The Manipulation of Gold Prices 152 comments
-
Font Size:
-
Print
- TweetThis
There is no other leveraged commodity market where short sellers increase their positions, materially, as the price rises, and increase them even more when prices are exploding, except gold and silver. The reason traders don’t normally do that is that it exposes short sellers to unlimited liability and risk. Yet, in both March and July 2008, and on countless occasions over the past 21 years, vast numbers of new gold and silver short positions were temporarily opened up, with the position holders seemingly unconcerned about the fact that precious metals had just risen exponentially, and that there was a very real potential they would bankrupt themselves with unlimited upside potential. Normal traders would not expose themselves to such unlimited risks.
I conclude, therefore, that over the last 21 years or so, “fake” precious metals supply in the form of promises of future delivery have habitually been increased when prices increase until increased “supply” managed to overwhelm increased demand, leading to a temporary price collapse. This is compounded by the fact that the futures prices on COMEX tend to dictate the “official” report price for the precious metals elsewhere.
After the market is broken, shell-shocked leveraged long market participants have always been thrown out of their positions by margin calls, and/or have been happy to sell contracts back to the short sellers at much lower prices. This process has always allowed short sellers to cover short positions at a profit. If for some reason naked shorts needed to deliver, they could always count on various European central banks (and some say the Fed basement repository) to backstop them, releasing tons of physical gold into the market. It seemed that there were always another 34 tons or so of gold dumped at strategic times to bring down fast rising prices. Meanwhile, huge physical market demand in Asia and severe shortages buffered the downside. Because of the physical demand, prices steadily increased but, perhaps, at a much slower pace than would have been the case in the absence of market manipulation.
Rarely was there ever a serious short-squeeze. Rarely, that is, until Friday of last week when the deliveries demanded by non-leveraged long buyers reached record levels. In spite of an avalanche of complaints from gold and silver investors, the CFTC (Commodity Futures Trading Commission) has never bothered to audit even one vault to see if the short sellers really have the alleged gold and silver they claim to have. There is a legal requirement that, in every futures contract that promises to deliver a physical commodity, the short seller must be 90% covered by either a stockpile of the commodity or appropriate forward contracts with primary producers (such as miners). Inaction by CFTC, in the face of obvious market manipulation, implies a historical government endorsed price management.
Things, however, are changing fast. As previously stated, the first major mini-panic among COMEX gold short sellers happened last Friday. As of Wednesday morning, about 11,500 delivery demands for 100 ounce ingots were made at COMEX, which represents about 5% of the previous open interest. Another 2,000 contracts are still open, and a large percentage of those will probably demand delivery. These demands compare to the usual ½ to 1% of all contracts.
The U.S. economy is in shambles. Both commercial and investment banks are insolvent. European central banks no longer want to sell gold. China wants to buy 360 tons of it as soon as humanly possible, and as soon as it can be done without sending the price into the stratosphere. A close look at the Federal Reserve balance sheet tells us that Ben Bernanke eventually intends to devalue the U.S. dollar against gold. There has been a vast expansion of Fed credit, which has risen from $932 billion to $2.25 trillion in the last two and a half months. The Fed has bought nearly all toxic bank assets that were supposed to be purchased pursuant by the $700 billion Congressional bank bailout.
Official bailout funds have been used to buy equity interests in the various banks instead. By avoiding the use of monitored Congressional funds, the Fed has embarked on a secretive campaign to buy toxic assets. They have refused to give any accounting of their activities, even though they are using taxpayer money to do this. The Fed has refused, for example, to comply with a “freedom of information act” request from Bloomberg News. That refusal is now the subject of a major lawsuit.
The Federal Reserve has embarked on the biggest money printing surge in history, though the world economy has yet to feel its effect. To prevent newly printed dollars from causing immediate hyperinflation, these newly printed dollars have been temporarily sequestered into the banking industry’s reserves, rather than being released for general use. This was done in a number of creative ways.
First, the number of “reverse repurchase agreements” has been increased to $97 billion. A “repurchase agreement” is a non-recourse method by which the Fed increases the money supply by paying dollars for collateral. The collateral, in this case, are toxic defaulting mortgage bonds that banks want to be rid of. The cash enters the system and theoretically stimulates the economy because it supplies banks with money to make loans with.
A “reverse repurchase agreement” is the exact opposite. It is a method of reducing the money supply by selling bonds to the banks, and taking the cash back out of the system. In this case, the Fed gave banks cash for toxic defaulting mortgage bonds. Then, it took the same cash back by selling the banks new treasury bills just received from the U.S. Treasury. The Fed, in turn, bought these T-bills with the newly printed dollars. The banks, having gotten rid of toxic assets, were allowed to transfer private risk to the taxpayers. This process bolsters bank balance sheets by privatizing bank profits, and socializing bank losses.
At the same time, the U.S. Treasury has been very busy selling newly printed Treasury bills to anyone foolish enough to buy them. To a large extent, the fools reside overseas, but some reside inside this country, and the sale of these U.S. bonds has resulted in a substantial inflow of foreign reserves to the Treasury. Banks have also been offered favorable interest rates on both reserve and non-reserve deposits held at the Fed.
This was combined with what is probably a tacit agreement by which the banks were given the money and led to redeposit most newly printed cash back into the Fed, in a category known as “Reserve balances with Federal Reserve Banks”. This category has ballooned from $8 billion in September to $578 billion on November 28th.
On October 9, 2008, the Federal Reserve began paying interest on deposits at Federal Reserve Banks. The overnight rate happens to have dropped way below the “official” federal funds rate. Meanwhile, rates paid by the Fed on required deposits are only .1% less than the federal funds rate, and on voluntary deposits only .35% less than the federal funds rate. Accordingly, U.S. banks can engage in a dollar based one-nation carry trade, which further sequesters the newly printed dollars.
Banks are borrowing from the Fed, then taking the same money, redepositing it, and earning a spread on the interest rate differential. Banks can also deposit newly printed dollars into a category known as “Deposits with Federal Reserve Banks, other than reserve balances.” This category also earns interest in a similar way, and has risen from $12 billion to $554 billion in the same time period. The funds will eventually be used for direct lending from the Fed to open market borrowers, at huge levels of risk that even the free-wheeling cowboys who run things at America’s private banks are not willing to accept.
That being said, most money center banks in America are certainly NOT risk averse, even now. People who are bailed out of foolish decisions never become risk averse. They are, however, very insolvent, and, aside from the non-recourse provisions of Fed repurchase agreements, they would prefer, for bad publicity reasons, not to default on their obligations to the Fed. Aside from the newly printed dollars given to them by the Fed and the recent transfer of all risk to the taxpayers, they have no liquidity of their own with which to make new loans. That is why they aren’t making any. The Fed will eventually make the loans itself and take all the risk, while using the private banking system as merely a means for delivery.
Right now, however, the Fed wants to sequester the new dollars, until the U.S. Treasury has finished the major part of its funding activities. That will allow the Treasury to borrow money at very low rates. The Fed intends to feed money into the system, but at the minimum rate needed to prevent the DOW index from staying under 8,000 for any significant period of time. Right now, most measures are designed simply to stop U.S. banking laws from automatically requiring the closure of most big banks.
