Gold Bulls: Beware 28 comments
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I’m making my New Year’s resolution early this year. I’m done pretending that we have honest markets. I know most of you are already fully aware of this, but I’m gonna throw one last chart out for those who might remain unconvinced:
That’s a 10-day chart of Wachovia Bank (WB), the nation’s fourth largest bank, whose “price discovery” resembled Mr Toad’s Wild Ride, before crashing in Citigroup’s (C) lap. Just remember this, the next time the SEC bans short selling, and an insolvent bank’s market cap jumps $20B overnight, buy a put. Yes kids, financial terrorism is alive and well!
Gold and Silver bugs yawn at these prices gone wild charts, we’re used to them. We get our prices from a magical place called the COMEX, where pixies discover prices unfettered by the shackles of supply and demand.
Which brings me to the point, I think gold’s gonna get whacked again as soon as Hank and Ben are done blackmailing congress. My Ouija board says $830 is a likely buy point in the next 30 days. We need to take into account the ongoing price suppression of gold. I applaud the efforts of James Conrad, Ted Butler, Jason Hommel, and others, but I see zero chance that it’s about to stop, for now.
Paulson and Bernanke have turned capitalism into three card monte, so the US Treasury can sell low interest paper. I have no idea how long it will be until the true uber-bubble bursts (that, of course, is my beloved US Dollar), but it surely will, taking the hopes and futures of millions with it.
Precious metals are the natural enemy of all things fiat, and it should be clear to you that TPTB have no intention of running an honest card game (look at that WB chart again). Right now, we are witnessing bold-faced racketeering from our leaders (if only we had a Justice Department….).
Perhaps I am alone in this last concern, but I am really starting to question the wisdom of precious metals ETFs. State Street (STT), who runs the GLD ETF, fell more than 27% on Monday; Barclays (BCS), parent of IAU, was down 16%; Deutsche Bank (DB) parent of DBP, down 17%. History has not been kind to those who accepted paper promises for precious metals. I have been haunted by the words of fellow blogger, “deuxsous”:
If your gold position is paid-for physical gold stored safely by you, then just hold it and forget about it. That's what I did in the 1970's.
But if you are a modern paper gold trader, just burn the paper and move on to the next paper fad.
Disclosure: Author is long “pretend” gold that he can never actually touch, and is looking to swap into the shiny metal kind of gold in the very near future.
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This article has 28 comments:
As a foreigner looking at the actions (manipulation is such a loaded word) of the treasury, Fed and Bernanke/Paulson, this image of instability does nothing to make me want to put my money anywhere near American equity markets, or $ denominated assets.
Uncertainty + arbitrary, sudden, capricious rule changes = ungood.
Don't get fancy. Split your 'investment' funds in a manner you think appropriate (50-50 or 60-40 or 70-30, whatever) and put some into GLD or SLV. When prices have a run up, sell off some of the ETF to rebalance the ratio, when they run down buy some ETF to rebalance.
Over time you will buy low and sell high and increase the total. Every so often, take out half of the 'profits' and use them to buy physical.
If you're lucky one of the run ups will be massive and you will collect a windfall. If so, you might want to wait to buy the physical until the price comes back down a bit.
Don't worry about not being perfect in implementation. It won't ever happen. Just try to put yourself in a better spot next month than you are this month. Keep working at it and if possible add more savings to the total so your holdings will grow over time.
If the dollar every completely collapses you will at least have some paper gold and some physical. That will put you far ahead of most of the country's population.
I had the same problem. I finally decided that I could not trust my IRA to still be there when I needed it. I figured they will find some way to loot it by then. I cashed it out, in spite of the tax hit and penalty, and bought physical. I am trying to do the same with my wife's IRA, but now the shortage of physical Gold and Silver is making this difficult to do.
Well it did it today. So what now? Does is go lower,as of now it looks like its tested it successfully.
Well it did it today. So what now? Does is go lower,as of now it looks like its tested it successfully.
This article was actually written on Monday (and yes, I'm a little irritated that it took this long to publish). So, I'd have seemed smarter on Tuesday.
The Ouija board tells me that $830 is a low-risk entry price right enow. I did not expect that target to be hit so quickly. So, I would expect an over-shoot to the downside, before the next advance.
The Ouija board expects to see the low after the tenth of the month. So, I'd wait and see for now, which means no new money (not sell), unless, prices go below $775 (which I see as unlikely).
The omen that I'm looking for is, what will appear to be, a convincing bounce in stocks. Hope this helps.
But considering the huge sell off of commodities yesterday, have people started hedging their gold with anything?
Read an interesting article which explains why it's absolutely necessary.
www.greenfaucet.com/co...
Good luck. And make sure you hedge!
Divesting has already begun in these countries. I wouldn't bet against a tsunami of dollars coming into our economy.
Dollar cost average into Gold, no one knows the bottom, but the top looks a lot more attractive. The PPT is loosing its power, and the real market will prevail.
I think the 'decoupling' of Gold from Dollar should be a process affecting gold here. Looks good to buy now yes, but still depends on the $. Would have loved to see Gold rallying after the bailout was approved. Lets see this week.
Hey Eric,
I agree with the theory 100%. I don't know if my nerves can take seeing gold under $500 (but I will agree it's possible now).
I get more angry everyday about the propaganda surrounding gold. Federal law requires the US mint to provide gold, silver and platinum coins to the public (not friggin' dealers) at market price plus expenses, in "quantities sufficient to meet public demand."
This is Paulson's job, and I am sure that he is solely responsible for the suspension of the eagle and buffalo coin production (and I don't buy any explanation I see for the "shortage"). He has decided that it is in his buddies best interest to keep precious metals depressed and out of the hands of the general population.
I've been hoping that the new administration will put an end to the price manipulations very shortly after the inauguration. The "in your face" manipulation is one of the many things that has destroyed confidence in all things American and capitalist.
I agree acquiring physical is the way to go. What makes me sad is how ugly it will probably be here when you are proved right (and I'm not ruling out the possibility of confiscation either). What's the point of being rich in hell?
And it's all because Paulson is too spineless to do what he is required by law to do.
Here's an observation you might find amusing; the people who don't think gold is money are the exact same people who thought house prices never go down.
I've never tried the "reply" button before, so apologies if this posts twice.
I agree with the theory 100%. I don't know if my nerves can take seeing gold under $500 (but I will agree it's possible now).
I get more angry everyday about the propaganda surrounding gold. Federal law requires the US mint to provide gold, silver and platinum coins to the public (not friggin' dealers) at market price plus expenses, in "quantities sufficient to meet public demand."
This is Paulson's job, and I am sure that he is solely responsible for the suspension of the eagle and buffalo coin production (and I don't buy any explanation I see for the "shortage"). He has decided that it is in his buddies best interest to keep precious metals depressed and out of the hands of the general population.
I've been hoping that the new administration will put an end to the price manipulations very shortly after the inauguration. The "in your face" manipulation is one of the many things that has destroyed confidence in all things American and capitalist.
I agree acquiring physical is the way to go. What makes me sad is how ugly it will probably be here when you are proved right (and I'm not ruling out the possibility of confiscation either). What's the point of being rich in hell?
And it's all because Paulson is too spineless to do what he is required by law to do.
Here's an observation you might find amusing; the people who don't think gold is money are the exact same people who thought house prices never go down.