This page has been archived and commenting is disabled.
Guest Post: Why You, They And — Hell — I Might Just Buy That Parabolic Move In Gold…
Submitted by Gresham's Law
Why You, They And — Hell — I Might Just Buy That Parabolic Move In Gold…
It may be just me, but it seems like majority of market participants are terrible at dealing with one of the rudiments of life as a human being; time. It is almost as if the herding man lives in constant contempt for his former self and dogmatic surety about his current convictions (whether they relate to past, present or even the future). If this hunch happens to be true, then it doesn’t take much to see the folly – for surprise surprise; as time passes the much-loved present conviction joins the realm of past regrets. So to thwart the arrogance of the gold bubble-top callers and the long-for-the-sake-of-being-long speculators here I outline why you, they and — hell — I might just buy that forthcoming parabolic move in gold.
Apologies if I sound like a broken record – but nothing about the future is obvious. However, given that the typical 21st century futureologiest has a tendency to look at the past to guide his actions – gold may be regarded as particularly perplexing. For whereas equities have never (ever) met the widespread expectation that characterises its top (i.e. a ‘permanent plateau’ of abundant delight – a cornucopia), gold has frequently met the widespread expectation that envelopes its market top; hyperinflation. Gold, widely regarded as the objectification of worriment, has no precedent of not meeting the expectation held at its market top. Unlike most other assets on the radar of the speculator, the currency price of gold has often never returned to the levels traded on the eve of the bull run.
So regardless of your current convictions about your future self, I suspect that the great question that will haunt you will be this; what if this is one of those times? Pictorially speaking; will it be this:
The gold price's ascent and descent during the 70s & 80s.
Or this:
The paper mark price of gold... still waiting for it to come back!
The man who takes the time to peruse the history books has the comfort of knowing that the expectation associated with stock market tops has never before come to pass. However with gold there is no such luxury!
The Point:
So why do I mention this? And why now?
You may have guessed the reason but nevertheless I’ll spell it out – recent price action in gold may invite premature I-told-you-so’s from the gold-skeptics:
Daily Gold Futures Chart as of 14 December 2011 - Click to enlarge. Source: FINVIZ.com
Consider the musings of the gold top callers — after a decade of popping bubbles they’ve made a note to themselves and said ‘ Aha! I know how this works now! All I have to do is call a bubble whenever the price of a financial asset rises!’. I would argue that they have no idea about the environment that characterises a bubble-like top in an asset like gold. With the usual irony that is witnessed in the speculative arenas of life; they seek signals that do not correspond to the reality that they deal with (or so I presume). As I mentioned above – the future is not obvious. One implication of this is that it is never ’easy’ as such to accurately call the top of a bubble! To call a bubble top right now really has few consequences – prices today aren’t wildly different from yesterday and all you might miss out on is opportunity. This kind of thinking may make a little sense when you’re shuffling paper titles to assets – but I would argue that it doesn’t apply so strongly to gold. Try calling a bubble when the implication could be that you lose virtually everything just by the ‘risk free’ asset; cash!
The arguments of the gold bubble callers aren’t the only ones that are contemptous towards gold – another set of peculiarities comes from the ‘long-for-the-sake-of-being long’ speculators. Some bizarre communities of investors (MMTers ahem!) really don’t believe that central bank balance sheet expansions debase currencies. But that’s not all – they nevertheless are friends (or perhaps ‘frenemies’) with the long gold trade. The reasoning goes that others foolishly believe in the fairytale that fiat currencies can be debased, therefore they buy gold and so you front-run them. While I admit that the degree to which the market discounts the debasement of fiat currencies (via the bidding up gold) can be extreme – I scarcely acknowledge the premise! Anyhow, leaving this strange mode of thinking aside for a second, the implication is that these people think that they’ll just ride the bull market to the top and then get out. As I said above: – try doing that when you would really (really!) pay for that decision.
And now let me mention the final reason why I’m posting these thoughts right now: these attitudes may have the platform to gain ground over the coming months. We may have reached an inflection point in one of the indicators that people consider to be very important when dealing with gold (note: we don’t necessarily agree 100%) — the real interest rate:
Of course the longer-term picture remains unconvincing for positive real rates on the short-end of the curve
»
- 24132 reads
- Printer-friendly version
- Send to friend
- advertisements -
Yes, as an unbalanced boat can toss back and forth for a long time. But when the telling wave or gust of wind hits, the capsize happens so fast that most are not able to jump overboard in time. See, for example,
http://en.wikipedia.org/wiki/Vasa_%28ship%29
Need to adjust that 2nd chart to value of an oz of gold to a German Jew im Berlin in DM. I think everyone of them with gold would have traded it all for passage to London a few days before they got a knock on their door.
