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Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads To Backwardation, Short Squeeze And ‘Havoc’ Concerns

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Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads To Backwardation, Short Squeeze And ‘Havoc’ Concerns

Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads to Backwardation, Short Squeeze and ‘Havoc’ Concerns
All major currencies have fallen sharply against gold and silver again today with gold reaching new record nominal highs in Canadian and New Zealand dollars, in sterling, in euros and of course in dollars as turmoil continues in global markets.

In volatile trade, gold is down 1% from new record highs and is trading at 1,860.10 USD , 1,300.40 EUR , 1,126.40 GBP, 1,470.90 CHF and 142,414 JPY per ounce and has risen some 2% in all currencies. Silver has surged by nearly 3% in all major currencies.

Cross Currency Table

The London AM fix was a third consecutive record nominal high in US dollars. Gold’s London AM fix this morning was USD 1,862, EUR 1299.28, GBP 1126.91 per ounce (from yesterday’s USD 1,794.50, EUR 1,246.44, GBP 1,087.12 per ounce).

Markets continue to assess the ramifications of Venezuela deciding to repatriate their large gold reserves from London to Caracas. Their reserves are large in gold tonnage terms but small in dollar terms.

Venezuela’s central bank is the world’s 15th largest holder of gold, with 365.8 tonnes, of which some 211 tonnes, worth $12.3bn are held in London with the Bank of England and JP Morgan, Barclays, and Bank Of Nova Scotia.

Many analysts and the Gold Anti-Trust Action Commitee (GATA) have long contended that much of the central bank gold reserves have been leased out by bullion banks and that in the event of central banks choosing to repatriate their bullion, significant supply issues could develop which would lead to a short squeeze and a parabolic increases in prices.

The concern is that other central banks concerned about dollar and currency debasement and expropriation of their gold reserves by embattled large debtor sovereign nations may follow suit.

A short squeeze is quite likely given the scale of global investor and central bank demand.


Already, there is a small degree of backwardation developing in the gold market with certain near term futures contracts now trading at higher prices than longer term contracts. The near term August ’11 contract was trading at $1871.40/oz while June ’12 contract is trading at $1,870/oz (1216 GMT). The spread between spot and longer term contracts has fallen suggesting that gold may soon join silver in backwardation.

Silver has been in backwardation for seven months now and backwardation appears to be deepening again. This morning the September ‘11 contract is trading at $41.41 while December ‘12 is trading at $40.65.

The possibility of backwardation in gold suggests that major investors are concerned about the supply of physical gold. Buyers are concerned about securing supply in the future and are willing to pay a premium for spot or immediate delivery.

It could indicate that the short squeeze anticipated by many is taking place and we could see a sharp upward move in gold prices.

This would not be surprising considering the very small size of the physical bullion markets versus the size of the overall financial and currency markets and considering the high demand coming from investors and central banks globally.

It is worth remembering what happened when silver went into backwardation some months ago. It led to a price surge from $30/oz to over $50/oz in 10 weeks.

Backwardation rarely happens in the gold and silver bullion markets. Since gold futures first started to be traded in 1972 (on the Winnipeg Commodity Exchange), there have only been momentary backwardations of a few hours.

It suggests that larger gold bars are difficult to acquire in volume and that the physical market is becoming stressed and less liquid.

Backwardation can end in default, failure to make delivery and in sharply higher prices. A default on the COMEX would have important ramifications for the dollar and could see sharp selling of the dollar and sharp falls on global markets.
Gold backwardation has been warned of by newsletter writer Denis Gartman overnight. He said that if Chavez  “does push” for repatriation of $11 billion of gold reserves held in developed nations’ institutions it could lead to backwardation which would wreak ‘havoc’.
Investors should buy “nearer gold” and sell deferred bullion futures, he wrote. October and December futures will trade to premium over February and beyond in this case, Gartman wrote.

Meanwhile, in another sign of gold experiencing a near perfect storm, UBS have said that macro hedge funds were noted buyers and may also have dominated demand during yesterday's Comex sweeps. They said that the funds may have been waiting for a correction to buy but due to concerns of the market moving away from them decided to buy yesterday.

“If participation from the macro hedge fund community has only just started to accelerate, this adds a new dynamic to the gold market.”

In normal financial and economic times, gold would be considered overvalued but we are far from that today and gold is experiencing a near perfect storm which could propel prices higher.

JP Morgan’s call for $2,500 gold by year end does not that outlandish given the fraught financial, economic and monetary conditions today.

A correction remains a real possibility but buying and holding bullion remains the best strategy in today’s volatile markets.