The extent of manipulations engaged in by this Federal Reserve is mind numbing. The total number of sequestered dollars has now reached well in excess of $1.2 trillion dollars. That means that Fed credit, so far, has been effectively increased only by about 10%, over the last 2.5 months, rather than 150% that appears on the surface of the Fed balance sheet. The rest is temporarily sequestered.
Back in July, the U.S. Treasury, through the ESF (Exchange Stabilization Fund), sold billions of euros and, I believe, established a dollar sequestering “derivative” by paying interest, perhaps in Euros, to foreign money center banks. This was designed to keep dollars out of circulation, overseas. It was the beginning of the dollar bull back on July 15th.
I had thought, at the time, with good reason, that the U.S. would run out of foreign exchange and would be forced to close down the operation within a few months. I underestimated Ben Bernanke.
Instead, the Fed managed to establish currency swap lines with various foreign nations, under the guise of supplying them with dollars. This need for dollars arose partly as a result of the actions of the Fed, in sequestering Eurodollars in July, and partly as a result of the multiple credit default events which triggered over $2.5 trillion worth of selling in the stock and commodities markets, as 50 to 1 leveraged players were forced to cover about $50 billion worth of credit default insurance obligations.
In truth, the Fed needs the foreign currency more than the foreign central banks need dollars. The Fed is using its new foreign currency resources, in part, to control the value of the dollar, and to ensure that U.S. bailout bonds are sold for the highest possible prices at the lowest possible long term costs. Anyone who buys long term Treasury bills is going to lose a fortune of money in the long term.
The Fed has also taken a number of steps beyond those already discussed to restrict aspects of the normal money supply which most strongly affect exchange rates. For example, they only allowed “currency in circulation” to rise by $33 billion in aggregate, while at the same time increasing foreign reverse repurchase agreements to reduce foreign availability of dollars by $30 billion, and reducing the “other liabilities” category dollar availability by another $7 billion. Since it is likely that “other liabilities” involve foreign held dollars, this resulted in a net deficit of $4 billion on foreign exchange markets, as compared to September, 2008.
All these actions, taken together, have supported the dollar overseas, and led to a breakdown of the commodities markets. The adverse effect of a paradoxically rising dollar has been especially severe in dollar dependent commodity producing nations, such as Ukraine.
The net effect is that the U.S. dollar, in spite of terrible fundamentals, is now King of the Currencies once again, at least temporarily. The rising value of the dollar happens also to support naked short sellers of gold and silver, on COMEX, and these are old friends of the Federal Reserve. Supply and demand ultimately determine the price of gold but, in the shorter term, it is inversely tethered to the dollar. When the dollar is artificially high, gold prices will often plunge artificially low.
But, in short, the Fed currently has gained complete control over the value of the dollar. It can now adjust and micromange the dollar on a day-to-day basis. All it needs to do is open and close the “dollar spigot.” When they want the dollar to rise, the Fed can reduce the number of sequestered dollars. When they want it to fall, they simply ease up, releasing dollars into the financial markets. There is only one problem. Real investors are fleeing the stock market, and stock indexes are becoming more and more dependent upon government cash in order to avoid collapse.
People are liquidating holdings in mutual funds, and redeeming against hedge funds at a fantastic rate. This has created heavy downward pressure on stock prices. If the DOW falls below 8,000 for any significant amount of time, most big American insurance companies will be forced to recognize huge losses on their portfolios, and will become insolvent. Insolvent insurers, like insolvent banks, must be closed by their regulators as a matter of law. Obviously, mass insurer bankruptcies would be yet another major destabilizing slap in the face to an increasingly unstable economy.
The Fed now has only two ways to stop this. One is by brute force. It can buy securities directly, through its primary dealers, thereby supporting and pumping up stock prices. It has done a lot of that in the past few weeks, but this method is highly inefficient and costly. It is better to catalyze upward market movement rather than force it. Catalysis of markets involves opening up the money spigot a bit, allowing some of the sequestered funds to bleed back into the system. This allows the stock market to rise or stabilize naturally, as the equivalent of inflation is created mostly in the stock market without substantial bleed through. At the same time, however, opening the money spigot reduces the value of the dollar and causes gold prices to rise. Rising gold price adversely affects COMEX short sellers who are, as previously stated, old friends of the Federal Reserve.
Gold buying enthusiasm, everywhere but at the COMEX, is at record levels, whereas stock market investing appetite is low. For this reason, when the Fed tried to constrict the money supply on Monday, it caused more damage to the stock market than to the price of gold. Gold declined by over 5%, but the S&P 500 collapsed by over 9%. The next day, the Fed eased up on the money supply spigot, allowing the dollar to fall and the stock market to reflate. If the Fed repeats this performance over and over again, stock investor psychology will be seriously harmed. Withdrawals from mutual and hedge funds will accelerate. The stock market will sink at an uncontrollable rate, and the world will surge onward toward Great Depression II, much worse than the first. At some point, there will be nothing the Fed can do about it, no matter what manipulations it attempts. Hopefully Ben Bernanke is aware of the dangerous nature of the game he is playing.
The Federal Reserve must now make a tough choice. In the past, Federal Reserve Chairmen may have felt it necessary to support regular attacks on gold prices to dissuade conservative people from putting a majority of their capital into gold. Now, however, the world economy needs much higher gold prices in order to devalue paper money, not against other currencies in a "beggar thy neighbor" policy, but against itself. This can jump start the system. If the Fed continued to support gold price suppression, that would collapse the stock market far deeper than they can afford, most insurers will end up bankrupt, and there will be no hope of avoiding Great Depression II.
I think Ben Bernanke is aware of this. Gold shorts will be abandoned, to avoid financial catastrophe. In commenting, I take a practical view, accepting what appears to be so, without passing judgment on the acts and omissions of the last 21 years.
Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again.
It is only a matter of time before gold is allowed to rise to its natural level. Assuming that about half of the current increase in Fed credit is eventually neutralized, the monetized value of gold should be allowed to rise to between $7,500 and $9,000 per ounce as the world goes back to some type of gold standard. In the nearer term, gold will rise to about $2,000 per ounce, as the Fed abandons a hopeless campaign to support COMEX short sellers, in favor of saving the other, more productive, functions of the various banks and insurers.
Revaluation of gold, and a return to the gold standard, is the only way that hyperinflation can be avoided while large numbers of paper currency units are released into the economy. This is because most of the rise in prices can be filtered into gold. As the asset value of gold rises, it will soak up excess dollars, euros, pounds, etc., while the appearance of an increased number of currency units will stimulate investor psychology, and lending and economic output will increase, all over the world. Ben Bernanke and the other members of the FOMC Committee must know this, because it is basic economics.
Many venerable names in banking agree, although none have gone so far as to take their thoughts to the natural conclusion. Both JP Morgan Chase's and Citibank’s analysts, for example, are predicting a huge rise in the price of gold. That is interesting because GATA has come up with fairly compelling evidence that JP Morgan Chase (JPM) and HSBC (HBC) may have been big COMEX naked short sellers in the past.
Goldman Sachs (GS) is also a huge bullion bank, which allegedly is heavily involved in downward gold price manipulation. However, this month, both HSBC and GS took lots of deliveries of gold from COMEX. Given the size and bureaucracy at such firms, it is certainly possible for the majority of traders to be entirely honest, while others, at the same firm, may be totally corrupt.