The only problem is zero dollars are making their way to consumers.
There are shitty low balance credit cards with nose bleed interest rates.
That's a negative return. Like every other hair brained scheme.
again investing $1,000 and earning $100 is loosing $900.
Actually Joe Douchebag usually buys $1,000 worth of chinese plastic.
Losing all $1,000 earning $0.00 Blutarski. Deflationary debt spiral.
Today gold dropped below the 200-day MA for the first time since January 2009. It´s simply extremely overbought. The correction will most likely be both protracted and severe.
well let us not forget that gold crossed over on jan 4 of this year at 1388. sure we saw the 1800's but i was worried when that parabolic move came about. because as a gold and silver bug, when you see things like that you know full well a correction will come one day...........so you have eyes in the back of your head. sure it is nice to see that green but what goes up , does correct...............
It was at 800 three years ago and could very well drop back to that in the next 1-2 years. It´s trading at a huge premium to extraction cost which means that a lot of jewelry and trinkets has been melted down. This will continue to hang over this overbought market. Meanwhile the death of the dollar and fiat money remains very elusive to say the least with the price of U.S. govt. debt being 1-2% off a recent 100-year high and the dollar having its usual violent rally off a cyclical low.
Nobody is saying that you have to be at the All Inn. One poster here at ZH suggested a very simple and pretty good strategy: 50% gold and 50% cash FRNs. You lose almost NOTHING by holding cash vs. Treasuries, unless you are a trader, then good luck!
Oh, but do I wish, I had more of those cheap dollars to spend on that physical gold and silver...
With the little I own, I feel, so much richer!...
You see, it's a state of mind.
Solstice troll festival be damned.
Yonder he comes, all hail. Le Roi Soleil. Watch him shine.
Ahahahahaha.
Gee. When real estate made a little correction in 2007 no-one called it a bursting bubble. They said:
"It's catching its breath for a race to the top."
"It's a positive sign because it means it's climbing a wall of worry."
"There has never been a better time to buy."
Those are the statements you hear when you're in a bubble. Not now. Not about gold.
Dont understand the people who come on here and get all angry and emotional against gold, and don't hold gold.
If you dont hold gold and don't intend to why in the fuck do you get so emotional over gold. I get the feeling these people are worried that they don't own gold, and have to denigrate it and its holders in over the top ways to try and quiet their own anxiety. Like whistling past the cemetery.
If you are not interested in gold then why bother commenting on it in such incredibly emotional ways. Me doth think they protest too loudly.
well one thing is for sure. this year bugs have been to places never seen before. it will happen again. i have complete faith in the banking sytems of this planet to muck it up like they always do and nothing will ever be fixed. gold crossed at into 2011 at 1388 and silver at 30.67. the year is not over yet.........i would like to get my 30 percent increase this year but might have to wait a while......but it will come........
I am grinning as I read these trolls that "protest too much". Some are informed. Others are not. Some are envious of possible gains they have missed. Some are so "smart and successful" as traders (supposedly) that it galls them that gold bugs and silver savants have done well the last few years just by buying and holding.
In other words, we don't deserve our insurance. Well, sometimes KISS works when eras end.
And silver and gold are perfectly tailored for such times.
"The market ... “It will fluctuate, young man. It will fluctuate!"
People expecting one-way markets will always be disappointed.
What matters is not the price of a good in dollars but the price of a good in other goods. Gold is a good value rather than a good 'deal'.
This article is premised on hyperinflation as during the 1920s in Weimar Germany when conditions today are identical to Weimar Germany ... in the 1930s.
Gold price declined on dissatisfaction with Comex and its handling of MFG. At one time today there was a $40 spread between NYC and HK prices with a large discount to Comex gold.
The end of China 'boom' will torpedo all commodities including gold.
The crack up of European banking is stripping credit from the world economy. Credit is necessary to support any bid for gold.
American government will not and cannot confiscate privately held gold, the idea is laughable! The same govt has been trying for fifty years to confiscate people's pot, heroin, speed and coke ... with zero success! Before then, it tried to confiscate peeps' booze: hello Al Capone!
FDR ended the circulation of specie in the US without any pushback: almost every bank in the country was bankrupt/closed and people were out of food and desperate for funds. Roosevelt's ending specie circulation bailed out the US banks and restarted business, to almost everyone it was more than a fair exchange.