Cost averaging (dollar, euro, pound) is worth considering after the recent price move.

For the latest news and commentary on gold and financial markets please follow us on Twitter.

NEWS

(Bloomberg) -- Gold May Advance From Record on Growth Concern, Survey Shows
http://www.bloomberg.com/news/2011-08-18/gold-may-advance-from-record-on-growth-concern-survey-shows.html

(Reuters) -- Gold hits record on U.S. growth, Europe woes
http://www.reuters.com/article/2011/08/19/us-markets-precious-idUSTRE7781Q420110819

(Wall Street Journal) -- Central Banks' Demand For Gold Quadrupled In 2nd Quarter
http://online.wsj.com/article/BT-CO-20110818-712171.html

(Wall Street Journal) -- PRECIOUS METALS: Gold Price More Than 1% Higher In Asia‎
http://online.wsj.com/article/BT-CO-20110819-702236.html

(Bloomberg) -- Chavez Emptying Bank of England Vault as Venezuela Brings Back Gold Hoard
http://www.bloomberg.com/news/2011-08-18/chavez-emptying-bank-of-england-vault-as-venezuela-brings-back-gold-hoard.html

COMMENTARY

(ZeroHedge) -- Cue Panic As Fed Resumes Liquidity Swap Lines, Lends $200 Million To Swiss National Bank, Most Since October 2010
http://www.zerohedge.com/news/cue-panic-fed-resumes-liquidity-swap-lines-lends-200-million-swiss-national-bank-most-october-2

(Financial Sense) -- Gold & Silver: Full Spectrum Dominance
http://www.financialsense.com/contributors/jim-willie/2011/08/17/gold-and-silver-full-spectrum-dominance

(Reuters) -- Analysis: Gold move highlights risks to Venezuela reserves
http://www.reuters.com/article/2011/08/18/us-venezuela-economy-gold-idUSTRE77H5Z620110818

(Financial Times) -- Traders prepare for Chávez gold transfer
http://www.ft.com/intl/cms/s/0/e08657a4-c9b9-11e0-b88b-00144feabdc0.html#axzz1VMvCxReZ

 

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Fri, 08/19/2011 - 07:56 | 1576418 bullionbaron
bullionbaron's picture

Would like to see the HUI break this H&S pattern and pass the 610 mark, we may then be able to have a run in Gold stocks:

http://www.bullionbaron.com/2011/08/hui-forming-head-shoulders-pattern.html

Gold stocks the cheapest they've been since early 2009:

http://www.bullionbaron.com/2011/08/gold-stocks-cheapest-since-early-200...

Fri, 08/19/2011 - 08:01 | 1576428 Haywood Jablowme
Haywood Jablowme's picture

 

This parabolic stage is gonna be one hell of a ride.  YEEEEE HAAAAWWWW !!!!!

I've been waiting for $100 swings for a few short years now.  Let's do this shit.

 

Fri, 08/19/2011 - 08:40 | 1576576 dollarmite
dollarmite's picture

Reality bitches

Fri, 08/19/2011 - 10:46 | 1577227 zorba THE GREEK
zorba THE GREEK's picture

Backwardation: Greek love making. Those who shorted gold are going to get backwardated.

Fri, 08/19/2011 - 11:28 | 1577467 Strider52
Strider52's picture

I've heard it many times: You will not get rich on gold, it only stores value, but doesn't pay dividends, and doesn't make a profit. Plus, you can't eat it.

  Well, the Precious is up 50% in one year. I don't think the dollar has depreciated 50% in that same time. But I'm no math genius. Oh, wait...I am.

  Lucy, you have some 'splainin to do.

Fri, 08/19/2011 - 12:51 | 1577904 DosZap
DosZap's picture

Strider,

I've heard it many times: You will not get rich on gold, it only stores value, but doesn't pay dividends, and doesn't make a profit. Plus, you can't eat it.

 

And like the USD IS, and DOES???.

LOL

Fri, 08/19/2011 - 08:06 | 1576452 snowball777
snowball777's picture

Fuck paper.

Fri, 08/19/2011 - 08:42 | 1576586 Pladizow
Pladizow's picture

Hopefully this will wake the big boys up, i.e., institutional investors, biillionairs, hedge funds, etc.... to the fact that if they want to move the market (and we know they do) then they should deal in physical!

Fri, 08/19/2011 - 08:47 | 1576597 Sathington Willougby
Sathington Willougby's picture

in Amerikant, paper fucks you!