More important, however, than dwelling on the accuracy of conspiracy theories is the fact that huge international banking firms normally do not take metal deliveries from futures markets. They normally buy on the London spot market. The fact that they are demanding delivery from COMEX means one of two things. Either the London bullion exchanges have run out of gold, or these firms are finding it cheaper to buy gold as a “future” than as a spot exchange.
Smart traders at big firms may be buying on COMEX to sell into the spot market, for a profit. This pricing condition is known as “backwardation”. Backwardation is always the first sign that a huge price rise is about to happen. In the absence of backwardation, there is no rational explanation as to why HSBC, Bank of Nova Scotia (BNS), Goldman Sachs, and others are forcing COMEX to make large deliveries.
The fact that this backwardation is hidden from the public eye is not surprising. In spite of the ostensible existence of a so-called “London fix”, 96% of all OTC transactions are secret and unreported. The transactions happen solely between two parties, and are done opaquely, in complete darkness. The current London fix may well be just as fake as the bank interest rate reports that comprised LIBOR proved to be, just a few months ago.
It won’t matter much if you purchase gold at $750, $800, $850, $900 per ounce, or even much higher. All of these prices will be looking extraordinarily cheap in a few months. The price of our pretty yellow metal is about to explode, and it is probably going to soar, eventually, to levels that not even most gold bugs imagine. COMEX gold shorts will be playing the price a bit longer, in an attempt to shake out some remaining independent leveraged longs. Once that is finished, however, and it will be finished soon, the price will start to rise very quickly.
Disclosure: The author holds physical gold and is long positions in GLD and gold futures.
Related Articles
|
This article has 152 comments:
Are you saying that somehow, magically, if gold goes up 10x due to a gold standard, that it will decouple from the other commodities, and they will remain low?
Do you expect the dollar to slump after Treasury has grabbed a few $Trillion from the debt markets at low rates?
Hmmmm ... think they might know something we don't?
Just wondering.
Naked short selling, which is effectively what is taking place on the COMEX, is tantamount to counterfeiting, but without the hassle of actually printing up any phony documents! It’s all done electronically!
Gosh, it’s a system seemingly designed to encourage fraud. And yet this market which mostly sells phantom metal is the one allowed to set the price of real, physical metal? Are we humans insane, or what?
Dave
daveeriqat.wordpress.c.../
Best and most informative article to date on the subject.
Go find some facts and evidence that contradict what was and has been presented. THESE FACTS AND EVIDENCE ARE PUBLICALLY AVAILABLE AND IN FRONT OF YOUR FACE!!
So...we're all waiting for your eloquent rebuttal...and we'll even allow you 3501 words. (And no...brevity on your part will not be viewed as intelligence, but rather of lack of rebuttal evidence). Now go do something useful and bring us back your evidence-filled rebuttal for all the world to see (including us ignorant "goldbugs").
On Dec 04 11:39 AM raytayzmd wrote:
> ...funny how as a goldbug becomes more paranoid so too does the length
> of his posts...3500 words!...THIRTY FIVE HUNDRED WORDS!!!...
We are nearing a cash metals market and a free trading market in gold and silver.
Again, great writeup.
Warren
preciousmetalstockrevi...
PS I am buying all the silver I can get my hands on locally, and very hard to find a 'deal' nor even find something worth having. Open a pawn shop and a 2nd hand shop, you will fill it to the rafters with tools carpenters and mechanics do not need. Then when it is all over, you will be rich. Also step up to scrap silver, put it in bins and barrels and "please hold on to the bar"!!!
On Dec 04 11:32 AM Dave Eriqat wrote:
> Nice article!
>
> Naked short selling, which is effectively what is taking place on
> the COMEX, is tantamount to counterfeiting, but without the hassle
> of actually printing up any phony documents! It’s all done electronically!
>
>
> Gosh, it’s a system seemingly designed to encourage fraud. And yet
> this market which mostly sells phantom metal is the one allowed to
> set the price of real, physical metal? Are we humans insane, or what?
>
>
> Dave
> daveeriqat.wordpress.c.../
What still does not fit in is the increasing gold futures short positions by JP Morgan, Fed friend and Fed shareholder. Since such a revaluation would require temporary markets closures, the forced cash settlement of all gold and silver futures contracts at the previous day's price would resolve that sticky situation very neatly. If that is the case, then it would certainly be in the banks' best interest to have the price as low as possible on the forced setllement date.
Great article.
The price has been deliberately suppressed to enable the uber-wealthy to accumulate as much as they can.
JPM-Chase has been shorting,(manipulating... the price of Australia's Sino Gold and now hold 5-6%.
M-Lynch did the same thing and hold around the same percentage.
That is why shorting is fraud. Why else would a massive bank like JPM-Chase incurr the cost of a transaction of 1 (one) share ????????
regards.
the Gold balloon is going up.
You sell,and get back highly inflated dollars.
Unless you are heavily in debt,and wish to pay up early,what do you do with the dollars you "MADE"?
This time will come if you are patient enough.
ceotalk.blogspot.com/2...
That is precisely what is happening now. They are multiplying like cockroaches; their scarcity is coming into doubt, and for good reason. This means that soon you will need more of them to trade for real goods. The traditional way to move wealth from one collapsing currency regime into the next is gold.
On Dec 04 05:53 PM elcopone wrote:
> Excellent article. The only question where do you put your money
> so as to capitalize on this?
Most critics missed the bull, and the "common wisdom" of stocks for the long haul is looking ill.
BRAVO! on a subject "WE THE PEOPLE" need to understand. If America is to have a future gold/silver will need to be it's money just as the Constitution had called for.
Question: If the Fed is paying interest on bank depsosits, isn't this one way that the Fed's cash can leak into the banking system? If they wanted to initiate controlled inflation, it seems that they could just slowly hike the interest they pay.
Plus, how many traders at GS are specifically focused on bullion? Their internal hedge funds probably do make large macro bets on gold, but are these fund traders separate from the bullion desk? It would be interesting to get some off-the-record commentary from some MD at GS who can see past those firewalls.
Mr Conrad needs to learn about the futures markets.
If gold is at 600 & starts a rising trend then more speculators & small players start to go long.
For them to go long they need to buy their positions from the Commercial sellers.
ie as they buy their longs from the commercials the commercials are buying shorts to cover their positions.
So in futures markets long positions always rise as the prices increases to it's peak.
Ergo this means that short positions that the sellers are holding always rise as the price pushes forwards to it's peak.
Then when prices top longs liquidate their positions so the numbers of longs decrease all the way down to the bottom.
Ergo the short positions the sellers are holding decrease all the way to the bottom.
Conrad speculating that this only occurs in the silver & gold markets means he doesn't understand these markets & is guessing on the movements.
Likewise you will see the positions above mentioned run in reverse when a commodity is trending down & speculators are shorting it.
The speculators are going short on a falling price; the commercial sellers are selling long positions to them & buying short positions as the price falls to it's bottom & when it hits bottom & reverses you will see the speculators selling their positions back to the commercials & hence we see the speculative shorts reduce as the price rises whilst the commercials long (covering their positions) reduce their numbers.
This is the natural see-saw of positions as speculators take one side & increase their positions by purchasing off the commercials who naturally cover with the opposite side of the trade.
Having studied the COTs positions for years it's clear this increasing & decreasing of positions as prices rise & fall is simple Trading 101
One wonders why writers speculate about what they don't know and then spoon feed their ignorance to their gullible readers.
