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Morgan Stanley Deconstructs The Funding Crisis At The Heart Of The Recent Gold Sell Off, And Why The Gold Surge Can Resume

Tyler Durden's picture





 

A week ago, we touched upon the likelihood that the recent gold sell-off was driven primarily due to a quirk in liquidity provisioning in which gold plays a key role via its "forward lease rates", or the Libor-GOFO differential. Specifically, in "As Negative Gold Lease Rates Collapse, The Gold Sell Off Is Likely Coming To An End" we said, "In a nutshell, negative lease rates mean one has to pay for the "privilege" of lending out one's gold as collateral - a prima facie collateral crunch. The lower the lease rate, the greater the use of gold as a source of liquidity - and since the indicator is public - it is all too easy for entities that do have liquidity to game the spread and force sell offs by those who are telegraphing they are in dire straits and will sell their gold at any price if forced, to prevent a liquidity collapse." Said otherwise, the lower lease rates drop, and they recently hit a record low for the 3M varietal, the likelier it is that gold may see substantial moves lower. Today, Morgan Stanley's Peter Richardson recaps precisely what was said here, in a note titled "Recent fall in gold prices points to bank funding costs." Granted, MS only looks at the first part of the equation - the dropping lease rates, and ignores the re-normalization in gold, aka the tightening in lease rates. Well, with the 3M forward lease rate now almost back to unchanged, it appears our speculation that the gold sell off, with spot at $1575 on the 15th, is over were correct, and gold is now $40 higher, and just below the critical 200 DMA that everyone saw as the catalyst of gold going to $0. So what does MS have to add to our analysis? Well, much more optimism for one, because not only does the bank think we are right that the collapse in negative lease rates (i,e., the flattening to practically unchanged) mean the sell off is over, but such a normalization of the gold lease market has "the makings of a renewed upward assault on the recent all-time high.... Our current gold price forecast for 2012 of US$2,200/oz remains in place under these circumstances." Qed.

The key highlight of Morgan Stanley's hypothesis of what negative gold lease rates imply for gold:

Firstly, we think negative lease rates are highlighting a sharp increase in the demand for gold as collateral for US dollar loans at a time of reduced liquidity in the traditional US dollar interbank funding market. The more negative the lease rates the higher the cost of funding using gold as security.

 

Secondly, access to this collateral on a scale indicated by the rise in GOFO can only emerge if the providers of liquidity to the leasing market are prepared to increase the stock of lent gold in circulation. This development points to the central banks, the largest custodians of above-ground stocks and the traditional providers of liquidity to the gold-leasing market. Aware of acute funding pressures in the traditional interbank market, it seems increasingly likely to us that central banks have increased the quantum of gold available for use in a  non-traditional funding market, at least until the measures to alleviate bank-funding stress in the US dollar swaps market have been  successful. The recent easing in the scale of negative gold lease rates, suggests that demand for this source of short-term funding might be easing, but has not disappeared, even after the raft of measures announced by the ECB and the earlier coordinated intervention by the six central banks.

Said otherwise: we likely have smooth sailing for now, as banks will not proceed to cannibalize each other for a bit. But keep a very close eye on on that LIBOR-GOFO spread: the second it collapses, it may be time to step away from the market.

Full Morgan Stanley note:

Recent fall in gold prices points to bank funding stress

Spot gold prices fell 6.6% to $1,602/oz in the week ending 16 December 2011, their biggest losing week since early October. We attribute some of the impetus in the selling pressure to year-end portfolio adjustments, a flight to cash as concerns over the European sovereign debt crisis mounted in the face of further ratings downgrades and a related strong safe haven rally in the US dollar (USD). However, this sharp fall continued downside price pressure evident in Q4 2011 that has resulted in a decline in prices on a quarter-to-date basisof 1.5%.

This quarterly decline has reinforced the impact of the sharp falls in gold prices registered in September 2011 after prices reached a new all-time high of US$1,951/oz on September 6. This has raised market fears that the September high and rally in early November 2011 to US$1,798/oz mark the twin peaks in the ten-year bull market for gold, and effectively mark its conclusion.

Our view is different. While recognizing the technical damage sustained in recent weeks, we do not see the bull market as having reached its ultimate peak at this time.  While seasonal and non-gold market factors have undoubtedly played an important role in the two corrective waves of selling since September 2011, the unusual phenomenon of negative gold lease rates and falling gold prices points to other factors at work in the gold market. We conclude in this report that these probably relate to bank funding stress. While this is expected to continue into 2012, recent coordinated actions by six central banks, and separate actions by the ECB, suggest that non-gold-related measures to ease access to US dollar swaps will gradually ease the downside pressure on the gold price. We expect this corrective phase will conclude when the Federal Reserve adopts a new round of quantitative easing in H1 2012, weakening the US dollar and reigniting the safe haven trade for gold that is likely to see a renewed and successful challenge to the September 2011 high.

Spot gold prices fell 6.6% to $1,602/oz in the week ending December 16, 2011, their biggest losing week since early October. We attribute some of the impetus in the selling pressure to year-end portfolio adjustments, a flight to cash as concerns over the European sovereign debt crisis mounted in the face of further ratings downgrades and a related strong safe haven rally in the USD. However, this sharp fall continued downside price pressure evident since the initial correction in early September 2011 and has resulted in a decline in prices on a quarter-to-date basis of 1.5%.

This quarterly decline has reinforced the impact of the sharp falls in gold prices registered in September 2011 after prices reached a new all-time intraday high of US$1,925.10/oz on September 6, and a closing price high of US$1,889.70/oz on August 22. As a result, this latest fall has raised market fears that the late August-early September high and recovery in early November to US$1,798/oz delineate the twin peaks in the tenyear bull market for gold, and effectively mark its conclusion.

The timing of this sell-off, in our view, is instructive. In part, this is due to the pressure of book-squaring and portfolio adjustments going into year-end. While this adjustment is likely to have affected a wide range of commodities, given gold’s strong relative and absolute performance throughout 2011, notwithstanding the falls in price since September, the ability to realise profits on the gold trade to offset losses in other commodities or asset classes would have increased the intensity of recent selling pressures, in our view. Spot gold returns for 2011 based on the differences between opening and closing prices will, at today’s price of around US$1,600/oz, be 12.5%, a return that is only bettered by Brent oil within the commodity universe that we monitor. Within the traded precious metals, gold has been the standout performer, with silver registering a negative return of -4%, platinum -20%, and palladium -22%.