Fri, 08/19/2011 - 09:02 | 1576618 Pladizow
Pladizow's picture

A university professor did a study where he left 10 students dispersed around New York City with the simple instruction of "find each other". Seemingly impossible?!

However, they all did. Because they all went to Grand Central Station - a historical focus point.

Gold is and will further replace US Treasuries as a focal point and everybody out of fear will rush to meet everyone else there.

"A rally lead by fear will be far stronger then one lead by greed" - James Dines

Fri, 08/19/2011 - 09:54 | 1576901 Manthong
Manthong's picture

Good perspective.. thanks.

From the Ackerman piece:

“Grandma and Grandpa … they are on the other side of the Federal Government’s good fortune, unable to generate a livable retirement income on a million-dollar nest egg."

When grandma and grandpa figure this out, today’s prices will be cheap.

 

Fri, 08/19/2011 - 10:20 | 1577008 snowball777
snowball777's picture

If they can't figure out how to live decently with a paid-off home, a mil, and SS checks, then Grandma and Grandpa should go buy some Medicare D-subsidized Viagra and fuck themselves repeatedly.

 

Fri, 08/19/2011 - 09:04 | 1576667 Sudden Debt
Sudden Debt's picture

I hope that's not your plan on how to spend your weekend...

 

Fri, 08/19/2011 - 09:39 | 1576821 Oh regional Indian
Oh regional Indian's picture

Ouch.

Paper cuts, FTW!

Vivek (My real name, in case anyone is wondering, Hello!)

Fri, 08/19/2011 - 11:32 | 1577491 Strider52
Strider52's picture

Fight Club Rule # 2: Nobody uses real names at Fight Club.

Fri, 08/19/2011 - 07:56 | 1576422 sunnydays
sunnydays's picture

Blythe having fun this morning?

Fri, 08/19/2011 - 09:03 | 1576661 Bullionaire
Bullionaire's picture

JPM:SILVER now negative for 18 days.

 

Suck on THAT, Blythe.

 

 

Fri, 08/19/2011 - 09:14 | 1576708 fuu
fuu's picture

Which I believe is longer than when silver was on the way to 50 this spring.

Fri, 08/19/2011 - 08:02 | 1576438 Turd Ferguson
Turd Ferguson's picture

DO NOT be a smartypants top-caller. Sit back and relax while the world burns.

"A correction remains a real possibility but buying and holding bullion remains the best strategy in today’s volatile markets."

www.tfmetalsreport.com

Fri, 08/19/2011 - 08:07 | 1576456 cossack55
cossack55's picture

Have you got my fire extinguisher, Turd?  If so, keep it.

Fri, 08/19/2011 - 08:42 | 1576577 Smiddywesson
Smiddywesson's picture

Exactly.  The list of lifeboats remaining is becoming alarmingly short.  The healthy currencies like the swissy don't want survivors swamping their currency, and the dollar is being debased.  That leaves gold and silver, and though they can supress silver, they are buying gold.  How do you hold down prices when everyone is swarming into the boat, including yourself?  Central banks are buying, and now here comes the public!!!

Weeeee!

I really have to laugh at the deflationist who said gold would tank along with everything else because debt default is inherently deflationary.  They completely missed the fact that the world is awash in paper and there will be nowhere else to hide than PMs.  It doesn't matter how much wealth destruction there is, there's still plenty to push up the gold market.  Academic idiots.

Fri, 08/19/2011 - 09:26 | 1576760 oddjob
oddjob's picture

You are a smarty pants chartist unnecessarily worrying investors about manipulated short term drops in the PM prices. Is there a difference?

Fri, 08/19/2011 - 09:33 | 1576790 sunnydays
sunnydays's picture

charts and graphs for the day, month 6 month and year of commodities - shows who - Blythe must be sweating right now. 

 

http://sherriequestioningall.blogspot.com/2011/08/financialcommodity-cha...

Fri, 08/19/2011 - 08:01 | 1576440 PaperBear
PaperBear's picture

Intra-day highs for Gold of $1,878/oz and for Silver of $42.72/oz.

WOOHOO, SHORT SQUEEZE, SHORT SQUEEZE, SHORT SQUEEZE.

Fri, 08/19/2011 - 08:46 | 1576595 Smiddywesson
Smiddywesson's picture

I don't think we will see that for a while yet.  Continued central bank acquisition depends upon keeping gold and silver under control, and they have unlimited fiat.  They will fight back, perhaps using up another two of their precious margin increases.  That would be sweet, because next week we would be right back at the same price and they would have two less margin increases in their gun, and they know it.

