now hands down.
Been fighting the FED the whole time since 2000 and my net worth has quadrupled.
started buying gold in 2000 at $300 - check
house for cash in 08 - check
Just waiting for the next FED fuckup. This time I'll retire to S. America.
You don't say! You mean Jim Sinclair ("gold will never go below $1600 per ounce" due to the Cyprus crisis) and Bo Polny and Eric King might be right? Say it ain't so.
So you hate gold, yet you read all of those web pages?
Well, duh, every hear of going contrarian?
Well there's intelligent contrarian and stupid contrarian. It appears you gravitate towards stupid.
Very little produced, very little hedged.
It turns out that Macedonia has been passing under the radar. It's Gold reserves are 6.8 tons of Gold. That's twice as much as Germany. I wonder how long it will be before the USA or the IMF come to relieve them of that healthy reserve.
If it wasn't important it wouldn't be on top of left screen of CNBC.
Bitcoin down 6% in early trading doesn't bode well
IMO, gold is doomed to fall in the short/medium term and destined to skyrocket in the medium/long term.
Don't buy it unless you can hold it for a LONG time.
"IN OUR HANDS IS THE GREATEST POWER OF OUR DAY - GOLD". May be the smart money is ready for the end game or may be not yet. Surely they know a lot about money and a lot about gold.
The campaign against gold has been going on for about 300-400 years (depending on which versions of history you subscribe to). From goldsmiths loaning out more than they had on hand in the late middle ages, to john law's mississippi bubble, to the rothchilds/schiff german-european banking houses funding both sides of the napoleonic wars, to their current incarnations of central banking instutitions - but the fundamental precept through these time periods amounted to changing the definition of money from one that was based on precious metals (silver/gold) to one that is fiat. You see evidence of this campaign today as Gold is decried as a relic by the very people who would benefit most from owning it. I don't believe these are bad people but when the system is manufacted to confuse, it will result in well - confusion.
The financial game being played is really at its heart a con game. The "elite" for lack of a better word are students of history and know that all fiat eventually dies. What you seeing is the greatest transfer of wealth in the history of the world and the only ones to survive when the rules of the game are changed are those who make the game. You can ridicule gold all you want but what do you think all the power brokers of the world are buying with their fiat currency? They are buying gold and silver, they are buying land, they are buying companies with real physical and intellectual assets and privatizing them often at huge discounts when they deflate the system, they are buying political influence, they are buying products of rarity and vintage that come with a handshake agreement to hold their value in whatever currency is pushed going forward within this clique. What they are doing is making others work for nothing and skimming the fat off their labor and storing it for when the game ends.
I think Jean Baudrillard was right when he said we live in hyperreality. People live on the internet and exchange their wealth for bits of data (xbox/PS points, video game currency, reddit gold, bitcoin, one of the hundreds of other alt-currencies). These things aren't real. They cannot exist beyond their manufactured world yet people still exchange what is real for them. Do you see the con? Do you think that's air your really breathing? Do you think that piece of paper called the USD is worth anymore than what someone else is willing to give you for it? The same can be said for gold vis a vis a fiat currency but the problem is Gold cannot be debased, it cannot be inflated and it along with it's little brother silver have withstood the test of time through all manner of deceit and worldly change.
I don't know what side of history I am on and by owning precious metals like gold/silver during this time I may be proved a fool. The point is that it really doesn't matter if I am a fool or not. The fact is Gold/Silver are the only two instruments to have survived the world of man and held their value. From Lydians to modern day bullion buyers. Eventually all fiat currency is debased. All credit is debased. There is not one credit instrument in the history of the world that has withstood the test of time.
BTW just a side note because i see such negativity towards precious metals from the bitcoin "investors" - I think people who own bitcoins are fools. Bitcoin is not a store of value and never will be. In fact the primary use of bitcoins that lends value to it (black market transactions) is the very thing that will cripple it. Imagine yourself at a farmers market. You have 1 bitcoin and 1 g of gold and need to complete a transaction because you're hungry as fuck. The farmer in turn needs to exchange it for something that holds value for the lean times he will experience when he isn't bringing in his harvest "Hi sir, that's a very nice bushel of corn you have there. Would you take this bitcoin for it? You know the very same thing that people use on the internet to buy pedophila, drug material and is used to gamble with? You know the one that snubs it's nose at world governments everywhere and depends on an energy/technology infastructure to exist and function? The one that looks almost exactly like the other hundreds of alt-currencies out there? The one that even after continued explanation is mired in obfuscation and requires itself to be exchanged for another fiat currency so that it can have something beside a imaginary bit of data on a piece of memory someplace. Or will you take this piece of gold?