The correction in gold also coincided with a commodity-wide sell-off linked to a sharp rally in the USD. On a TWI basis, the USD strengthened 2% in the week ending December 16, while Brent crude oil fell 6%, the MG Base Metals Index fell 5%, and US dollar gold prices fell 8%. This mirrors a similar picture since the peak of the gold market in late August when the TWI of the USD has rallied by 7% but gold has fallen by 15% up to the week ending December 16. Over this same period, the MG Base Metals Index has fallen 16%, but Brent crude has declined by only 5%.

Why is gold behaving as a risk asset?

The marked similarity between the wider components of the commodity complex has inevitably raised questions as to why gold has behaved in such a similar way to other commodities and other risk assets since early September. This question is even more pertinent when seen in longer-term perspective since the collapse of the Lehman Brothers investment bank in September 2008, as gold prices rose by 147.8%  between September 10, 2008, and August 22, 2011, a compound annual return of 35.3%. In short, has the safe haven commodity asset of the first three years of the financial crisis lost this status, or is this a short-term correction and consolidation in a continuing bull trend?

Technical indicators are not encouraging in this context. The sharp fall in US dollar prices in the week ending December 16 rang many alarm bells. According to Kitco Metals:

“Ever since the February gold contract spiked to a new all-time high on September 6 at $1,925.10/oz, the bearish forces have been clawing at the marketplace. That session – [on] September 6 – etched a bearish key reversal day on the daily chart, which simply means the market rallied to a new high, but then reversed intraday to close lower, near the bottom of the daily range. The market remains under the influence  of that bearish key reversal. While the September 26 spike low [sic] at $1,543/oz has held in gold market price action throughout [subsequent] months, last week's break below the widely watched 200-day moving average flashed a big red warning signal to longer-term bulls. That longer-term moving average is widely considered a proxy for the longer-term trend. The entire rally throughout 2011 has held above that key moving average, until last week. It represents an important technical breakdown and leaves the September low at $1,543/oz vulnerable to a strong test in the days ahead. If the market were to break under $1,543/oz, the next key chart support zone lies first at psychological support at $1,500/oz, but then a strong band of congestive support from the $1,475/1,482 area is seen from May through July.”

Bank funding stress might hold the key

While we recognize the force of this technical argument, we note in passing that since the fall to a closing day low of US$1,575/oz on 15 December, the market has managed to hold above the key downside support level of US$1,543/oz. Whether this recent consolidation holds long enough to become the basis for a renewed rally will, in our view, depend strongly on whether the recent acceleration in selling pressures abates because of recent monetary policy initiatives by central banks designed to alleviate bank-funding pressures.

Why are bank funding pressures and the gold price linked? Why are they now linked in a manner that has proven negative for gold prices, rather than positive, as was the case in the post-Lehman era? In our view, the answer to this question can be found in the gold leasing market and what London’s Financial Times has designated the “recollateralising of credit with gold.”

To appreciate how this recollateralising of credit with gold has developed, it is necessary to look again at the roots of European bank funding stress. Essentially, as the sovereign debt crisis has worsened, many small to medium-sized banks in Europe have experienced a rising need for cash, and particularly cash in US dollars. This was because many of these banks have borrowed US dollars in the overnight interbank market but have invested in longer-term US assets, accelerating the dangers of funding mismatches, as traditional counterparties to these loans have been withdrawing liquidity and refusing to extend loan facilities. This development has been reflected in the private market for short-term US dollar loans between banks in the London Interbank Offered Rate (LIBOR), which has risen consistently since July 25 (Exhibit 3).

As LIBOR rates kept rising, it is clear that by late November, the need for US dollar funding via the euro/USD swap market also markedly increased. In the week before the central bank intervention on November 30, the euro/USD basis swap, an instrument of the interbank market that marks the rate differential between short-term US dollar and euro loans, reached levels last seen in November 2008, indicating a severe need for dollar funding.

This persistent rise in the costs in the private market for US dollar loans as reflected in LIBOR provides the link to recent developments in the gold market, in our view. For LIBOR is also a key component of the gold lease rate, a derived value calculated by subtracting the Gold Forward Offered Rate (GOFO) from LIBOR for different maturities between one and twelve months. The London Bullion Market [LBMA] defines GOFO as the “rates at which contributors [the market-making members of the LBMA] are prepared to lend gold on a swap against US dollars”.

In the context of a severe need for US dollar funding, it is the ability to access US dollars via a swap in the gold forward market that provides the link to bank funding stress and recent developments in the gold market, in our view. As Exhibit 4 shows, notwithstanding the steady rise in LIBOR rates, GOFO rates have risen faster as the demand for borrowed gold as a means of providing collateral for short-term dollar funding has risen in line with the growing pressure on banking funding.

This rise in GOFO also dates back to the same period as the rise in LIBOR, putting downward pressure on gold lease rates. Very low or even modestly negative gold lease rates have been a feature of the gold market since 2001, when the demand for gold hedging by mining companies started to decline sharply.

However, the recent sharp move into strongly negative gold lease rates that began in late August/early September identifies an important change in the tenor of the gold market. This is not only because gold lease rates have fallen to a 22-year low, but also because the  emergence of strongly negative gold lease rates has also coincided with falling gold prices. This apparent reversal between a well-attested inversion between US dollar gold prices and lease rates further highlights the significance of recent developments in what the Financial Times has called “a little-watched corner of the gold market.”

So what are the sharp fall in gold lease rates and the attendant decline in gold prices indicating?

Firstly, we think negative lease rates are highlighting a sharp increase in the demand for gold as collateral for US dollar loans at a time of reduced liquidity in the traditional US dollar interbank funding market.

The more negative the lease rates the higher the cost of funding using gold as security. Secondly, access to this collateral on a scale indicated by the rise in GOFO can only emerge if the providers of liquidity to the leasing market are prepared to increase the stock of lent gold in circulation. This development points to the central banks, the largest custodians of above-ground stocks and the traditional providers of liquidity to the gold-leasing market. Aware of acute funding pressures in the traditional interbank market, it seems increasingly likely to us that central banks have increased the quantum of gold available for use in a non-traditional funding market, at least until the measures to alleviate bank-funding stress in the US dollar swaps market have been successful. The recent easing in the scale of negative gold lease rates, suggests that demand for this source of short-term funding might be easing, but has not disappeared, even after the raft of measures announced by the ECB and the earlier coordinated intervention by the six central banks (Exhibit 6).