:-)

Fri, 08/19/2011 - 08:03 | 1576442 scatterbrains
scatterbrains's picture

One day we may see  1 grain ingots replace the $20 dollar bill which translates to $9600 per ounce.   I don't watch ebay pricing very closely but it seems lately that  1 grain size transactions are becoming more popular to the common man... or so I'm thinking.

Fri, 08/19/2011 - 08:04 | 1576443 snowball777
snowball777's picture

Do you get the feeling that La Cucaracha timed this for maximum impact?

http://www.youtube.com/watch?v=_2RvhqGzYY0

"Stand and Deliver!"

Fri, 08/19/2011 - 08:05 | 1576449 lolmao500
lolmao500's picture

Silver needs to go above 60$ to be back at reasonable levels and gold/silver ratio.

Fri, 08/19/2011 - 08:22 | 1576516 FranSix
FranSix's picture

The Gold/Silver ratio should continue to correct in the onset of credit quality breakdown.  The next correction level for the Gold/Silver ratio is very probably the 89-week EMA on the weekly chart.  The technicals on the Gold/Silver ratio are that gold will continue to gain on silver in coming weeks.

Backwardation in Gold is not great for the price advance, because every backwardation in Oil prices, Copper prices, Silver prices have all preceded a correction.  The more chronic the backwardation, the more meaningful the correction.

So far, the backwardation is only brief.  The spead between spot and futures is not meaningful enough to coax out gold into the markets.

Fri, 08/19/2011 - 08:51 | 1576605 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Ya thats b/c they raise margin 15 times in 4 days, thats why there are artificial corrections

 

www.silvergoldsilver.blogspot.com

Fri, 08/19/2011 - 08:52 | 1576609 Smiddywesson
Smiddywesson's picture

The definition of a "correction" is rapidly changing in gold.  It seems TPTB are rapidly becoming TPTW (the powers that were) in this market.  I'm not saying there won't be any corrections.  I'm just saying they will be sharp and brief, and won't help keep the prices from climbing.

Fri, 08/19/2011 - 11:16 | 1577395 FranSix
FranSix's picture

I can see gold challenging the inflation adjusted 1980 high of $850 (~$2300/oz. U.S.)and then backing off to consolidate.  The timing of this move is difficult to discern as gold has been appreciating during market down days in a very aggressive fashion. 

Hopefully it will let off some steam in the meanwhile, but a crash will bring gold prices down.  I presume the low should be in the $1500/oz. range.

Fri, 08/19/2011 - 17:39 | 1579135 akak
akak's picture

The so-called "inflation adjusted" 1980 high of ~$2300 in gold is only adjusted for the fraudulent, manipulated and low-balled CPI figures.  In reality, the TRUE inflation-adjusted 1980 price peak of gold would be more on the order of $3000 per ounce.

Fri, 08/19/2011 - 12:49 | 1577902 DosZap
DosZap's picture

FranSix,

<Backwardation in Gold is not great for the price advance, because every backwardation in Oil prices, Copper prices, Silver prices have all preceded a correction.  >

Sure it is, it means we get ANOTHER, yet another shot at BTD!.

Fri, 08/19/2011 - 08:06 | 1576451 Sudden Debt
Sudden Debt's picture

160 times more paper silver than physical....

100 times more paper gold than physicla....

NOBODY WORRY!!! THERE'S PLENTY TO GO ARROUND!! NO NEED FOR A PHYSICAL RUN!!!

 

Fri, 08/19/2011 - 08:09 | 1576464 cossack55
cossack55's picture

Its funny, I keep my paper gold and silver in the bathroom and my phys gold and silver buried in 4" PVC.  Why is that?

Fri, 08/19/2011 - 08:33 | 1576556 Stumpy
Stumpy's picture

You think vaccum sealer bags will do the trick? I used four layers. I worry about the winter though.

Fri, 08/19/2011 - 08:53 | 1576614 Smiddywesson
Smiddywesson's picture

Gold doesn't tarnish and squirrels won't eat it.  It's safe

Fri, 08/19/2011 - 09:58 | 1576928 cynicalskeptic
cynicalskeptic's picture

I don't know about that........    seems like some of the gold stored in COMEX vaults is foil covered chocolate.

Fri, 08/19/2011 - 08:06 | 1576453 thunderchief
thunderchief's picture

I hope they do it.  And I hope it leads to other countries doing the same.  The banks have multiple owners on each bar.  That is the only way to have such a bloated paper market.   Get in line for cash settlements Soveriegn Nations.

