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Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads To Backwardation, Short Squeeze And ‘Havoc’ Concerns
From GoldCore
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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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...
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.
Reality bitches
Backwardation: Greek love making. Those who shorted gold are going to get backwardated.
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.
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
Fuck paper.
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!
in Amerikant, paper fucks you!
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
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.
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.
I hope that's not your plan on how to spend your weekend...
Ouch.
Paper cuts, FTW!
Vivek (My real name, in case anyone is wondering, Hello!)
Fight Club Rule # 2: Nobody uses real names at Fight Club.
Gold shares a buy on multiple fronts:
http://www.jsmineset.com/2011/08/18/mining-share-ratio-to-gold-back-at-pre-qe1-levels/
http://www.marketoracle.co.uk/Article29952.html
http://www.freemarketfan.com/2011/07/gold-stocks-have-very-favorable.html
Blythe having fun this morning?
JPM:SILVER now negative for 18 days.
Suck on THAT, Blythe.
Which I believe is longer than when silver was on the way to 50 this spring.
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
Have you got my fire extinguisher, Turd? If so, keep it.
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.
You are a smarty pants chartist unnecessarily worrying investors about manipulated short term drops in the PM prices. Is there a difference?
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...
Intra-day highs for Gold of $1,878/oz and for Silver of $42.72/oz.
WOOHOO, SHORT SQUEEZE, SHORT SQUEEZE, SHORT SQUEEZE.
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.
:-)
One day we may see 1 grain ingots replace the $20 dollar bill which translates to $9600 per ounce. I don't watch ebay pricing very closely but it seems lately that 1 grain size transactions are becoming more popular to the common man... or so I'm thinking.
Do you get the feeling that La Cucaracha timed this for maximum impact?
http://www.youtube.com/watch?v=_2RvhqGzYY0
"Stand and Deliver!"
Silver needs to go above 60$ to be back at reasonable levels and gold/silver ratio.
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.
Ya thats b/c they raise margin 15 times in 4 days, thats why there are artificial corrections
www.silvergoldsilver.blogspot.com
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.
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.
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.
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!.
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!!!
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?
You think vaccum sealer bags will do the trick? I used four layers. I worry about the winter though.
Gold doesn't tarnish and squirrels won't eat it. It's safe
I don't know about that........ seems like some of the gold stored in COMEX vaults is foil covered chocolate.
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.
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
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.
She's gonna want a Kardashian-sized engagement ring, y'know.
She's a low-maintenance-cost darling. A saver, not a spender. And she's disgusted by celebrity gossip. A keeper!
Hell, don't look at it for 10 months...
Can you please elaborate on what a junior miner/junior gold is? I am unfamiliar but interested
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.
I concur.... There are companies that are hideously cheap.
Unless they are hideously hedged?
Vivek
If they are hedged, ergo, they are not cheap....
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.
Who? Never heard of him. Now give us our money you cancerous ridden bitcch.
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.
Yes, good question.
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.
Good cheater analysis. Now, who calls the top?
looks like the shiney stuff is about to strap on the booster rockets!!
Long shovels and metal-detector-defying safes.
+2001 (anticipatory)
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.
Arrrgh!
That' show they were able to prevent Golbal Warming:
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!
i like the part where gold trades at $1860.
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.
Bunch of barbarians. The lot of ya's.
TO ROME!
It's time to go Nero status on all these bitchez.
Banks to Chavez: "How about we send you a few pounds of rocket propelled plutonium instead ? "
Chavez to Banks: I'm gonna die painfully of cancer within a few months. Brizzing it!
The market looks ripe for a morning reversal. Sell VIX.
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.
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.
BIG selling in the GLD right off the opening bell.
Where it goes from here...no clue.
Gold to the Sun and Silver to the Moon (Bitchez) :)
I love you Blythe smoochy smoochy
Scotia-macotta now asking 2009.00 for a 1oz maple plus delivery:
https://www.scotiamocatta-estore.scotiabank.com/stores/scotiamocatta/cat...
"Their reserves are large in gold tonnage terms but small in dollar terms."
what does that even mean?
I wondered that too. Maybe they meant "small in dollar printing ability."
It means too much coffee. They are under pressure to push this stuff out before it is old news.
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
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.
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.
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.
Infinite FIAT.... Meet commodity money.
Now you two behave please.
Why the reference to Fartman? He is as clueless as they come. How is his xlf call doing?
"Gold is money. Everything else is credit." -- J.P. Morgan.
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.....
@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
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.
:) :)
It's funny how losing a large chunk of your retirement funds in one week focuses the thinking of some of the brighter sheeple.
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.
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.
re: '..panic..'
So...I guess all the world has been in a panic for about 6000 years....
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.
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?
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."
"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!
YEEHA!!!
Smoochy, smoochy won't do it. Get out of the way man!! Come here bitch, smack, smack, now take those panties off.
u can't call it backwardation using August 11' Gold , its off the board with open interest of 628 lots ...
Ignore the fact that Tulips did the same thing once upon a time.
Even though you could eat them!
...and Tulips were used as money for 1000's of years. Enough about the tulips already!
yea, shut your tu lips already
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.