Conclusion

With funding stress still evident in the European banking system, we expect gold lease rates to remain negative until the recent exceptional measures instituted by central banks start to take effect, as demand for collateral for short-term funding will remain high. We expect the provision of liquidity to this market from above-ground stockholders to also continue, providing an additional safety valve to the European banking system while providing short-term pressure to the gold market as surplus gold from these stocks is put back into circulation. While we believe this situation will persist into early 2012, in due course we expect that these pricing pressures will subside as the US dollar swap window reopens. We expect this to result in a consolidation in the gold price above the key technical downside support level of US$1,543/oz before the adoption of more stimulatory measures by central banks, and the US Federal Reserve in particular, provides the catalyst for a renewed rally. If, as we expect, the timing of this policy initiative coincides with a normalizing in the gold lease market, then the makings of a renewed upward assault on the recent all-time high will be back in place. Our current gold price forecast for 2012 of US$2,200/oz remains in place under these circumstances.

 


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Tue, 12/20/2011 - 12:15 | Link to Comment Captain Kink
Captain Kink's picture

All that glitters this holiday season...

 

Merry Christmas to all you ZH nut jobs.  I couldn't make it without each and every one of you.

Tue, 12/20/2011 - 12:25 | Link to Comment idea_hamster
idea_hamster's picture

Maybe they should dub it the "AuFO-L spread" -- it would have that counter-intuitive/ironic tag name caché

Tue, 12/20/2011 - 12:36 | Link to Comment whatsinaname
whatsinaname's picture

What will happen to Au if RP gets the GOP ticket ?

Or what will happen to it if the USD/Euro goes bust before he ascends the throne ?

 

 

 

Tue, 12/20/2011 - 12:43 | Link to Comment Troll Magnet
Troll Magnet's picture

well, thanks to our wonderful bankers, i picked up another 100 oz JM bar at what i consider to be a fair price and am patiently setting more cash aside to pick up a truckload when/if they *really* plunge.  more sale please!

Tue, 12/20/2011 - 12:54 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Anyone looking for a better explanation than the MS nonsense re-printed above could start here:

http://www.bullionbullscanada.com/index.php?option=com_content&view=arti...

Tue, 12/20/2011 - 17:34 | Link to Comment SAT 800
SAT 800's picture

Your reference points to a page of hopeless, naive, babbling. The authors know nothing about the futures or forwards markets and the wild-eyed arm waving conspiratorial BS marks you as a non-student of the real world.

Tue, 12/20/2011 - 13:20 | Link to Comment He_Who Carried ...
He_Who Carried The Sun's picture

...and gold is now $40 higher, and just below the critical 200 DMA that everyone saw as the catalyst of gold going to $0.

Nono, Mr TD, not to 0 but to 1300. There will be more trouble and GLD will be higher for sure. Is it going to reach the 1950 area again? Not this year, you know... ;-) Next year?
Well, the fundamental reasons for the last sell-off have not changed. Should additional capital requirements put many financial businesses under strain (again), Gold will drop.

How likely is that?

I am off to the island as of tomorrow. We've had some fun encounters overhere at ZH. Merry x-mas everyone!

Tue, 12/20/2011 - 14:05 | Link to Comment Big Corked Boots
Big Corked Boots's picture

"I am off to the island as of tomorrow."

Long Island sucks this time of year. But then, it sucks just about every time of the year.

Tue, 12/20/2011 - 14:16 | Link to Comment He_Who Carried ...
He_Who Carried The Sun's picture

I am going a tad further south though...?! Have fun!

Tue, 12/20/2011 - 13:21 | Link to Comment I think I need ...
I think I need to buy a gun's picture

im so tired of all this shit the news feed is really slow with yet another 2000 dollar gold prediction. Its going to minimum of 10k overnight sometime soon,,,,,the gld chart broke its over its just when this weekend new years eve when?????????

Tue, 12/20/2011 - 13:43 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Cachet is the right spelling  mon cher idea_hamster.

2 questions:

1. Is the recent strength of the dollar in Gold terms fundamentally justified given fiscal situation of the US?

2. Are we at a point of leverage which is tantamount to Kondratieff "spring", i.e. have we purged enough debt to make paper expansioncoming from a sound low level ofdebt?

Ok, then use funding squeeze to increase your position.

 

 

 

Tue, 12/20/2011 - 14:19 | Link to Comment idea_hamster
idea_hamster's picture

Merci beacoup!  Mon orthographe est vraiment affreux en englais et francais tout les deux, n'est ce pas?

Tue, 12/20/2011 - 18:12 | Link to Comment steve from virginia
steve from virginia's picture

1. Is the recent strength of the dollar in Gold terms fundamentally justified given fiscal situation of the US?

Yes, Saudi Arabia likes our dollars and continues to accept them. As more crude oil can be had for less dollars, the dollars are more valuable. What the government has to say about this is irrelevant.

2. Are we at a point of leverage which is tantamount to Kondratieff "spring", i.e. have we purged enough debt to make paper expansioncoming from a sound low level ofdebt?

Contrary to the bleatings of Republicans, the US government has unlimited borrowing power and can monetize its debt service practically forever. The decision to limit debt is political, it has nothing to do with economics.

Also:

 - the decoupling that matters would be gold from crude or other commodities as well as gold decoupling from the 'inflation' rationalization.

The idea of VALUE goes beyond a mechanical quantity relationship of some goods exchanged for others. Dollar worth in particular hinges upon what it buys, what it is proxy for rather than how many are in circulation. As the dollar's worth increases relative to petroleum, it will become a proxy for crude rather than the (falling worthless) other goods it can now purchase.

Hollywood, hookers, machine guns, coke, Congressmen, etc.

When the dollar can only buy crude or is held in order to obtain crude or its product, the dollar will have little VALUE even as it will be WORTH a lot in exchange for the crude. This will be so unless there is some other use for crude besides the current waste for no-remunerative return.

Note VALUE as opposed to WORTH. They are not the same.

Gold is an asset with value, this matters not whether you can get a 'good deal' on it or not.

 

Tue, 12/20/2011 - 12:35 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Merry Christmas to you too Captain!

Tue, 12/20/2011 - 12:14 | Link to Comment vast-dom
vast-dom's picture

FUCK YOU MS! Gold would have been well over $2k if it weren't for you et. al.

Tue, 12/20/2011 - 12:22 | Link to Comment Turd Ferguson
Turd Ferguson's picture


Importantly, the slide stopped almost right at the 3-year trendline from the lows of 2008. Price has fallen to this line 6 or 7 times in the last 3 years and has recovered each time. It will do so again now.