Fri, 08/19/2011 - 08:06 | 1576454 stateside
stateside's picture

Many gold juniors traded in Canada are off 50-75% this year.  Many with 43-101 rated 500,000-1,000,000 ounce deposits have a market cap of less than $15/oz with gold trading at $1,850.  There has never been such a disconnect in the history of gold/junior gold stocks.  Either gold will trade down to $500/oz, or we are on the cusp of one of the greatest bull markets of all time in the Canadian gold juniors that will make the internet stock craze look like child's play.

 

stateside

Fri, 08/19/2011 - 08:31 | 1576549 Stumpy
Stumpy's picture

Let's say I don't regret conselling my girlfriend buying a considerable chunk of her retirement funds on ZJG (BMO Junior Gold). Don't look at it for 10 years babe, and then, thank me.

Fri, 08/19/2011 - 08:48 | 1576599 mayhem_korner
mayhem_korner's picture

She's gonna want a Kardashian-sized engagement ring, y'know.

Fri, 08/19/2011 - 09:08 | 1576681 Stumpy
Stumpy's picture

She's a low-maintenance-cost darling. A saver, not a spender. And she's disgusted by celebrity gossip. A keeper!

Fri, 08/19/2011 - 09:19 | 1576737 Flakmeister
Flakmeister's picture

Hell, don't look at it for 10 months...

Fri, 08/19/2011 - 09:54 | 1576907 Frog-And-Toad
Frog-And-Toad's picture

Can you please elaborate on what a junior miner/junior gold is?  I am unfamiliar but interested

Fri, 08/19/2011 - 11:19 | 1577410 Roger Knights
Roger Knights's picture

Seniors are the large miners; the ETF for them is GDX.

Intermediates are smaller; their ETF is GDXJ (misnamed "Juniors")

Juniors are smaller still; some are producers, some are explorers. Both can be found in the ETF GLDX.

Fri, 08/19/2011 - 08:33 | 1576559 Flakmeister
Flakmeister's picture

I concur.... There are companies that are hideously cheap.

Fri, 08/19/2011 - 09:40 | 1576824 Oh regional Indian
Oh regional Indian's picture

Unless they are hideously hedged?

Vivek

Fri, 08/19/2011 - 10:35 | 1576972 Flakmeister
Flakmeister's picture

If they are hedged, ergo, they are not cheap....

Fri, 08/19/2011 - 09:01 | 1576653 Smiddywesson
Smiddywesson's picture

Or the government will halt all trading in mining stocks to "inhibit speculation" and use the time to lay the groundwork to take over those mines.  We have some former holders of GM stock down here that might agree that is possible.

Fri, 08/19/2011 - 08:07 | 1576457 disabledvet
disabledvet's picture

Who? Never heard of him. Now give us our money you cancerous ridden bitcch.

Fri, 08/19/2011 - 08:07 | 1576458 Advoc8tr
Advoc8tr's picture

I love it when a plan comes together.  All playing out exactly as the consensus view on Zero Hedge over last couple of years predicted it would.  Hang on to those bars boys and happy stacking.  Can't wait for the crimex to crash, top up on any distress selling and then wait for the true physical price discovery.....

Anyone else gone from nutjob to messiah overnight among their near and dearest ???   So NOW they get it.

Fri, 08/19/2011 - 08:37 | 1576567 Oro
Oro's picture

Yes, good question.

Fri, 08/19/2011 - 09:07 | 1576678 Smiddywesson
Smiddywesson's picture

Yes, there is a lot of crow being eaten around the office.

No, I don't believe you will see true physical price discovery.  The big banks are holding gold, and they are insolvent.  They will ramp the price of gold as high as possible when this breaks because they have to. 

This is the usual procedure.  Punish bears and hold up stock prices until the top of a bull market and then flip short and drive down prices to ridiculous levels to pick up bargains for the next cycle. 

They will do the same for gold, just in reverse.  They have held down gold prices during the fiat bull, and now that the fiat bull market is nearing the end, they will flip long in gold and drive gold prices like crazy.  Their methods are the same.  They will never allow true market pricing in anything.  It is not a market, it is a game. 

Fri, 08/19/2011 - 11:01 | 1577304 cramers_tears
cramers_tears's picture

Good cheater analysis. Now, who calls the top?

Fri, 08/19/2011 - 08:08 | 1576461 Prepared
Prepared's picture

looks like the shiney stuff is about to strap on the booster rockets!! 

Fri, 08/19/2011 - 08:10 | 1576472 mayhem_korner
mayhem_korner's picture

Long shovels and metal-detector-defying safes.