Stating belief as fact is a sad base to speculate upon which is what many new to the PM markets tend to do.
The speculators are going short on a falling price; the commercial sellers are selling short positions to them & buying long positions as the price falls to it's bottom & when it hits bottom & reverses you will see the speculators selling their positions back to the commercials & hence we see the speculative shorts reduce their positions as the price rises whilst the commercials long (covering their positions) reduce their numbers.
We've been hearing that for the last 30 years.
Benanke will be forced out in 60 days,then what?
gold @ 2000 puts a gallon of gas @ 9.00 a gallon.
Be careful what you wish for!
Hello? Margin anyone?
Allow me to contribute another interesting fact to reinforce your conclusions in the linked article describing the end of the gold carry trade whereby gold is sold short and the proceeds are invested into treasuries. With treasuries now yielding nothing, the fraudulent practice of short selling will end and gold will finally appreciate in a "free market"
seekingalpha.com/artic...
`Simply the best article I've read to explain the current events. The information in this article was the missing catalyst for me to finally be able to make sense of current market behavior. Thank you`
I can only re-emphasize the same - sorry for plagiarizing.
Thank you for sharing, now let's Rock and GOLD !
Like I told a "friend" of mine, all I care about are skills I can apply in my life. I don't care about money, money is a byproduct of work. If you convert your currency to gold your new money is gold, and now gold will become superfluous. It means nothing but the meaning you assign to it. It is like a name, what is in a name? A rose by any other name would still smell just as sweet. You people should find a job or a career in which you can constantly grow or become better in and then keep investing in the job or career.
Work is a blessing, the more of it we do the more of it we receive. Work is measured in a currency. What is your currency?
Should we start hoarding amber? That being said. Any hedge against the Fed and Treasury's market manipulating is a worthy consideration. Even gold perhaps. I usually prefer something that earns interest and doesn't sit in a vault and has aa history of being seized in time of national crisis though.
I'd love to see a rebuttal to sharefin's comment. While I sort of see sharefin's point (though I need to do more research on both sides of this argument), I also truly believe gold has been manipulated - it only makes sense to manipulate if you look at things from the standpoint of the Federal Reserve... Why wouldn't they manipulate it?
I worry about just holding some contract for gold without actually holding the metal itself (physically in my possession - though hidden from government eyes/prying hands). I did something silly a while back. I put $100 into a forex account (with Oanda) and bought gold on margin. I think I bought 3 ounces of gold at around the ~$660 range with that $100. If gold ever went up to $9,000 an ounce, I'm not sure that the forex company would still be in business - and if it was, I wouldn't be sure that the contract I bought would be honoured. It if is, I guess I would have turned $100 into ~$27,000... Somehow I think you must own the physical metal itself (or the company that mines it) or you run the risk of owning a piece of paper for a promise that will never be honoured. Honour, in a corrupt system seems, doesn't exist.
On Dec 05 02:21 AM FIAT MONEY wrote:
> TO ALL. REMEMBER THE GIGO PRINCIPLE......GARBAGE IN GARBAGE OUT.
> HOW RELIABLE ARE THE DATA PROVIDED BY THE CENTRAL BANKS, THE IMF
> AND THE BIS. QUI BONO? FACTS ARE HARD TO COME BY. PLEASE PROVIDE
> ABSOLUTE PROOF THAT THERE IS NAKED SHORT SELLING. QUIT SPECULATING.
> I URGE YOU ALL TO READ ANTAL FEKETE'S MISSIVES ON MONEY, THE MONETARY
> METALS, (WHICH BY THE WAY SO MANY OF YOU REFER TO AS COMMODITIES)
> BOND SPECULATION ET CETERA. professorfekete.com OTHER THAN
> HOLDING THE PHYSICAL YOU ARE MERELY TOYING WITH FLUMMADIDDLES. TU
> NE CEDE MALIS
First, when I say that the gold and silver shorting behavior is abnormal to commodity markets, I am talking about commercial short positions. The vast majority of speculators are always long on gold and silver. They are generally the victims, not the perpetrators. The so-called "commercials" are the short sellers, and they are heavily represented by the big bullion banks.
There is no other commodity, other than gold and silver, in which commercial short sellers create huge numbers of highly transient short positions in the middle of bull markets, ignore the fact that the market keeps rising, and keep adding to their short positions until the market comes crashing down. This has continued to happen in the midst of vastly increasing world demand for gold and silver. Take oil, as an alternative example. When demand was high, commmodity speculation was running rampant, and prices were exploding. Then, with demand destruction, prices crashed. In the gold market, we know that demand is soaring, but prices on the futures markets have, nonetheless crashed. This is abnormal price behavior. If this were only happening now, I would attribute it to the recent credit default event selling, but it is not unique to now. It has been happening, over and over again, for at least the last 21 years.
Here's an example of how the gold market is played. In the beginning of last week, with the prospect of an avalanche of delivery demands, records indicate that commercial shorts added about 5,000 transient short positions. This crashed gold to the $700 range. In "olden times", when the non-leveraged longs did not exist, this would have prevented most deliveries from happening, as the longs panicked and sold their positions back to the short sellers, being unwilling to take more loans in order to take possession of a declining metal. This time, however, when the short sellers finally realized that they were dealing with a different "animal" and that non-leveraged longs would be filing their delivery demands no matter what, the increase in open interest abruptly closed, and a mini-panic began, sending gold prices up by over $100 per ounce, in a matter of only 3 days.
This type of shorting behavior is not unique to last week. In July, just before the U.S. government initiated what I believe is its new policy of paying interest to foreign money center banks who agree to sequester eurodollars, 3 major gold shorting banks suddenly increased their short positions by close to 10 times what they were, just one month prior to that. It is now rather obvious that these banks had inside information from the U.S. Treasury or Federal Reserve. They knew what was going to be done to the dollar. No one without inside informatino would have increased their short positions by 10x, in a fast rising futures market, in the midst of exploding world demand, and at a time when no one else guessed that the dollar was going to rally. We can only guess the identity of these banks because, unlike futures markets in nations like Japan, U.S. futures regulator, CFTC, refuses transparency and will not agree to release the bank names.
Finally, some of you have commented that one should not buy gold futures, because you are afraid of counter-party risk. I do not agree. COMEX futures contracts are backstopped by the entire membership of the exchange, and it is doubtful that the U.S. government would allow the exchange to go bankrupt, even if it meant releasing a small portion of Fort Knox gold to save them from uncovered delivery demands. The same is even more true of NYSE-Liffe, which has the entire wealth of the New York Stock Exchange membership backing it up. So, I think you will get your gold or silver, if you pay in full for your contracts, and take delivery.
It is important to start buying gold and silver on futures exchanges for two reasons. First, it is the cheapest place to buy both metals. You can avoid all the hefty dealer markups if you buy futures and take delivery. Second, in order to end the manipulation more quickly, the short selling crew needs to be put out of business. They have accomplished what they have, over the last 21 years, by taking advantage of leveraged long desperation. If you are not leveraged, and have sufficient liquidity to really buy your contracts, you will be immune to their shenanigans. You can simply take delivery, put the gold into your safe deposit box or other safe place, and no matter how they manipulate the price in the short run of a few months to a year, the price will rise exponentially in the longer run. This is a mathematical certainty because of fundamentally flawed dollar dynamics, and a continuing worsening of the differential between world supply and demand for both metals.