Clearing 1645 will confirm that the bottom of the manufactured, September-December "correction" is in. Paper gold will then rally through Q1 with a 2012 price target of $2300.

Tue, 12/20/2011 - 12:48 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ $2300

I have litle doubt that gold will do more-or-less what it has continued to do in the short-term ahead: march higher with its usual ups and downs.  Yeah, maybe to $2300.  Still a buy at $2300, but of course a better buy now at $1600 and change.

And then one day, real fast, all the gold will be GONE!  The FOFOA moment.

Tue, 12/20/2011 - 17:38 | Link to Comment SAT 800
SAT 800's picture

There are no "manufactured corrections"; the prices are the result of the operation of the "hive mind"; it's a free market. "Clearing $1645" neither confirms nor fails to confirm anything. Long Silver from $29.35 basis March. It's easy to be a Guru in a long bull market; especially writing for the public.

Tue, 12/20/2011 - 22:30 | Link to Comment StychoKiller
StychoKiller's picture

I can think of $14 (make that 15!) Trillion reasons why Au/Ag are undervalued at this point.

Tue, 12/20/2011 - 12:24 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

We just bought more PMs on this dip. I love the fact that they continue to take our soon-to-be-worth-less-and-less fiat in exchange for even more Precious Metals. Just picked up our latest shipment at the PO.

It is a good day when I can fondle new-to-me PMs.

Tue, 12/20/2011 - 12:26 | Link to Comment Boston
Boston's picture

Yup. Our rolls of Maples---bought last week at 1,590---arrive in a couple of days. Just in time for the holidays!

Tue, 12/20/2011 - 12:33 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Call me suspicious, but they are not "mine" until they in safely in my grubby paws. Get(ting) physical baby.

http://www.youtube.com/watch?v=vWz9VN40nCA

Tue, 12/20/2011 - 12:36 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

The Bearing's household picked up little more yellow after rolling back in from Peru.

Tue, 12/20/2011 - 12:39 | Link to Comment Dagny Taggart
Dagny Taggart's picture

Nothing says festive holidays like sparkling PMs. Welcome back DoChen.

Tue, 12/20/2011 - 12:44 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Thanks Dagny!  M.C. (note, I was careful NOT to write M.S...) to you and yours!

Tue, 12/20/2011 - 12:42 | Link to Comment Turd Ferguson
Tue, 12/20/2011 - 12:48 | Link to Comment yabyum
yabyum's picture

Turd, It was nothing but larceny. Why are these bastards not in jail?

Tue, 12/20/2011 - 12:52 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Nice to see your smiling face in ZH Turd. Getting ready to post a two part series on the Golden End Game. Just one person's (mine) point of view, not gospel.

Anyone who states as 'fact' their view on how it (Gold and fiat) will all play out is even crazier than me.

Tue, 12/20/2011 - 12:56 | Link to Comment Turd Ferguson
Turd Ferguson's picture

I hear ya, CD. All we can say for sure is that the current "system" is unraveling. What happens next is anyone's guess.

Tue, 12/20/2011 - 13:08 | Link to Comment San Diego Gold Bug
San Diego Gold Bug's picture

TF,  Keep up the great work!  I think $2,200 will be acheived with a much higher spike possible in 2012 and cetainly 2013.  Hopefully they won't put all of is in the FEMA camp in Kansas (NDAA) between now and then.  I saw this on your site last week, comparegoldprices.com, it has proven to be a good resource.  It must be one of your readers, hat tip to them.

Merry Christmas

Tue, 12/20/2011 - 14:22 | Link to Comment Handyman
Handyman's picture

My last order of Ag Maples and Grizzlies are still not here. They said a week or 2 at most. Tomorrow will be 3. They didn’t have to ship it very far.

I’ve got one more shot left in the powder keg and I agree with many of you that there is one more big dip but if it is accompanied by even minor chaos it will be hard to get it out of the bank let alone turn it into physical PM. I'm thinking I'll pull it now and keep the cash on hand. Then, play the situation as it rolls out. Cash may be more of a neccesity in the short term.

Tue, 12/20/2011 - 12:21 | Link to Comment UnderDeGun
UnderDeGun's picture

Ok, is this the "baited hook" before gold takes the "dive" that is expected on the big flight to safety that's coming when the Euro tanks?

Tue, 12/20/2011 - 12:54 | Link to Comment Smiddywesson
Smiddywesson's picture

Yes.  Gold is priced by the system.  Until the system is swept away, or until the banksters step in and change the system, gold will sell off with everything else.  In fact, knowing how fun loving the banksters are, they will use up their remaining margin hike and dirty tricks to pick up bargains just before the end.  There is no way to time this, so I gradually buy but I still save some purchasing power for the later stages where bargains will be available, until, without warning, they are not.

Tue, 12/20/2011 - 13:23 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Another + 1

Slow accumulation of gold is what I have been doing for decades.  Buy a little more, then buy a little more as money comes in.  That has worked very well for me.  And it will continue (most likely) to work out very well for me in the future as well.

Until it doesn't: no more gold!

Tue, 12/20/2011 - 12:19 | Link to Comment tony bonn
tony bonn's picture

it is articles such as this when i feel like i am getting a true education.....

of course ms is disengenuous when it does not disclose that it is part and parcel of the government sanctioned gold manipulation cartel but i am sure we will see such an article forthcoming...otherwise go to gata.org

 

Tue, 12/20/2011 - 12:56 | Link to Comment Smiddywesson
Smiddywesson's picture

Good point, when the conspirators point out the existence of the vehicle they use to suppress gold prices, we can all bet it will be used for a head fake in the future.  Maybe we will see negative gold lease rates used to shake us out in the future.

Tue, 12/20/2011 - 12:21 | Link to Comment Tinsu
Tinsu's picture

Sounds like time for "bubble" to meet "pin"

Tue, 12/20/2011 - 12:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Live blogging from the Kim Jong Il wake and family funeral....

Gold is the only way to avoid imploding buying power around the world. Dilutional currency expansions, balance sheet expansions to accomodate still rising debt growth will only kill buying power half as much as deflating asset values and near zero interest rates. 

 

Tue, 12/20/2011 - 12:29 | Link to Comment Turd Ferguson
Turd Ferguson's picture

dupe comment

Tue, 12/20/2011 - 12:28 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 "FUCK YOU MS!...."