+2001 (anticipatory)

Fri, 08/19/2011 - 08:09 | 1576466 Dr. Gonzo
Dr. Gonzo's picture

Panic buying! Panic Short covering! This is getting good. Bought my first oz 9 years ago when I didn't know anything about gold and considered it "Pirate Treasure." I got addicted and couldn't stop buying "Pirate Treasure." Then I really learned about it and understood why pirates liked it so much and I've  Been putting every dime into PM's ever since. Pirates were smart. 

Fri, 08/19/2011 - 08:25 | 1576528 gwar5
gwar5's picture

 

Arrrgh!

 

Fri, 08/19/2011 - 08:54 | 1576613 RealFinney
RealFinney's picture

That' show they were able to prevent Golbal Warming:

Fri, 08/19/2011 - 17:45 | 1579189 akak
akak's picture

Aye, matey, that be the truth!

Scalliwags and scurvy rogues we privateers may be, but paper pushers, never.
Such scoundrels deserve the plank and eternal rest in Davey Jone's locker, avast!

Fri, 08/19/2011 - 08:11 | 1576473 lieutenantjohnchard
lieutenantjohnchard's picture

i like the part where gold trades at $1860.

Fri, 08/19/2011 - 08:11 | 1576474 Manthong
Manthong's picture

It ain't over yet.. They still have plenty of ink and paper. That goes for both kinds of fiat.. legislative as well as monetary.

Fri, 08/19/2011 - 08:12 | 1576478 augie
augie's picture

Bunch of barbarians. The lot of ya's. 

Fri, 08/19/2011 - 09:19 | 1576735 fuu
fuu's picture

TO ROME!

Fri, 08/19/2011 - 15:01 | 1578430 augie
augie's picture

It's time to go Nero status on all these bitchez. 

Fri, 08/19/2011 - 08:12 | 1576479 Just Observing
Just Observing's picture

Banks to Chavez: "How about we send you a few pounds of rocket propelled plutonium instead ? "

Fri, 08/19/2011 - 08:30 | 1576546 snowball777
snowball777's picture

Chavez to Banks: I'm gonna die painfully of cancer within a few months. Brizzing it!

Fri, 08/19/2011 - 08:13 | 1576484 Cdad
Cdad's picture

The market looks ripe for a morning reversal.  Sell VIX.

 

Fri, 08/19/2011 - 08:44 | 1576538 Stumpy
Stumpy's picture

Pre-market: 41.51 +1.04 (2.57%)

Maybe not. 

edit: Pre-market: 42.00 +1.53 (3.78%) . I'm definitely keeping my VXX where it is today.

Fri, 08/19/2011 - 09:16 | 1576718 Cdad
Cdad's picture

Well, I'm the kind of trader that believes there are no tops, and there are no bottoms.  There is strength for selling into, and weakness for buying.

My experience with the VXX is...you take it when it gives it to you because the instrument is quite flawed...and when it turns, the percentage damage that comes...well, it comes very quickly and is severe.  

So...I am not calling a top.  When trading VIX, that is impossible to do.  My sense today is that there will be some market strength this morning which will be driven by energy stocks...a reversal there.  As well, Europe has come off its lows [not that I would buy that...as I am short there].

And more generally speaking, gap up opens are for suckers.

 

Fri, 08/19/2011 - 09:39 | 1576819 Cdad
Cdad's picture

BIG selling in the GLD right off the opening bell.

Where it goes from here...no clue. 

Fri, 08/19/2011 - 08:13 | 1576485 tocointhephrase
tocointhephrase's picture

Gold to the Sun and Silver to the Moon (Bitchez) :)

Fri, 08/19/2011 - 08:15 | 1576489 tocointhephrase
tocointhephrase's picture

I love you Blythe smoochy smoochy

Fri, 08/19/2011 - 08:16 | 1576497 sudzee
sudzee's picture

Scotia-macotta now asking 2009.00 for a 1oz maple plus delivery:
https://www.scotiamocatta-estore.scotiabank.com/stores/scotiamocatta/cat...

Fri, 08/19/2011 - 08:21 | 1576512 Arius
Arius's picture

"Their reserves are large in gold tonnage terms but small in dollar terms."

what does that even mean?

Fri, 08/19/2011 - 09:00 | 1576601 Esso
Esso's picture

I wondered that too. Maybe they meant "small in dollar printing ability."

Fri, 08/19/2011 - 09:11 | 1576692 Smiddywesson
Smiddywesson's picture

It means too much coffee.  They are under pressure to push this stuff out before it is old news.