Now that the European central banks are refusing to sell gold, the supply has dried up, which is probably why some of more honest portions of various investment banks are forcing COMEX to make deliveries. If people continue to force the short sellers to make deliveries, the game will be over, because naked gold shorts no longer have easy access to real metal. Last week's delivery demand avalanche was coupled with the exit of many leveraged longs. Furthermore, it follows on hefty demands for delivery in late September. Another episode, hopefully even bigger, in the February delivery month, will, in all likelihood, sink the gold manipulators, and catapult gold into the stratosphere.
Let me give you some facts about how to do this. First of all, you need to open a futures account. There are hundreds of brokers, but not all alleged futures brokers are really full fledged futures brokers. Many will refuse to facilitate delivery. For example, Interactive Brokers, OptionsXpress, ThinkorSwim, and many others only claim to handle futures. Such brokers refuse to deliver. RJ O'Brien, MF Global, E-futures, and many others on the other hand, DO facilitate delivery. Make sure you open your account at a brokerage houses that accommodates delivery, and doesn't just push you into the casino-like speculation game. Remember that in casinos, in the long run, only the house wins.
DO NOT BUY COMEX miNY contracts. They ARE NOT SUBJECT TO DELIVERY DEMANDS! MiNY COMEX contracts are cash settled. If you don't have enough money to buy a full contract, buy the NYSE-Liffe mini-Gold and mini-Silver contracts. With NYSE-Lifee, you can take delivery of 32.6 ounces of gold, and 1000 ounces of silver. However, if you do have the cash, the standard 100 ounces gold and 5,000 ounces of silver are usually cheaper per ounce, and you can buy them either on COMEX or NYSE-Liffe. ALL 100 ounce and 5,000 ounce contracts are subject to delivery demands.
Taking delivery and paying for temporary storage on gold, will set you back $25 plus about $12 per month storage for each bar at one of the COMEX warehouses. There will also be a charge from your brokerage house. Yes, I know, you won't leave your bars at the exchange, but, you will need to pay for a few days storage, before you pick them up, or have them delivered by Brinks, so they will hit you for the whole month minimum charge on each bar.
Brinks, and a number of other gold delivery agents can take the bars and deliver them to you anywhere in the USA, or even overseas, at a relatively low cost, compared to the value of the gold. You can contact them for more information, or ask your brokerage house. Jim Sinclair, at JSMineset.com, is currently putting together a summary of delivery charges, from the various gold/silver delivery services. The costs of delivery are a few dollars cheaper on NYSE-Liffe, at least at HSBC, but the difference is not significant.
One questions is the artificial manipulation of the DOW at 8000 and there seems to be a lot of circumstancial evidence for this as regardless of the bad news - somehow massibe bull orders come in to bring the DOW over the 8000 mark.
So can i ask james (or anyone else) to brinbg together some analysis and research on thei mainpulation of the DOW. This would be the story of the decade.
But now having seen the definitive article on gold manipulation - can James or someone of his standard write the article on the manipulation of the DOW to keep it at above 8000. Apriori there seems support that massibe orders come in whenever the DOW gets below 8000 - regardless of bad news suggesting it go to a much lower level. So some analytical expert like James needs to look for empirical evidence on this assertion.
if the DOW is being manipulated - this is the story of the decade - also once we know the organisers we can align to their strategy and make money....
I think this article is eligible for the Pullitzer prize; Revelation on Gold Manipulation.
I and many others would like to see (read) some additional information about the manipulation of the Dow and your findings around the 8000 level. I'm not clear about that part of the manipulation process.
Please enlighten us further Mr. Conrad,
brgds,
freundinvesting.com/20.../
Owning physical gold like coins and bars would be futile as no one would want to buy it from you, just as no one would want to buy illegals drugs, like coke, crack, and such. Just declare it a felony to buy or sell Gold in any form.
Overnight.
If FDR did it, couldn't the current President do it as well?
If you want to make it more powerful and academic,I sugest you should include all the references ( even, if they available for all of us who like to read about this), I congratulate you once again and will be looking for all your work.
Also, sustainable communities such as Global EcoVillage.com might be good.
Gun manufactures?
John
The issue comes down to this: Do you trust your banks, insurance companies, ETFs and government to keep their promises? If not, buy physical gold.
There is no such thing as a 'naked' short in the commodities market. Every transaction involves two parties, a buyer and a seller. The buyer winds up being "long" and the seller winds up being "short" at the market price.
You can't add a short position without adding a long position too. And you can't get larger and larger numbers of long speculators without the commercials taking the opposing short positions in larger numbers.
In addition to the big bullion banks, there are also miners in the commercial gold ranks. Both the banks and miners hold vast supplies of gold which they procured at prices which are much lower than the current market prices. This physical gold is allowed for use as 'margin' against their short positions as they can deliver their physical if need be.
So, when the price of gold rises, the commercials sell to speculators by adding to their short positions at the higher prices knowing that they can deliver if need be, and if the price falls again they can close out at a profit. They make money in both cases, either by delivering at the high contract price or by closing out at a lower price.
Thus it makes sense for them to increase their short positions when prices get higher and higher. They're taking a measured risk that they will be able to close out at a profit knowing that they can take a profit by delivering the physical (and lower cost) gold.
For the most part, having commercials increase their short position at higher prices makes sense. Everyone wants to sell when prices are high right? Commercials are no different.
That doesn't mean there couldn't be some shady dealing going on based on insider info. Seeing huge position increases right before major events could raise some red flags, or it could be commercials establishing spread positions of some sort using options to offset their futures positions. The timing is suspicious, the numbers may be perfectly reasonable.
What you want to see is the number of commercial short positions not expand when prices go up. That would indicate that they expect even further price increases or they would be selling.
In a financial world filled with conventional (incorrect) wisdom, rampant error and deep obsfucation, your article is a great example of the fine indepth pursuit of the underlying truth that the gold and sound money advocates have come up with these last 8 years and more.
Rather than writing gold advocates off as conspiracy theorists, they are one of the few groups over the last ten years that have tried to clearly see and accurately understand the gross distortions that the current debt based fiat money system was fostering. Many foresaw and warned of the potential implosion of this unstable system, consistently for years now.
Now we live through it. In some ways agast at the scale and speed of the unravelling. Confident that the sound money solution to many of these problems will only be grasped for in extremis - when all else has failed.
Meanwhile we witness the folly of mountains of fresh debt creation to bailout failed institutions, themselves victims of their own profligate debt money creation. What a circus.
We are witnessing one of the greatest artificial attempts by a monetary authority to counter the inexorable laws of economic nature, by manipulating everything - which failed institutions should fail, who should get bailout money etc. etc. All this by a basically bankrupt monetary authority.
New debt based money issuance floods from the sky into ( targeted ) hands and the conventional wisdom is fixated on deflation - because the free flow of fresh debt based money is not flowing in all ( consumer ) quarters. Well that may be, but it is ceratinly flowing in some quarters.
Gold and silver, the monetary metals, and their historic acceptance as assets of last resort, have always and do now stand as the only viable threat, and repudiation of, to this debt based ( inverted ) money pyramid ( John Exter's inverse pyramid ). That is why so much manipulative effort would be focussed on such a seeming minor commodity.