No, thank MS.   If it was well over $2k right now you wouldn't have been able to buy it at $1,575 which then you could conceivably sell for well over $2k.

Sometimes your long-term enemy is your temporary friend even while they're screwing you.    Look at it as PM Stockholm Syndrome.

 

 

Tue, 12/20/2011 - 12:42 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 

Yes.  If they give me more time to buy more physical, they are doing me a favor, as well as all of us who keep buying.  You can think of it as:

"Merry Christmas, from your friends at Morgan Stanley"

Tue, 12/20/2011 - 12:23 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'The London Bullion Market [LBMA] defines GOFO as the “rates at which contributors [the market-making members of the LBMA] are prepared to lend gold on a swap against US dollars”.'

Market-making? You don't say...

Tue, 12/20/2011 - 12:26 | Link to Comment mrdenis
mrdenis's picture

Buy gold in Canada bring it to the US and sell if for profit ..because it will weigh more ....canada has a lower gravity pull ...http://news.nationalgeographic.com/news/2007/05/070511-weird-gravity.htm...

 

Tue, 12/20/2011 - 12:27 | Link to Comment Mercury
Mercury's picture

Gravity arb!

Tue, 12/20/2011 - 13:35 | Link to Comment FeralSerf
FeralSerf's picture

Or in other words, Maples are a better deal than Eagles because they're slightly heavier?

Tue, 12/20/2011 - 12:26 | Link to Comment Bullwinkle Moose
Bullwinkle Moose's picture

Demand physical delivery. Accept nothing else. Paper gold will be just as worthless as paper money.

Tue, 12/20/2011 - 13:04 | Link to Comment BoNeSxxx
BoNeSxxx's picture

This is a true statement and one most here are well aware of.

Tyler's outstanding work on hypothecation, re-hypothcation, re-re-hypothication and re-re-re-hypothecation has been nothing short of stellar.  MF Global was the canary in the proverbial coal mine with respect to paper carry risk.

That said, I'd be curious to know from some of the vets here when it will be 'game over' for the likes of GLD.

It seems to me that for the time being it is still a viable way to play the gold market.  An orderly rise to $2,000 doesn't NECESSARILY preclude a corresponding rise in GLD.

The real risk doesn't set in until the great unwashed masses (or a sovereign or a giant bank) demands physical delivery and the scramble to discover ownership forces the issue into a real CONfidence problem.

Do we have a timeframe on this?  Early warning sign(s)?  Or is the concensus that we passed the tipping point and it could happen any day?

Inquiring minds want to know :-)

Tue, 12/20/2011 - 13:29 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

It could happen very fast!  The best thing I can offer up is to watch (even if just a few minutes) the gold market every day.  The 24hgold.com / eBay widget.  Check comments at ZH and pmbug.com.  Call your coin shop (or whomever you buy your gold from) frequently.  <-- that is yet another reason to buy from your local coin shop, you get an information source...

And keep accumulating, even if slow.  At the end, it's all about the ounces!

FOFOA once in an email to me said that the Freegold process could happen tomorrow, or years from now.  He could not say for sure (who can?).   His guess was a year or two.  Seems reasonable to me.

Tue, 12/20/2011 - 14:14 | Link to Comment therearetoomany...
therearetoomanyidiots's picture

Hard gold up 23 and change as of this moment.   Bouncing off support?

 

Re: FOFOA - Funny, I knew a guy in the late 80s that was hording gold, guns and cash, probably before reagan policies kicked in.  

 

That said, I am doing so now, guns, ammo and PMs.   Methinks this is different times...

 

Finally, thx for the advice on the local coin dealer. 

Tue, 12/20/2011 - 14:45 | Link to Comment Catch-22
Catch-22's picture

GLD was my main vehicle for trading (cash flow not investing). Very liquid, the right amount of volatility, still responded reasonably well to technicals despite central planning interventions and based on physical (we thought) which provided the fundamental story.

 I’m afraid I can’t argue with Tyler… You know if that thing goes, it’s going to be after hours and after the great connected ones have left. Looks like it could be another MFG “all or nothing” kind of a deal, with massive amount of casualties.

Since I’m counting on small percentage gains, I must compensate with large amounts on trades to eek out a living. If I woke up one morning and they pulled a “Celente” on me, it would hurt. It would really hurt.

Risk/reward management, I’m forced to join the crowd who saw their vehicle disappear or destroyed, to the sidelines and wait for a major crisis to test those vehicles… 

 

Until then, enjoy the Holydays.

 

Tue, 12/20/2011 - 23:09 | Link to Comment StychoKiller
StychoKiller's picture

I would suggest that you do what the big boyz do:  Line out all the verbage in your trading acct contract that allows them to steal yer FRNs, then sign it.  If necessary close out the current acct and open a new one.  If they don't agree to yer line outs, that should tell you something as well.

Tue, 12/20/2011 - 12:28 | Link to Comment Turd Ferguson
Turd Ferguson's picture


"So what are the sharp fall in gold lease rates and the attendant decline in gold prices indicating?

Firstly, we think negative lease rates are highlighting a sharp increase in the demand for gold as collateral for US dollar loans at a time of reduced liquidity in the traditional US dollar interbank funding market."

Yah, whatever. This is nothing but bullshit propoganda. Can you use this reasoning to explain the dramatic beatdown in September which followed a similar decline in lease rates?

The fucking central banks loan gold to the bullion banks who, at the central banks behest, sell it into the market with the intent painting the tape to flip the algos into sell mode, thereby creating a waterfall decline. After the massive selloff, the banks re-buy the gold by covering their shorts and return the leased gold to the central bank.

Tue, 12/20/2011 - 12:34 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Works like a charm. There is no way to deny that by owning metal you are fighting every CB in the world. Victory can only come by forcing them to institutionalize it or going around them altogether. The latter is mo likely if you ask me, for now. There is little chance that they give up this scheme after having it work so well for so long.

Tue, 12/20/2011 - 12:51 | Link to Comment XitSam
XitSam's picture

I may be wrong here, but negative lease rates do not indicate a rise in the demand for gold. They do demonstrate a need for dollars. Gold (and other things) is the collateral being put up to get dollars.  If there were increased demand for gold, wouldn't the lease rates be positive?

Tue, 12/20/2011 - 12:29 | Link to Comment The Axe
The Axe's picture

Does it trouble everyone or anyone that Morgan now joins UBS, Goldman and others including Jimmy Cramer with a bullish stance on Gold.. I am not short, but my bias is to short gold on up days like today.