Sat, 08/20/2011 - 06:11 | 1580551 bushboy
bushboy's picture

I think it means their foreign reserves are for example 80% gold and only 20% cash/dollars. China for example  is the opposite with 99% cash/dollars and 1% or less gold.

Bushboy

Fri, 08/19/2011 - 08:21 | 1576514 Eager learner
Eager learner's picture

BTFD on a correction is all well and good, depending on where the new floor is.
Those macro hedge funds maybe have some concerns about the floor being in a elevator going up.

Fri, 08/19/2011 - 08:24 | 1576523 Smiddywesson
Smiddywesson's picture

Better get a Russian naval escort.  I wouldn't want to be a sailor on the boat they use to ship the gold back to Chavez, it will never make port.

This abortion of an economy will be long gone by the time they discover the hold was empty, and by then it is old news.

Fri, 08/19/2011 - 08:27 | 1576536 Jayda1850
Jayda1850's picture

I have to agree cdad, all indices are well off the lows and gold is down $30 from the high. With no US economic data coming out today, wouldn't suprise me if we finish in the green today.

Fri, 08/19/2011 - 08:33 | 1576555 Poor Grogman
Poor Grogman's picture

Infinite FIAT.... Meet commodity money.

Now you two behave please.

 

Fri, 08/19/2011 - 08:37 | 1576568 Dr. Engali
Dr. Engali's picture

Why the reference to Fartman? He is as clueless as they come. How is his xlf call doing?

Fri, 08/19/2011 - 08:37 | 1576569 gwar5
gwar5's picture

 

"Gold is money. Everything else is credit."  -- J.P. Morgan.

 

Fri, 08/19/2011 - 08:40 | 1576579 Chicken_Little
Chicken_Little's picture

I'm wondering what will happen if Chavez's repatriation indeed does catch some bullion banks short of deliverable gold. JP Morgan may be one of them which worries me. In 1999 didn't some big bank get caught short and Gordon Brown came to the rescue with half of England's gold? If so, isn't the probability of something like this happening today with another country high? Maybe I'm imagining things, but I think JP Morgan would find a better way to get it than going into the physical market like us honest people do.

Silver is a whole different ballgame.....

Fri, 08/19/2011 - 08:44 | 1576590 dollarslide
dollarslide's picture

@Advoc

You now want some gold honey? Here's my wedding ring. 

I put the house in your name. Oh, and the summer house too.

Goodbye

Fri, 08/19/2011 - 08:52 | 1576610 sudzee
sudzee's picture

If gold gets any tougher to get I'll just have to buy 45 x as much silver. I'm thinking phyz ag premiums are about to jump.

Fri, 08/19/2011 - 08:56 | 1576625 fredquimby
fredquimby's picture
@Advok8tor "Anyone else gone from nutjob to messiah overnight among their near and dearest ???   So NOW they get it."

:) :)

Fri, 08/19/2011 - 09:04 | 1576669 Poor Grogman
Poor Grogman's picture

It's funny how losing a large chunk of your retirement funds in one week focuses the thinking of some of the brighter sheeple.

Fri, 08/19/2011 - 09:08 | 1576680 theotheri
theotheri's picture

maybe not $500/oz but certainly below $1000/oz.

Once the dust settles and markets the world over stabilize.  Definitely S&P below 1000 once that happens.

Gold is useless except in a panic.  The panic will recede.  After the pain.

Fri, 08/19/2011 - 09:21 | 1576746 Smiddywesson
Smiddywesson's picture

theotheri,

Your assertion that gold is useless except in a panic is untrue, otherwise banks wouldn't have held it in reserve back in the days when fiat was healthy.

Your assertion that gold prices will recede after the panic, although undoubtably true, ignores the depth of that panic and its probable extended duration.  Think in terms of worldwide rioting, wars, and starvation.  Think about the effects of such an event on the prices of gold and it makes your observation misleading and unhelpful.

Gold prices will climb as high as the banks need them to make them solvent, and quite a bit farther as the public crowds into the trade out of fear.  Then, under a new monetary system, the banks will slowly let out their supply and convert the net worth of the world to their use.  Think of it as a stealth tax.  As the value of everything is measured in gold, and the price of gold doubles, the worth of everything else is taxed by 50%.

They always win.

Fri, 08/19/2011 - 12:35 | 1577840 Mesquite
Mesquite's picture

re: '..panic..'

So...I guess all the world has been in a panic for about 6000 years....