Remember value exists only in the minds of men but the minds of men can be manipulated. Look to history for what is real in an era of the unreal.
@feelinfine - great post my friend.. I subscribe to these sentiments also...
as ordinary Joes, we do not have the luxury to what exactly the "elites" have planned, so all we can do is study history, observe what the "elite" are doing (to the best of our ability) and try protect ourselves best we can. I've been in the game for 20 years, I own property and business and physical gold. I dont own paper assets including Fiat, save for a checking account with a few months spend credit and a few € on hand should the old bank go tits up..
I try to educate ordinary decent people about the world of economics and monetary policies so varying degrees of success.. some get it; some dont want to get it...
to help those who are willing to help themselves I introduce them to Karatbars as a way of earning additional income and acquiring Physical gold again to reasonable success. Some may say karatbars is overpriced gold or a MLM or whatever and thats OK but I consider it a reasonable trade-off because these people have now some gold where before they had none.
I personally make a reasonable return for my efforts. However the biggest problem is ignorance, I was shocked and dismayed at the complete lack of financial IQ of the general public. Maybe its my ego but my main motivation is education I've seen too many good people wiped out because of main stream conditioning. I post on ZH because you guys are educated perhaps a few more will join us in our quest to use our knowledge to 1 help others get gold and get a return for our time.
www.teamramgold.com
Double.
It is a given that many smart people use other people's money to make their money. That does not mean their money is any smarter.
In fact there have been double blind tests with all the major currencies, including gold, and they are all as dumb as, well, rocks. Didn't get a single question right.
The past few years has seen a lot of governments (China, Russia are the biggest) move into gold as a hedge against the US dollar. Sensible, yes. As was setting up a parallel BRICS Bank. Are their government representatives the smartest people in the room, doubtful.
They have learned that hard way that the USD is just another weapon in Uncle Sam's assymetric warfare toolbox. Goldman and the US government work hand in glove. Do you think either of them is going to let gold rise any time soon? And reward Russia and China? It has taken 70 years from Bretton Woods to get where we are now. Absent a major war, the phase out of the USD and replacement with the next global currency will be at least a 20 year project.
Smart money is making sure gold doesn't go anywhere but down.
I like to buy more of stuff as the price declines and then I have to sell because I need the money.
I wanted to chime in about real estate investing. My parents bought 2 acres of land in an up & coming town outside NY in 1970. They paid 45,000 for the 2 acres. We just sold it for 650,000. Now before you go getting excited about the score....let's do some math, shall we? 650-45=605. OK, but now let's take out the 360,000 they paid in property tax (averaged...the 2 acres were last taxed at 12,000 per year) So that leaves a 245,000 profit right? WRONG. Uncle Sam is going to tax 605,000 for capital gains...and since there were no improvements, there are no deductions. So let's say it's taxed at 20% which is 121,000. So you have 245,000-121,000=124,000 profit....over 45 years! So, the question is how much gold would 45,000 have bought in 1970? The answer is 1250 ounces. So 1250 × 1090 = 1,362,500 dollars...A ND it would have been portable, nimble and hidden from govt. .. Anyone still want to invest in land or bad mouth gold?
@stingboo ... couldnt agree more"!!!!! pretty much same thing applies to my parents... by the time taxes,,, fiat depreciation and, repair bills are considered .. real estate is a fuckin nightmare... i personally have 4 rental units, on mortgages ... such a fuckin headache
wish I bought gold 20 years ago!!! still irish proverb.. when is the best time to plant a tree, 20 years ago... when is the second best time... NOW...
www.teamramgold.com
I like that you layout the math and just want to know if the taxes paid are close to accurate.
But I have to point out you are selecting a Snapshot in Time.
Lots of business reports are snapshots in time, so that is not a problem unless you are making a decision like this.
- Lots of people show their favorite Index Fund and say the same kind of nonsense, If you had invested in 1980 in the S&P 500 Index you would have such and such today
- that is nonsense no one can say what years to invest or any one year to invest, hindsight is 20/20, but you forget all the bad times when scared people sold their assets or good times where they put too much into new assets all at once
But I'm not a financial expert.
And in 1970, if you had put $45,000 into Berkshire Hathaway, you'd have $225 MILLION, and you wound't be worrying about taxes.
However picking a point in time is cherry picking. What if you bought your gold your gold in 1979 or 1980 and sold it in 2003? You would have LOST on gold.
So, go ahead and replaciate your "winnings" TODAY. You think gold is going to increase to 200 times in the next 40 years?
What is replaciate? How can I do that?
If we bought Berkshire Hathaway in 1960, we would be broke.
No, you'd have made even more money. Buffet began buying BH in 1962.
gold = dead money
Why?