Tue, 12/20/2011 - 12:32 | Link to Comment Tyler Durden
Tyler Durden's picture

Because all the banks are pushing for, and will get, QE.

Tue, 12/20/2011 - 12:37 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

QE from whom? The ECB is in limbo as Bb & Goldman are in a struggle for supremacy. I'll just assume you mean the Fed for safety reasons...

Tue, 12/20/2011 - 13:03 | Link to Comment jekyll island
jekyll island's picture

Probably the Fed, but who really knows?  QE is the only tool CBs have to stop bank runs, even more so now with the silent electronic runs that can be created with a few keystrokes.  Banks are in trouble, they expect QE and they will get it.  It is a cartel after all, isn't it?  

Tue, 12/20/2011 - 13:42 | Link to Comment Ahmeexnal
Ahmeexnal's picture

Yes, the ECB will eventually QE to infinity.

But the real issue here is the IMF will start QE with it's SDRs.

Remember IMF is offlimits from any country's laws.  Maybe it's time someone took a baseball bat and a few minutes with DSK and make the sad fuck start singing.

Tue, 12/20/2011 - 13:59 | Link to Comment Captain Kink
Captain Kink's picture

QE is happening right now! It never stopped and will continue in Japan, UK, EU, and US!  It is current and ongoing! They cannot stop or the system implodes now. THere is no choice if you are TPTB.

Tue, 12/20/2011 - 18:40 | Link to Comment davepowers
davepowers's picture

The FED gave us $31 bn in pure QE just last week in the form of MBS purchases paid for via typing up bank reserves.

Tue, 12/20/2011 - 12:39 | Link to Comment Cognitive Dissonance
Tue, 12/20/2011 - 12:52 | Link to Comment The Axe
The Axe's picture

If your right, and QE comes, gold will rock.  China will continue to slow, The ECB and US Congress seem reluctant to print. I worry about European sovereigns hitting the bid with some size. My charts, make me sense downward pressure..not up. But, you have been spot on with GOLD...I like the other side of this trade...seems crowded with longs...

Tue, 12/20/2011 - 13:05 | Link to Comment Smiddywesson
Smiddywesson's picture

My guess is that when central banks have enough gold in their vaults to do business under the new system, gold will be revalued under that system and fiat will be devalued.  THEN you will get real printing.  The printing up to this point wasn't intended to fix anything but merely to kick the can.  When the real printing starts, the intent will be to debase the currency and fix this mess we are in.  That's going to make all previous QE look anemic. 

Until the central banks have enough gold to make their move, all printing will be restrained. 

Tue, 12/20/2011 - 13:30 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Then we still have time to buy more.  I recommend that everyone do so as income permits.  You do not have to be at the All Inn.

Tue, 12/20/2011 - 13:25 | Link to Comment spekulatn
spekulatn's picture

F*** the banks!!  ;)

 

Looking forward to the MBIA squeeeeeeze.

Tue, 12/20/2011 - 12:31 | Link to Comment BurningFuld
BurningFuld's picture

Why only question is: "What is Goldman recommending?" Whatever it is..DO THE OPPOSITE!

Tue, 12/20/2011 - 12:53 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

USUALLY works.  The exceptions are what they depend on to maintain some believeability among their clients.  Once in a while they make a good call for their clients / or people who listen: Molycorp (MCP).  GS sold their chunk (IIRC) at the IPO price of $14 and it went much higher although it has backed off to the upper $20s now.

Unless of course GS made a MISTAKE and did not read the MCP story right...

Tue, 12/20/2011 - 13:57 | Link to Comment Freddie
Freddie's picture

Some AH on Seeking Alpha was saying GS is the smartest investment bank...blah blah.  IF those evil fKKKs did not control govts they would go out of business.  Their "investing prowess" is awful. They are the Madoff of investment banks.

Tue, 12/20/2011 - 12:31 | Link to Comment junkyardjack
junkyardjack's picture

Market is going to need all the capital it can get to keep BAC over $5

Tue, 12/20/2011 - 12:37 | Link to Comment mayhem_korner
mayhem_korner's picture

Market is going to need all the capital it can get to keep BAC over $5

 

"Capital"?  What's that?  You mean trailer trucks of digi-bux?

Tue, 12/20/2011 - 13:48 | Link to Comment FeralSerf
FeralSerf's picture

Yep, it's no more an increase of "capital" than a 2 for 1 share split is.

Tue, 12/20/2011 - 12:32 | Link to Comment vegas
vegas's picture

Here is my research report.

Governments continue to print fiat like no tomorrow. Every asset class will go higher reflecting this. Trillions today, and more trillions tomorrow. Outside of a short-term short trade for quick profit, why would anybody sell physical into this shitstorm? And they pay these guys how much? Thank you, and send donations.

 

http://vegasxau.blogspot.com

Tue, 12/20/2011 - 12:34 | Link to Comment mayhem_korner
mayhem_korner's picture

Why is gold behaving as a risk asset?

 

Because the bankster complex wants it to look that way and deflect any thought that gold could be real money (while the CBs accumulate bullion on the drops).  Just look at the timing of some of the margin calls to pull PMs down with equities. 

Tue, 12/20/2011 - 13:09 | Link to Comment Smiddywesson
Smiddywesson's picture

Yes, and that is why we are going to see lower PM prices before this is all over, the Evil Empire will not stay their hand when equities fall, they will drive down pms with equities.

Tue, 12/20/2011 - 12:36 | Link to Comment PulauHantu29
PulauHantu29's picture

Same thing happened in 2008. slv and gld dropped only to double in price (where slv had more then 400% rise).

Hard assets are the place to be as long as you have a good cash cushion my broker tells me.

Tue, 12/20/2011 - 12:37 | Link to Comment Josh Randall
Josh Randall's picture

The lies are swirling around like Liesman's stomach after trip number 8 at the Shoney's buffet

Tue, 12/20/2011 - 12:38 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I don't care what MS has to say about gold.  I just BUY it when I have the fiats.  I don't trust any of them, so I just stack, whatever the price is.

Tue, 12/20/2011 - 13:06 | Link to Comment jekyll island
jekyll island's picture

You bring up a good point.  Nice technical analysis in this article which, although educational, can be summarized as:  BTFD.  There, I saved you 6,000 words.  

Tue, 12/20/2011 - 12:40 | Link to Comment topcallingtroll
topcallingtroll's picture

Doesnt it bother anyone that all the big financial firms are touting gold except one?