Fri, 08/19/2011 - 09:09 | 1576686 El Gordo
El Gordo's picture

I was going to buy silver yesterday but did not get around to it, so you can thank me for today's rally.  I'll let you know when I'm ready to buy again so you can short your position.  It's really all about me you see, and I'm always wrong.

 

Fri, 08/19/2011 - 09:11 | 1576694 texas goldfinger
texas goldfinger's picture

The statement that gold is near backwardation is preposterous.  Anyone intelligent enough to look at live bids/offers will see the contango quite normal.  Perhaps gold is in backwardation if one ignores trade times, but that wouldn't really be backwardation, would it?

Fri, 08/19/2011 - 09:39 | 1576815 G. Marx
G. Marx's picture

http://www.martinarmstrong.org/files/US%20Treasuries%20and%20Gold%2008-1...

"
The US Treasurys are headed to record lows while gold is going up above $1800 coming close to this week’s projected resistance at 1860-1900 followed by 2050-60, which moves up to 1910-1960 followed by 2085-2105 for next week. These are NORMAL projections and still not a PHASE TRANSITION type of move just yet. Those projections stand at 2400-2600 level this month and become possible should gold rise above 2100. Support in gold is now beginning to form at 1730 and holding that on a daily closing basis will keep gold in a bullish position. A closing above 1818 today (which was achieved), will warn that gold can still press higher into tomorrow. A closing tomorrow for the week above 1900 would signal an explosive run next week."

Fri, 08/19/2011 - 10:36 | 1577134 Badabing
Badabing's picture

"will warn that gold can still press higher into tomorrow. A closing tomorrow for the week above 1900 would signal an explosive run next week."

Tomorrow? welcome to friday.

let's not forget OP-EX isn't that today?

Sunday @ 6:00pm eastern will be lots of fun!

Fri, 08/19/2011 - 09:41 | 1576831 alchemystic
alchemystic's picture

YEEHA!!!

Fri, 08/19/2011 - 10:03 | 1576942 Lmo Mutton
Lmo Mutton's picture

Smoochy, smoochy won't do it. Get out of the way man!! Come here bitch, smack, smack, now take those panties off.

Fri, 08/19/2011 - 10:52 | 1577262 Inyor Luvbocks
Inyor Luvbocks's picture

u can't call it backwardation using August 11' Gold , its off the board with open interest of 628 lots ...

Fri, 08/19/2011 - 10:53 | 1577264 bill1102inf
bill1102inf's picture

Ignore the fact that Tulips did the same thing once upon a time.

Fri, 08/19/2011 - 11:39 | 1577536 Roger Knights
Roger Knights's picture

Even though you could eat them!

Fri, 08/19/2011 - 11:42 | 1577554 moondog
moondog's picture

...and Tulips were used as money for 1000's of years. Enough about the tulips already!

Fri, 08/19/2011 - 12:16 | 1577703 Inyor Luvbocks
Inyor Luvbocks's picture

yea, shut your tu lips already

 

Sun, 08/21/2011 - 01:32 | 1582969 ssoniindia
ssoniindia's picture
Gold bars, coins sold at 750% premium on buying frenzy in Dubai

 

Gold demand in Dubai is proving so strong that gold dealers have raised their markups upto 750% to cash in on the investor frenzy. Uncertainties over global economy are making investors to purchase gold at any value.

“Most customers and retailers are trying to buy gold bars and coins. There is virtually no supply of 50 gram and 100 gram gold bars in the market. It seems wholesalers are releasing only one or two bars per day to their regular customers. If we have demand for 50 gold bars, our wholesaler is giving only one or two pieces per day. Even getting the second piece is difficult” said Pearlju Baby Chungath, Owner of Chungath Jewellery at Karama Center, as per emirates24/7.com

 

“Market price will go up further. Traders are selling gold bars at a premium of $50 per ounce. Normally the profit margin on a Gold price is Dh 20, now traders are charging Dh 100 to Dh 150 more than the market value,” said another trader. This is 500%-750% of normal profit markups!

 

Gold traders are reluctant to release more gold into the market as they expect prices to peak further as demand increases. "In the past six months it (demand) has at least doubled," says one Gold Bullion dealer, Chatan Dhakan of National Jewellery, as reported by bullionvault.com

 

The Dubai Multi Commodities Centre Authority (DMCC) had unveiled the UAE’s first official gold coin earlier this week. "This innovative Gold Bullion coin was conceived to satisfy the demands from investors seeking access to gold as protection against the ongoing global economic uncertainty," said DMCC executive chairman Ahmed Bin Sulayem.

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