But as in all things based on falsehood, obsfucation and deception, they can only go so far, and they run out of gas.
I only regret that we have to go to such extremes of experimentation ( with fiat money systems ) rather than heading the advice of those who knew e.g. the founding fathers in the Constitution.
See todays article by Prof. Antal Fekete
Red Alert: Gold Backwardation!!!
news.goldseek.com/Gold...
On Dec 05 01:10 AM FaithHasMeaning wrote:
> which btw props to author cause that was a lot of work to write.
I assumed he is: georgewashington2.blog...
Please tell me if I'm wrong.
Thanks.
I liked the artical but there is either a bad typo or you have talked yourself into a corner. Please clarify
"At the same time, however, opening the money spigot reduces the value of the dollar and causes gold prices to rise. Rising gold price adversely affects COMEX short sellers who are, as previously stated, old friends of the Federal Reserve"
"The next day, the Fed eased up on the money supply spigot, allowing the dollar to fall and the stock market to reflate.
Opening the money spigot reduces the value of the dollar and then in the second statement easing the money spigot allows the dollar to fall. It cant be both ways. Spigot on dollar fall, spigot off dollar up. Thats how I see it. Dollar up stock market up.
It that right?
If nobody cares about Gold why the hell do they hold so much of it ??
Why do MILLIONS of Asians and Middle Easterners hoard it, Even poor people in those areas use it as an alternative currency.
Good Grief !!
Put your trousers on so we cannot hear you talk.
regards
On Dec 05 10:24 AM AlexR wrote:
> Nobody is manipulating the price of gold, because nobody cares about
> the price of gold. They are, however, busy manipulating long-term
> bonds (specifically treasuries), which everybody watches.
That's why Silverbids.com is tracking the price gap between physical and paper precious metals using auction data.
Before buying metals, check our graphs to see what metals and quantities are selling for the lowest premium over spot.
Why do I say that? Because most goldbugs that write these articles are hopeless disconnected with how the market works, and cannot even tell if gold is in an uptrend or downtrend.
This author has explained in detail his view of what is going on behind the scenes and the article was worth reading.
I still see the part about gold going to $7000 an ounce being pure speculation and highly unlikely, but again the author is a goldbug.
Good effort overall.
However, it will not be an endless spiral downward. Gold cannot go to $6000-$7000 an ounce. We would have to be in the midst of a depression, and people would have to think gold is a safe haven like they used to. Not as many investors believe that gold is such a safe haven anymore.
Good analysis, but even Goldman Sachs cannot predict commodity prices (i.e. Oil going to $200-$250).
I suppose if you really wanted to access equity tied to the growth in gold price with only minimal risk of confiscation, the logical contingency would be to invest in gold miners with a growth profile. Many miners are exposed to the decline in base metals, so any miner that depends on their cost structure from proceeds in base metals for their gold mining are naturally disqualified. Note that many gold miners are really copper miners that have large, low grade copper/gold porphyry deposits. These should be avoided. Silver might react to price appreciation in gold, but silver does not serve as foreign exchange or banking reserve, so I will leave silver to the silver afficianados.
The gold price as of late is reacting to currency risk in the ruble and possibly in the euro. In a time of gold standard, you would hang on to your gold and raise interest rates to attract it when falling into deflation. Central banks in trouble have been selling their physical gold. Treasuries are being overbought, which may also lead to an approaching government bond risk. The decline of the Pound against the Yen and recently the Dollar is a major currency crisis. The UK has no gold to sell to prop up the currency and may resort to the Euro standard in desperation to avert a bond market collapse. Keep in mind that government bond markets are encumbered the world over by secondary lien type financings in the form of interest rate swaps.
Anybody casting a casual glance at the spot market from 3am to 11 am when the LME is open, you will see that the sell offs normally occur during this time. The LME is a PHYSICAL market. European central banks, as well as Russia have been selling their gold. Take it as a matter of confidence that governments invariably sell at the bottom. A $50 decline in the spot price in one morning on the LME means a very large deposition of gold in a panic on the market for the sake of short term political expediency.
As far as the naked short position in gold is concerned, you need only look at the COT positions to review where they stand since 2002. The long positions are the mirror of the short positions. What that indicates is credit derivative obligations and swaps arrayed against gold futures require party/counterparty agreements to hold a certain number of contracts.
The counterparty swaps obligation can actually force sales in bullion directly from government coffers, without papering over the market with short contracts. The entire edifice of derivatives, amounting in the quadrillion dollars range depends on a decline of interest rates in government bonds, and not surprisingly, a short of gold as a source of liquidity at the outset in 2002. The proceeds went mainly into oil, but as the oil price collapsed, any liquidity or available credit is now applied to treasuries.
This 'negative' gold standard has been in effect since 2002, which began the reflation in the markets, and used commodities as a vehicle. There is no basis for argument that this will be true in the future. I refer once again to the COT numbers in the gold market since that time to expose just how derivatives affect the precious metal price, and that it is the underpinning to a vast trade of hyper credit inflation in government bonds interest rates.
This market is now coming to a peak with low interest rates in the U.S., but has collapsed in Russia, leading to 13% interest rates and central bank dishoarding. This is causing disintermediation in the currencies. with wild whipsawing in currency values and government bond instability. An interest rate swap on the decline in interest rates can force the purchase of treasuries, along with a renewal of sales in bullion.
Note, however that the decline in oil prices is no longer leading to huge adjustments in the dollar price. With interest rate declines in the G7 contrasting low rates in the Yen, all currencies are likely to decline against the Yen, but in Japan, they cannot tolerate sub-90 Yen, as this would call into question their own derivatives complex based on interest rate differentials.
Now, where is gold in all this? A revaluation of gold to stabilize currencies, prices and government bond markets would seem the solution, but I have my doubts whether the politicians of the G7 are so keen to lose face and will battle strenuously against any rise in the gold price, as it would upset the apple cart of interest rate derivatives which have hit hyper-inflationary proportions.
What do you think all of that high and going higher Credit Card interest is buying. Can you say double dipping? Bailouts from the taxpayers at low interest and then slamming them with increasing rates under the radar.
Fire 'em all.
On Dec 06 10:46 AM FranSix wrote:
>
> This market is now coming to a peak with low interest rates in the
> U.S., but has collapsed in Russia, leading to 13% interest rates
> and central bank dishoarding. This is causing disintermediation in
> the currencies. with wild whipsawing in currency values and government
> bond instability. An interest rate swap on the decline in interest
> rates can force the purchase of treasuries, along with a renewal
> of sales in bullion.
>
The process unfolding bears great resemblance to the LTCM collapse in the 90's, except 1000 times bigger, with very little recourse. All of the bailouts mean zero is government bonds collapse and the currency reverts to its inherent value, which is zero.
This would impoverish billions of people who were formerly affluent the world over.
No attention is paid in the least to off balance sheet derivatives and how they affect markets, being themselves undercapitalized yet overwhelmingly influential due to the notional size of the obligations. Its like a futures market with a permanent open call or put option.
The lasting survivor in the credit derivatives meltdown as of late is the interest rate swaps. Everything and anything is being done to defend this market at the expense of all, in the attempt to roll it over into the new year.
Currency disintermediation has already begun with the collapse of Power Reverse Dual Currency Notes in Japan, a form of interest rate derivative.