They also pushed housing, tech stocks, and oil at the peak.

I have to go against the consensus that germans will print

Tue, 12/20/2011 - 13:16 | Link to Comment Smiddywesson
Smiddywesson's picture

Oh they will print.  You can bet your life on that because it's the only way to fix the system.  It's just they won't print until they are ready to revalue gold and devalue fiat.  In other words, central banks will all print together and they will all print in earnest, all over the world, all at the same time.  Any printing up to this point is the absolute minimum to kick the can.

So you are right, they won't print a significant amount until everyone else is ready to push the reset button on the system.

Tue, 12/20/2011 - 13:00 | Link to Comment pine_marten
pine_marten's picture

So what does the "market" have look like after the dust settles in order to convert ones gold into tangible assets or wealth?  I have not been in a position to set aside PM's but try as I might, I have a hard time envisioning a triumphant end game where one is saved in any real sense by having a hoard of PM.  Don't take this post the wrong way - I wish I had put up a sizeable amount and I'm slightly envious of those of you who have.

 

Tue, 12/20/2011 - 13:23 | Link to Comment Smiddywesson
Smiddywesson's picture

If there's a collapse barter will take over.  Later, people will accept small silver coins, because the risk of mispricing one is small.  You can forget cashing in your gold, nobody will know what it is worth at first.  PMs will always be useful, but as time progresses their true value will be known and that is when anyone with real money will be very, very wealthy because all other assets will fall in price relative to PMs.  Post collapse stocks lay on the floor sucking their thumbs.

If there is no collapse but the central bankers step in to devalue all fiat and revaluate gold, then PMs will be instantly available as money, and will be worth whatever the banksters say they are worth.  Inasmuch as the banksters have been stacking gold, and they have a lot of liabilities to offset, my guess is the price will be pushed to an incredible, previously unthinkable level.  Post reset stocks have their two best years ever.

Tue, 12/20/2011 - 12:55 | Link to Comment 905ozs
905ozs's picture

Err...Rothschild own the gold price (&silver) for 200yrs+, what's new?

"things" will get slightly back to normal once these evil creatures are tried & executed...a hopeless hope I guess

Tue, 12/20/2011 - 18:28 | Link to Comment Silver Pullet
Silver Pullet's picture

How about just executed?

Tue, 12/20/2011 - 12:56 | Link to Comment jomama
jomama's picture

is this an explanation for the paper market, the physical market, or both?  i loathe collusion between the two.

Tue, 12/20/2011 - 13:02 | Link to Comment the grateful un...
the grateful unemployed's picture

why not just buy the Industrials they're outperforming vs GLD

Tue, 12/20/2011 - 13:37 | Link to Comment tom
tom's picture

Interesting, but I don't believe these guys or alphaville understand how the Gofo market works. I'm no expert either, but there's some obvious mistakes.

Above all, there's no such thing as a "negative lease rate". A so-called "negative lease rate" is a negative spread of Libor to Gofo. The notion is that lower Libor (=unsecured) rates than Gofo (=gold-collateralised) rates implies that owners of gold are paying to lend out their gold. That's a misunderstanding and mistake.

Owners do pay to store their gold: a stable rate that tells little about financial conditions.

The Gofo rate is the rate that gold owners charge to lend out their gold (which means the borrower can do whatever he wants with it, including sell it, so long as he delivers x amount of gold on day y).

The lease rate is a rate that represents the amount of interest the lendor forewent because of the benefit of the gold collateral, versus a hypothetical unsecured loan. I believe in some types of contracts the lease rate is a contractual rate, but usually it's only an implied difference versus a hypthetical unsecured loan.

Lease rates are in fact always positive. However, lease rates are not publicly reported anywhere, even when they're contractual. So a faulty, misguided practice has developed to estimate lease rates by subtracting Gofo rates from Libor rates. This method is guaranteed to give you a very wrong answer. The fact that the Libor-Gofo spread tells you that lease rates are negative is irrefutable proof that the Libor-Gofo spread method of estimating lease rates doesn't work.

 

Tue, 12/20/2011 - 13:58 | Link to Comment OliverTwist
OliverTwist's picture

The notion is that lower Libor (=unsecured) rates than Gofo (=gold-collateralised) rates implies that owners of gold are paying to lend out their gold. That's a misunderstanding and mistake.

Finally! Great comment TOM! I had tears in my eyes reading this! I don't know why but this "banks are paying to lend out gold" shit is hard to get out of the minds of a lot of goldbugs! Please people read and think for yourself and do not just repeat what you heard from somebody! Actually what is happening that owners of gold are asking MORE to lend out their gold. And where you have to look is GOFO (gold forward rate) which was RISING and rising faster than LIBOR. Don't let the other definiton of lease rate which is LIBOR-GOFO mislead you.

And again: NOBODY IS PAYING YOU IF YOU BORROW GOLD!!!

Oliver

Tue, 12/20/2011 - 13:59 | Link to Comment BalanceOrBust
BalanceOrBust's picture

I believe Tom and Oliver have it right.  What this tells us is that the gold that people are willing to freely lend (to be sold into the market by others) has been lent (and presumably sold).

The implications for the short term future for gold prices remains the same as the situation has created the possibility for a squeeze. 

 

As we head into the low volume holiday weeks, this effect, coupled to bottoming treasury rates, could lead to a very large squeeze upwards on gold.

Tue, 12/20/2011 - 15:00 | Link to Comment OliverTwist
OliverTwist's picture

Maybe it can also mean that CB are more successful in easing paper money borrowing/lending pressure (LIBOR) than gold borrowing/lending pressure (GOFO). Which is logical because they can control paper money better that phisical gold.

I'm just speculating.

Tue, 12/20/2011 - 13:59 | Link to Comment BalanceOrBust
BalanceOrBust's picture

I believe Tom and Oliver have it right.  What this tells us is that the gold that people are willing to freely lend (to be sold into the market by others) has been lent (and presumably sold).

The implications for the short term future for gold prices remains the same as the situation has created the possibility for a squeeze. 

 

As we head into the low volume holiday weeks, this effect, coupled to bottoming treasury rates, could lead to a very large squeeze upwards on gold.

Tue, 12/20/2011 - 13:59 | Link to Comment BalanceOrBust
BalanceOrBust's picture

I believe Tom and Oliver have it right.  What this tells us is that the gold that people are willing to freely lend (to be sold into the market by others) has been lent (and presumably sold).