The troubling decline has been the drop in crude price. It costs almost $100/barrel to get new oil out of the ground. If the price drops below the lifting price there will be no more new oil. Gold is not systemically or economically important, crude oil (waste) is the center of the world's industrial economy.
Another thing to keep in mind is the 400+ nuclear time bombs around the world that need collectively Billion$ to keep from blowing up. Billion$ nobody has right now ...
*
THe words you are saying are having in them the words "young man". I am believing what you are saying might be having the truth but I am thinking that the words you are saying are being read by peoples who are old and who are having many gray hairs or having no hairs and so the words you are saying are not being for them because they will be dieing before young men who are not hearing the words you are saying and so your words are not having so much truth for them.
Roosevelt's ending specie circulation bailed out the US banks and restarted business, to almost everyone it was more than a fair exchange.
The troubling decline has been the drop in crude price. It costs almost $100/barrel to get new oil out of the ground. If the price drops below the lifting price there will be no more new oil. Gold is not systemically or economically important, crude oil (waste) is the center of the world's industrial economy.
Another thing to keep in mind is the 400+ nuclear time bombs around the world that need collectively Billion$ to keep from blowing up. Billion$ nobody has right now
***********
Good points-but you miss the fact that in deflation the price of extracting oil will also fall-so for example if the price fell to $50 and the price of extraction fell by an equal amount-it's simply a wash-same for the reactor operating costs-
As far as credit goes-of course it will continue to contract and you're right about the loss of money supply (credit) in this case-
Actual money (cash) supply is miniscule in comparison to the credit supply-which has been the main driver of GDP for years-
So what will replace the lost money (credit) supply?
Perhaps a re-pricing of gold and a lock to an increased cash supply which will allow printing the needed supply without devaluing the currency?
If gold was priced at say for eg: $100,000/oz-i believe we would have more than enough money supply and really-when you have a fixed supply "everything" must adjust to that locked supply and you are correct-prices means nothing-relative to exchanging one good or service for another and there is no such thing as too small of a money supply as long as everything is allowed to adjust to the supply-
Two notes on oil costs:
- The funds of the world are flowing to the extractors who are experiencing cost push inflation while the rest of the world deflates. Part of this has to do with 'net export' which is price-driven. High price amplifies consumption in extractor states b/c it enables the purchase of wasting goods such as autos and high-rises. Low prices don't effect consumption in extractor states while but are the consequence of deleveraging in consumer states.
- The real cost of extraction is relative difficulty in exploiting offshore and tight formations which cost 20x as much as on-land megafields.
Reactor costs are buried under borrowed-money subsidies that are vanishing under everyone's nose. Reactor decommissioning costs are greater than construction cost excluding waste storage. There is nowhere to put this waste ... on Planet Earth. #Fukushima is in the process of bankrupting Japan ... which has experienced deflation for 20 years.
As for replacing credit in a debt money system: nothing will replace it, the 'Niewe Economy' will be a lot smaller if not a lot different. If done properly, it will have a natural resource capital basis whereby money supply shrinks along with capital adequacy of natural resources and expands when natural capital is expanded.
The remark to the "young man" was made by JP Morgan sometime before he died.
As for replacing credit in a debt money system: nothing will replace it, the 'Niewe Economy' will be a lot smaller if not a lot different.
************
Why would it have to be smaller?
For eg: if you and i lived in two different countries-your hourly wage was $20/hr and mine was $1/hour-
We both stop for a beer after work-
You pay $5 and i pay 25 cents for the same beer-
How is my 25 cents any less than your $5 when my 25 cents can purchase the same amount of goods and sevices and have the same velocity as your $5?
it suddenly dawned on me the amount of available hydrocarbon fuel it would require to cool those 400+ active nuclear reactors around the world for the amount of time to see through full decommission.
that's a scary equation and we're probably cutting it really close to a full on extinction event.
There maybe some sort of Parabolic Rise in the price of Gold in the future, but for now, with gold having breached the 200 moving average, I have set our hedge fund fully short the precious metal. It looks to be the same play we had in 2008/2009 when gold tumbled 31% peak to trough. While we remain holders of gold, we are asymetrically short 5 to 1 until the markets tell us it is time to go long. That day just isn't today.
It is funny that Zero could be half right in all of this, that while the financial markets are imploding, and our hedge fund has been short starting with Citibank just after Christmas 2007, that Z is wrong on the PM.
Funny how that works sometimes. :)
http://thebeareconomy.com
Holdings in bullion-backed ETFs hit an all-time high yesterday, according to Bloomberg.