If things get as bad as I think they will, then every pensioner will lose their savings. I regard the middle class in the west as affluent, who are about to lose everything.
As for Comex and the bacwardation. Could be some commodity funds are exiting without looking at the optimal price (liquidation in a hurry) and the rebound that will follow will produce yet another great opportunity for "the naked shorts" bunch to have another short term party. Our target for 2009 (when USA default story picks up speed) is more modest at around 1200-1300 level.
My only reservation about your predicted scenario is this: In order for it to come about, devout Keynesians such as Ben Bernanke, Larry Summers, and Tim Geithner will have to endorse and implement a return to the gold standard. They will, in essence, have to admit that Keynes was the charlatan we free-enterprisers have always claimed him to be. This would be akin to asking Joseph Stalin and V.I. Lenin to endorse Adam Smith and fess up to the charlatanry of Karl Marx. Moreover it will require that all the world's central bankers agree on the necessity of going back to the gold standard. Is such an agreement possible? These fetid Machiavellians have spent their lives worshiping statism and the power it brings them. Are they going to shuck all this to embrace an honest monetary system that will drastically reduce their power, wealth and status? Or will they delude themselves by constructing some sort of Keynesian fiat world system to replace Bretton Woods II (such as Richard Duncan talks about at the end of his book, The Dollar Crisis)?
I see our world bankers and monetary leaders, along with the political thugs that back them up, as totally amoral rats that are now cornered by the immense malfeasance of their past exploits. Unfortunately cornered rats do not pick the noble path and proceed to fess up for their sins when in crisis. They resort to sophistry, cover-up, brute force, thievery, propaganda, etc. to perpetuate the lie they have constructed their careers upon.
Hopefully I'm wrong, and the grievous reality of what is facing us overwhelms the rats, compelling them to take the path that you describe. But my grasp of human nature tells me that the rats will try every other scheme in the book to avoid taking the proper path of an honest monetary system. Could Ben Bernanke actually renounce his entire academic career of Keneysain / FDR worship? Doubtful.
Still a marvelous article. And everyone should assume that it will come true. Because even if it doesn't materialize, one will be immensely better off five years down the road if he puts his life savings in gold coins, gold bullion, and gold shares. The paper fiat system is coming unglued, that is for sure. This means much higher gold prices no matter what type of monetary system the rats eventually construct to replace Bretton Woods II.
stockhouse.com
tinyurl.com/54tujx
Regards,
F6
"I believe the best course of action is to sell out of index funds and stocks, and buy GLD, SLV, physical gold, silver, precious metals mining stocks, companies that own agricultural land, Swiss francs, and other solid foreign currencies."
If you followed his advice, you would have bought GLD for $90. It is now about $74.5. SLV was around $13. It is now 9.4.
The gold miner index he told you to buy was then 38. It is now 23.
The Swiss Franc he told you to buy was then 94. It is now 82.
There is no better sign of a bad investor than crying "manipulation" and sprouting conspiracy theories when his bad calls go down 20-40% in a matter of a few months.
Their two big stocks they whined where being manipulated were NFI and OSTK. NFI is now bankrupt and the stock worthless, and OSTK is down about 75%.
Gold won't go down 75%, but it is not a good long-term investment. It is STILL far below its 1980 price. Even with the recent huge bear market we are in now, the S&P 500 is 8 times higher than its 1980 price. Gold, on the other hand, is down 12% over the past 28 years.
Or you could have put your money in "fiat money" US long bonds and made more than 10% a year whole the goldbugs lost on average 0.5% a year, actually much more since they incurred storage costs.
knowledge.wharton.upen...
Gold presented an amazing hedge against a decline in the Pound and the Euro, so why wouldn't gold and mining equity not present the same to U.S. investors?
Gold has never been an investment. It is a storage of wealth. Those that treat it like an investment will be discouraged and very disappointed. Those who treat it is a store of wealth, that is superior to fiat money, will be pleasantly rewarded over time.
jrs87sch said: "... people would have to think gold is a safe haven like they used to."
What makes you think people don't think gold is a safe haven? Why do gold bugs exist? Why do people around the world buy gold at all?
Also better stores of wealth would have been the vast majority of stocks and bonds; plus most any bit of U.S. real estate; plus most fine art and antiques.
Gold needs to do better than inflation in order to be a true store of wealth. But that won't happen unless real demand for gold rises faster than supply. That very well may happen, but it is hardly a sure thing. You're better of with TIPS.
For one thing, technology will probably reduce the amount of gold needed for industrial applications. And gold jewelry seems to be much less in fashion than it was in the age of Mr. T.
All that said, I have a small long position in GLD, not because of any fundamentals, but because I think there will be a greater fool out there who will overpay even more in the near future, in part because of the credulous reaction of so many to articles like this one.
Hmmm....yes, everything you say is true, but have you missed some of the central points of the author's arguments? Most all of these machinations in the gold market, as well as the dow, are engineered to prevent collaspe and at this point, certain run-away inflation. I think we can safely assume that two things drive an increase in gold value...inflation and a weak dollar. At least this much is not "internet conspiracy". Also, according to all the media, inflation is down (or can you say it's really there, only being held back...isn't this really stagflation?)...so why hasn't gold retreated further? Overall, it is still outperforming the dow and holding its own.
The economy is so huge, and the market is so often convoluted, it's always hard to know if I'm seeing things as they really are. I just read all that I can and try to draw the best conclusions possible for my own economic benefit. I thought this article was terrific and not at all over the top. I do agree with you, though, that we have to keep our BS detecting devices in good operating order!
I would like to hear more comments on how holder's of physical gold could avoid loss, in the event that the U.S. Gov't. were to eventually confiscate it as they did back in the 30's.
On Dec 05 12:06 PM Chris B wrote:
> Gold ownership or shorting performs as an inflation hedge contract
> and little else. When inflationary expectations go down, gold goes
> down dramatically, and vice versa. Whether inflationary expectations
> should go up or down is another argument. Just be sure you understand
> why the price of gold changes, or the price movements will only create
> confusion. Folks who invest according to internet conspiracy theories
> control much of the discussion about gold, but they do not set the
> reality of the market or the commodity. Is there a single sentence
> here that isn't true?
Nelson, There is an ever growing understanding of the fiat money fraud by the average Joe out there. I credit a large part of that to the free exchange of information found on the internet. I believe this is a "snowball rolling down a hill" event. If you are correct when you state "one will be immensely better off five years down the road if he puts his life savings in gold coins, gold bullion, and gold shares. The paper fiat system is coming unglued, that is for sure." Then, We the People will vote with our wallets and crush the paper money game through abondonment of it's use. A return to underground barter of said gold/silver coins and only using fiat when necessary. Can you evision a senario like this occuring?
As a store of wealth Gold price does not exist in a bottle. There is a very tight range of gold/DOW and gold/oil over time. If gold is 5,000 what would oil be? The point is if gold is 5,000, I can assure you it won't be a *real* gain, but a nominal one. You will maintain your purchasing power only. That's the nature of gold ex-speculative bubble. To me gold bugs are always trying to conjure a bubble in gold--why should a store of value move up 5x? What risk do you take when you buy gold? BTW: THE US has over 30% of the world's gold. We've got more than are fair share.