Because gold will have a surge in value ONLY when the widespread fear or actual collapse of the fiat monetary system is immanent, and that collapse is many many many years away. Everyone alive today will be long dead before it happens.
In the meantime, gold will be traded based upon traditional demand and hype cycles, which means BOTH up AND DOWN, and physical gold has a very high transaction and holding overhead.
I am sure that treasuries are a MUCH better investment: best liquidity, zero transaction and holding cost, they pay interest, and any time the financial/economic/monetary system teeters towards the edge, treasuries will surge in value.
What the gold wackos do not understand or accept is that when treasuries become worthless and stop paying interest, then the entire global social, governmental, monetary, financial, and economic system will also collapse, and you will need weapons and ammo to survive, not gold.
Guns and ammo? Who coulda knode?
This is the final straw.
I'm putting more gold on the zero interest credit card during tomorrow morning's smackdown.
Hahaha! Stupid goyim never learn. Are same as Charlie Brown before kick football. We promise not pull up ball same every Sunday night. We promise GOLD price finally go up. LOL!! This week we take GOLD under 1000. Soon be under 900. We train you silly goyim like clapping seals on big ball. You stupid goyim not see anything yet. Wait we drive food futures down low. Make food production go bankrupt. Then we buy up pennies on dollar. Make food prices soar through roof. We cause massive food holocaust in Amerika. Just like Ireland 1845-1850, and like Russia after we Bolshevik jews killed tens of millions of you stupid goyim after we killed Czar. We control markets artificially. Make you think is real. Stupid goyim kvetch. Dumber than cattle. OY VEY!!
Cheers to you Rabbi and your people! Jews, hardest working, most successful, smartest people on the planet. When it comes to competition or survival of the fittest, look to them and learn.
Heh heh. You very good shabez goy. You very well trained. You know nothing about history of my people and what we do. You only know your TV and Hollywood movies. You make rabbi very proud! Oy!!
I'm looking for Gold $860 to test the bottom.
For me the best argument in favor of gold is its ability to hold some value over thousands of years. Sure it will have ups and downs like anything else but looking back over the last few thousand years, different cultures and people from all over the globe have held it in esteem.
Please know that I am a pop culture moron without a shred of understanding of why people enjoy: TV, organized sports events or gold.
That settled, I believe I am a good observer and can overcome my personal cultural biasis to accomodate my observations of human nature.
Here is where I believe gold holds value and it has nothing to do with its elemental properties, simply that people like it, believe in it and have for a long time.
BTW I have always liked silver coins because I could afford to start collecting them when very young by mowing lawns and shoveling snow etc. By the time I made enough money to buy gold I had to start shelling out for my kids college tuition and dump money into losing businesses.
So be it!
I hate the name "GOLD BUG". I am not a bug.
I hate the name "GOLD BUG". I am not a bug.
Down $4 in super thin markets.
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Gold, like every other commodity is going to have its ups and downs. Gold at 900 is a buy. Long term its goiung up as the dollar goes down.
I love gold and I want all that I can get. I have a hard time finding any inexpensive 22 rimfire for sale. What the hell happened with 22 rimfire?
once the manufacturer finds out that people are willing to pay 6.50 a box of fifty, guess what the price never goes back down..
the government is really scared of the 22 long rifle round, it's so light weight , travels so far, is quiet, and there are so many old unregistered guns that use it..
fortunately a while back i thought i was buying a few bricks of gold and got 22 long instead, right when Obummer first got elected,
I am payin $30.00 Canadian for a box of 500 Remington .22s, which I thought is expensive...6 cents each when I can find them. . Then I rememberd paing $1.50 for a box of .22s in the 1970s...3 cents each. Six cents doesn't sound bad with inflation.
www.gunbot.net
I don't own any gold and never will. Silver, on the other hand...
And ammo. Ammo is a great investment. Never going to get cheaper, says good almost forever, and you can always use it yourself.
I'd stay away from gold for a little longer. I wouldn't expect it to rise until the Fed raises interest rates and even longer depending how fast interest rates go up.
The real travesty is that these paper players are permitted (by government) to set the price AT ALL.
Wake up North America. Late afternoon here in Taiwan and I'm awake and can see that your paper gold "price" is once again being slowly and relentlessly whittled down ~ somewhere ~ in preparation for North American market opening.
This goes on day after day.
You people really need to stop pushing gold. You've been on the wrong side the trade for at least five years. (And the wrong side of the stock market too.)
Anyone can be right about long term outcomes of markets, the real trick is be right about the market in short term increments of 2-4 years. And in that regard, as good as ZH is in laying out the long term reality, they've been wrong - BY A LOT - over the last 5 years!