Real estate went up on the parabolic expansion of credit, now everybody is so full they can eat no more credit. Gold went up with the printing of money, or should we say the USD went down....etc
Gold simply values fiat and the degree to which the Fed/Treasurey etc corrupt cabal can manipulate it.
The fact that TPTB went to extreme lengths to trash gold should tell how effing worried they are buy it and where it will go in the future. The best recommendation for gold is the extreme lengths the corrupt ones will go to keep its fiat value down.
Seems clear that the big raise in gold was due to the debasement of our dollar by Ben the failure... and it was a great run... BUT, until the debasement is turned back on in a big way, I do not see another meaningful run...
I do see a real potential for another 2008 crash, which will hit gold very hard again. Many banks may failo... Silver is toast for now so forget it.
After that coming soon crash has played out, THEN gold may well be a screaming buy, because Ben and the ECB both may start to print money like mad... if U hear of that on ZH, then make a move... until then, I am with the shorts.
So... the Euro goes splat and hits the ground before the $US....... does anyone believe that the $US is fundamentally sound and the US can somehow manage to poay off its debt or con somebody (besides rthe Fed) to buy more to keep the roll over goin?
China and the rest of the world are still buying TANGIBLE assets... if Europe and the US are dumb nough to sell off gold to cover paper.....
I suspect the global ponzi scheme is nearing endgame.... something smells real bad with MF Global... more than meets the eye.
Skeptic, I agree; it appears that some folks are selling their PMs to meet margin calls on their paper assets...it's mind-boggling...
I remember someone here saying back during the Sept dip that there would be another substantial dip before the year eneded and to expect another when the euro crashed and the worlds flees to the US dollar and once the lemmings figure out that the US is next in line to fall on its face that will be the parabolic move in metals.
Unless we're going to end up in the streets flinging poo at eachother after the collapse for years then yes commodities will be worth more than PMs but I'm betting sooner than later civilization will fall back to what has always been considered a measure of wealth, PMs.
I only own silver because if you have an ounce of gold that say might be worth $5K how the hell are you going to buy a loaf of bread? If you take a hacksaw to it you'll be sweeping up the shavings like a coke whore finishing up an 8 ball on a three day weekend binge.
The gold is for holding one's value over time, not buying bread. If one has to "spend" his gold in the big downturn, then he has not planned well. Holding silver for transactions at the local farmer's market is the key to living well during bad times.
Oh, hell. I promised I wouldn't post/repost the same info I've posted a hundred times before. Sorry.
+++
No Rocky. You SHOULD remind everyone from time-to time that silver is for spending and gold is the bridge for carrying our wealth over to the other side. BOTH are needed if / when times get rough.
You can't stop it. It's as inevitable as the increase of entropy. The thieving is harder and faster. The payouts have to roll. The debt has to increase. The promoting adversaries have to bicker over fake cuts.
The junky will soon need another fix. Economy will get worse. Debt will increase in form of dollar. Gold will continue to rise 18%. Circle of filth.
The time to worry is when it goes double exponential.
It really doesn't matter what gold is doing. We are all getting systematically poorer. Wealth isn't measured in paper. It's in how we live. Right now America has the highest population of the suckiest sucks that ever sucked. We don't compete, we bicker. We don't work, we steal. We don't debate, we lie. We don't adhere to law, we subjugate it. We don't promote truth, we spin fallacy. We don't act, we groan. We don't respect, we backstab.
I agree.
Behind the empty facade of American optimism and technology lies a terribly broken and defeated nation of "99%" sheep and 1% wolves who prey on them.
The nation ends when the sheep die off and the wolves turn on themselves.
@ Sathington Willoughby
+ 1 Well put. Bravo.
Very Nice! One who gets it.
So I get it now, the GOLD HORDERS are holding until AFTER the SHTF Collapse of America. I can understand that, truelly I can. Here is the problem, AFTER the collapse, there will be no LEVERAGE in which to keep your gold leveraged at 1000:1 like it is now. YES, I KNOW, YOU or I can not trade it at 1000:1, but there are PLENTY who can, and DO trade at that rediculous margin level. Imagine this for a moment, if there was no longer the ability available to finance a home, what would happen to prices? Thats right 90-99% decline. It does not matter whether its GREENBACKS or some new BLUE or RED US DOLLAR. In fact a new currency, if issued say 100:1 (100USD = 1 new USD) BUT a $100,000 HOUSE will be worth $5,000 WITHOUT the ability to finance it at 10X income/yearly.