This is why I am so bullish on stocks: they represent real assets too. Fragile surely if the capital strucutre is unsound, but I would wager a few donusts that all equity capital strucutre real estate stocks with cash will TROUNon b/sheet will TROUNCE gold over the next 5-10 years at these levels
======================...
On Dec 04 09:21 AM Umm, yeah wrote:
> Question - so if Gold goes to $2k in the short term, and $7.5k to
> $9k in the longer term (and as you say, returning to a gold standard
> prevents hyperinflation), what is your forecast towards other commodities
> including Oil, etc? The reason I ask is that if the other commodities
> also go up by a factor of 5-10x their current prices, how is that
> not hyper-inflation?
>
> Are you saying that somehow, magically, if gold goes up 10x due to
> a gold standard, that it will decouple from the other commodities,
> and they will remain low?
The Great Depression II will be very different from the Great I due to different underlying factors.
Then, the USA has been a self-sufficient country and a industrial superpower capable of functioning in full international isolation. Now, America is not a self-sufficient country. It depends too much on other countries many of whom are not friendly.
It is important to understand that the entire US economy is over-mortgaged. It is not just "sub-prime mortgages". America produces very few things the world needs at competitive prices.
======================...
On Dec 04 11:48 PM Allamad wrote:
> FDR confiscated all the private gold in the U.S. in 1933 (except
> for wedding rings and minor jewelry) at $20 an ounce. It's now sitting
> in Fort Knox. Who got the best of that deal? There is no reason not
> to think the government wouldn't step in again if the price got out
> of hand.
I may be wrong, but that's how I read it, and it makes sense to me.
On Dec 06 10:32 PM nova wrote:
> Strategic commodities materials are different from gold. These commodities
> prices depend on industrial demand that is substantially weakened
> in depressed economy times.
> ======================...
If you review the Commitment of Traders Report for EVERY futures market in the US, you will immediately notice something: the Commercials, ie, the big banks/brokerages/playe... are rarely grossly long or short in any market. They may be 10 percentage points more long than short. They may hold 60% of the longs and 55% of the shorts in a market. But rarely are they WAY out of balance. EXCEPT in gold and silver. Go to cftc.gov and verify what I'm saying.
Secondly, in the typical futures market, there isn't a market maker, unlike on a stock exchange. No one is required to take a trade except in the orderly flow of the pit, where the trade will be immediately dumped to scalp a tick or two. In other words, if 10,000 specs pile in to go long gold, the commercials do NOT have to take the short side. They can let the price run a bit before they take a trade. They can pile in long, too, and wait for specs to take the short side.
Look at the COT. You will see plenty of markets where specs are playing both sides, short and long. Some specs enter long, and other specs take the short side. The commercials do not have to take the trade. But in gold and especially silver, the name of the game is specs long against the commercials short. And it has been that way for years. The 4 largest commercials hold over 50% of the silver shorts and only 18% of the silver longs. Analyze the COT for EVERY market and you will not see that situation anywhere else. Not one single futures market. None. Again, cftc.gov.
It defies all imagination that the commercials in gold and silver have been so unbelievably foolish to bet against a rising market. In the past 8 years, gold has gone from $250 to $750 (with a high over $1000). The commercials have bet 100% against this move for 8 years. Think I'm joking? Look at the data.
Look at the S&P 500 futures contract. The commercials are net SHORT the S&P 500 because the trend has been DOWN. These guys aren't idiots. They are out to make a buck. It is well known that last year Goldman Sachs made a killing my SHORTING mortgage back securities. Yep, GS made billions betting against the stuff they SOLD to others. Now that is rational behavior for a commercial.
But not gold and silver. Mr. Conrad is 100% correct in his analysis. The only thing I would quibble is about the gold in Ft Knox. If GATA is right, the US doesn't own that gold. Much of it was swapped and sold years ago. Curious, huh?
A net loss on gold deposits threatened the loss of stability in the currency and the government bond markets.
This is why gold was confiscated initially to shore up currency, and then later to devalue currency against gold to exit the depression.
Did not understand a few things:
1. Why is this a 3 step process – “1. Fed gave banks cash for toxic defaulting mortgage bonds. 2. Then, it took the same cash back by selling the banks new treasury bills just received from the U.S. Treasury. 3. The Fed, in turn, bought these T-bills with the newly printed dollars. “
It could have been a simple single step – Fed exchanges toxic stuff for cash
2. Who are these “Naked Short Sellers” – what is their motivation rather business model. If they are plain old institutional traders why will they be taking only one side of the trade (short) in ever changing market situation. The shorts likely may not be naked at all – they could be bullion banks, miners etc – having ability to deliver at a profit.
3. “Leveraged Longs” – why do they have to capitulate each time. Are they inherently weak (why) or are they amateurs – you don’t want to lose more than a couple of times. ‘Non Leveraged Long’ is a good old squeeze – the side with deeper pocket wins. If longs have more money (or staying power) they will win, else the shorts will win. Since the shorts have been winning with alleged backing of the Fed (as suggested) – what will change the dynamic?
It is obvious that gold price is manipulated- in the current environment it should have thrived but has not. Fed and other central banks that create (print) fiat money have an inherent need to keep the gold prices down – so they do all they can to achieve their goal – they have plenty of fire power. So can the gold bugs ever win?
4. Dow manipulation below 8000– what are the dynamics – who does it how – a plunge protection team? We know some big players come in and buy – it has happened so many times including this Friday. Don’t quite understand the $ spigot dynamics – who/how?
If they have capacity to manipulate why at 8 why not at 10000. Why couldn’t they manipulate the oil price – a far smaller market.
Oh, and also FranSix, gold doesn't trade on the LME, it trades on the LBMA.
No major asset class has out performed Gold since 1971. Neither stocks, bonds or real estate.
I love how people always pick 1980 to trash Gold's performance!!! And this coming from Jeremy Siegel - Stock for the long run fame - who has probably cost more people money than even Alan Greenspan.
Actually, that is quite wrong. A study was done a while back, given a certain amount of money and time, comparing stocks and bonds, stuffing money under the mattress, and holding gold, Gold came out ahead, second place was money under the mattress. Those investing in stocks and bonds came out to be the biggest losers.
And real estate??? You got to be kidding!!!!
Gold, to me, is just money - to you it's the investment - but why invest when it's such a horrible one that is bested by dollars and bonds? Land is another good store of wealth, I agree.
On Dec 06 07:05 PM Greg Weston wrote:
> Rob: as a store of wealth, stuffing $100 bills under your mattress
> would have been better 28 years ago. You would have lost 0% nominally
> rather than 12%.
>
> Also better stores of wealth would have been the vast majority of
> stocks and bonds; plus most any bit of U.S. real estate; plus most
> fine art and antiques.
>
> Gold needs to do better than inflation in order to be a true store
> of wealth. But that won't happen unless real demand for gold rises
> faster than supply. That very well may happen, but it is hardly a
> sure thing. You're better of with TIPS.
>
> For one thing, technology will probably reduce the amount of gold
> needed for industrial applications. And gold jewelry seems to be
> much less in fashion than it was in the age of Mr. T.
>
> All that said, I have a small long position in GLD, not because of
> any fundamentals, but because I think there will be a greater fool
> out there who will overpay even more in the near future, in part
> because of the credulous reaction of so many to articles like this
> one.
jimrogers-investments....