The implications for the short term future for gold prices remains the same as the situation has created the possibility for a squeeze. 

 

As we head into the low volume holiday weeks, this effect, coupled to bottoming treasury rates, could lead to a very large squeeze upwards on gold.

Tue, 12/20/2011 - 14:21 | Link to Comment tom
tom's picture

Thanks. I'm not doing a very good job of explaining this. Maybe somebody will show up on here who really knows the ins and outs of the Gofo market and tear me to shreds.

Tue, 12/20/2011 - 14:51 | Link to Comment OliverTwist
OliverTwist's picture

Don't worry Tom! I know what you mean. Me too, I'm not an expert and can not claim that I've understood everything about the gold market. Aditionally my mothertongue is not english so sometimes it is really hard to do research for me.

It is tipical for intelligent people to be modest and fear to make mistakes but I think you should step up and speak to something you think you understood and try to explain it to others to help them to understand better.

And if somebody will show up and shreds us, so be it! It will mean that we will have an even better understanding of this topic. It is never a shame to learn! It is ridiculous to pretend to know everything better and to ignore critics.

Keep up your comments!

Oliver

Tue, 12/20/2011 - 14:56 | Link to Comment tom
tom's picture

Here's an example of a common transaction which might help to explain:

Bank A lends gold to Bank B at Rate X.

Bank B puts up cash collateral to Bank A, which pays interest on that cash at Rate Y.

We'll define a Rate Z as equal to Rate Y - Rate X. This is the net rate that Bank A pays to Bank B to borrow cash against Bank A's gold collateral.

Rate X is the gold lease rate. Rate Y is the unsecured rate. Rate Z is the Gofo rate. The only publicly reported rate is the Gofo rate. Usually only Rate Z, Gofo, is contractual, whereas Rate X and Rate Y are merely the theoretical components of Rate Z.

As Gofo rates were spiking recently, misguided analysts and journalists who wrongly assume that Rate Y is equal to the Libor rate, wrongly concluded that Rate Z's ascent could only be explained by Rate X turning negative.

In reality, the rate that Bank A pays to Bank B on Bank B's cash collateral (Rate Y) depends on Bank A's creditability and is not equal to Libor (because Libor is self-reported aka fudged and only highly creditable banks are included in the Libor pool). In reality, the ascent of Rate Z (Gofo rates) is explained by a spiking Rate Y, not by a declining Rate X.

In other words, the rise of Gofo rates has to do with the rising desperation for cash and weakening perceived creditability of the banks that are lending out gold, not with any willingness by anybody to pay anybody else to borrow their gold.

Tue, 12/20/2011 - 15:30 | Link to Comment OliverTwist
OliverTwist's picture

Actually I must say you are quite good at explaining things. I had to read it several times and even draw it on a sheet of paper but it makes sense!

Compliments, this is one of the best comments I've ever read on ZH! (and I've been reading it for a year or so)

I agree with you:

In other words, the rise of Gofo rates has to do with the rising desperation for cash and weakening perceived creditability of the banks...

Please ZH-ers read the comments of Tom! And think about it! It is not always and everything Evil Epire, banksters and Santa and all the other easy to grasp concepts!

Thank you again Tom for sharing with us your knowledge!

Oliver

Tue, 12/20/2011 - 18:45 | Link to Comment davepowers
davepowers's picture

thanks guys

Tue, 12/20/2011 - 13:40 | Link to Comment SDRII
SDRII's picture

Financials are to the SPX what the Yen is to the DXY. Gold is the sword of Damocles'

Tue, 12/20/2011 - 13:56 | Link to Comment Conax
Conax's picture

So many gold bugs around here.. I must say-

 

Alms?  Alms for the poor? Alms?

1/10 AGE? 1/10 AGE for the po'?

C'mon you stingy gold bugs- let's get with the redistribution program on ZH, gimme somethin'..

 

(Merry Christmas, ya'll! :)

Tue, 12/20/2011 - 15:57 | Link to Comment Alcuin Bramerton
Alcuin Bramerton's picture

Still unrecognised by most Western-based international market traders, but well-understood out East, is the significant fact that around eighty five percent of the total global gold inventory is held off-market in Asia. Soon this gold is going to be brought on-market through the China South Rare and Precious Metal Exchange.

 

Various figures are cited in connection with the potential value of this 85% gold injection. The lowest valuation is $371 trillion. The gold is held in depositories throughout Asia reported to involve between 125 and 172 separate locations. Among the largest are said to be those in Taiwan, Malaysia, Thailand and the Philippines.

 

Gold's price volatility in the Western rigged markets may be influenced by élite advanced knowledge of the planned commodity dilution.

Wed, 12/21/2011 - 08:30 | Link to Comment DanDaley
DanDaley's picture

Really?  What about this from Wikipedia: 

"It has been estimated that all the gold mined by the end of 2009 totaled 165,000 tonnes.[2] At a price of US$1900/oz., reached in September 2011, one ton of gold has a value of approximately US$60.8 million. The total value of all gold ever mined would exceed US$9.2 trillion at that valuation."

Tue, 12/20/2011 - 16:12 | Link to Comment roccman
roccman's picture

where's Bill "i called gold top $1900 and was broke dick at gold $200" ??

 

 

Tue, 12/20/2011 - 17:54 | Link to Comment Ag1761
Ag1761's picture

It's all about Gold now.

Someone tell me, did we ever leave the Gold standard in the 70's!! or was it just papered over....

Wed, 12/21/2011 - 04:05 | Link to Comment Bill Shockley
Bill Shockley's picture

Out in the trenches. My take.

Gold is simply the only recognized world currency, it is not functioning as a commodity. It has become the final currency used to borrrow against(the true reserve).

All currencies rise and fall in value, so does gold, so does cash. GOFO is just the interest(and the price) of the new reserve.

The more gold is used/needed as currency and the higher the interest the higher the price of gold will go relative to other currency since the issuers are bankrupt.

When the mad grab for the cash comes people won't grab for cash will they. They will grab gold.

 The price of gold will rise in the market place, that's the key.

If there is a marketplace.

Merry Christmas all.

I just bought 30 lbs of potatoes in Wisconsin for $6usd. 

We have more potatoes than gold in Wisconsin, we have cheese...and the Packers.

Green and Gold.

Peace and love.

Guns and gold.

Read 'A Tale of Two Cities"

It was written 40-50 years after the American and French revolutions and says more about America than I could ever convey about the difficulties that lie ahead.

Citizens it is about us.

  bill

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