I know they can just slap up housing, and they mine gold. DUH. It doesn't cost much to mine it first of all, so that is irrelevent.
Here is the problem, AFTER the collapse, there will be no LEVERAGE in which to keep your gold leveraged at 1000:1 like it is now. YES, I KNOW, YOU or I can not trade it at 1000:1, but there are PLENTY who can, and DO trade at that rediculous margin level.
************
Prove it-
$5 actually.
now i know you're just trolling.
I hate to break it to you, but the whole point of owning gold is to eliminate leverage of any kind. Paper assets are just a promise to pay, and promises, like rules, are meant to be broken. Even a paper dollar is not backed by anything but its status as legal tender. And that’s pretty vague: you can pay taxes with it, and creditors must accept it as payment of debt. Beyond that, it's just paper.
Gold on the other hand is a natural substance. Gold was here before people existed and it will be here long after we're gone. Its unique virtue is to be perfect for use as money. People could forget about gold as money for 1000 years, and rediscover it in a heartbeat: as soon as they need a store of value not dependent on the veracity of desperate men.
No government can print it, give it value or take its value away; that's why they hate it. It makes no promises other than to remain tomorrow exactly as it is today: gold. Once you have converted paper money to gold, you are free of promises from governments, brokers, banks, insurance companies or anybody else.
Only idiots and bankers buy gold with borrowed money. Gold is money, everything else is just a promise waiting to be broken.
Much of the smart money is dumping worthless paper incl. gold and silver ETFs 'cause they see what's going on around them with the likes of MF and rehypothecation and horror stories about bullion bankster gold swaps and manipulation, reality has finally set in....and so, now they're buying strictly physical: just watch for much larger premiums in the next few days.
As Helicopter Ben would say it's "transitory"....except in this case, it REALLY is!!!
Buy physical au & ag now!
You stayed <a href="http://www.cheaplouboutinssssuks.com/">discount christian louboutin</a> in the country? You know every village have the color? The <a href="http://www.cheaplouboutinssssuks.com/Christian-Louboutin-Pumps-c78/">cheap christian louboutin pumps on sale</a> color of the country round and round, all <a href="http://www.cheaplouboutinssssuks.com/Christian-Louboutin-Ankle-Boots-c90/">christian louboutin ankle boots</a> sorts of color highlight the different season, representing <a href="http://www.cheaplouboutinssssuks.com/">cheap christian louboutin</a> the people here to change destiny journey, the color and the farmers will be hard sweat taste <a href="http://www.cheaplouboutinssssuks.com/">christian louboutin boots</a> came into your eyes Joan, stimulating your nasal, rooted in each out of his dreams of the Chinese. <a href="http://www.cheaplouboutinssssuks.com/">http://www.cheaplouboutinssssuks.com/</a>
You stayed <a href="http://www.cheaplouboutinssssuks.com/">discount christian louboutin</a> in the country? You know every village have the color? The <a href="http://www.cheaplouboutinssssuks.com/Christian-Louboutin-Pumps-c78/">cheap christian louboutin pumps on sale</a> color of the country round and round, all <a href="http://www.cheaplouboutinssssuks.com/Christian-Louboutin-Ankle-Boots-c90/">christian louboutin ankle boots</a> sorts of color highlight the different season, representing <a href="http://www.cheaplouboutinssssuks.com/">cheap christian louboutin</a> the people here to change destiny journey, the color and the farmers will be hard sweat taste <a href="http://www.cheaplouboutinssssuks.com/">christian louboutin boots</a> came into your eyes Joan, stimulating your nasal, rooted in each out of his dreams of the Chinese. <a href="http://www.cheaplouboutinssssuks.com/">http://www.cheaplouboutinssssuks.com/</a>
My take: deflation scare to liquidate commodities/get dollars into banks (before inflating it away).
Bernanke has no intention of allowing deflation. Just remember that, and you're good. Weird timing around Christmas, though. Watching assets drop is not going to get people out spending.
Before a tsunami, the tide often goes way out before coming way in. People have been killed not just by staying on the beach, but even by running out to the seabed to gather up the stranded, flopping fish.
Ideally we would all head for the high ground just ahead of the wave, clutching our baskets of free fish. But I'm too chicken for that, I'm heading inland now.
Pointless article. The first 80% relies on the idea that real interest rates are set to increase. But the justification for this is a minor tick up in the graph... :s
Gold is my anchor. Silver is my oar. Enough already.
my 2 cents on silver:
it will kiss the 24 level and then roar to $79... it's written in p&f charts