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Pater Tenebrarum

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  • Love Trade Cools As Central Banks' Gold Demand Heats Up [View article]
    It got a little 'hotter' today.
    Aug 21 05:09 PM | 1 Like Like |Link to Comment
  • Fins Prepare To Slip Away, Merkel Fantasizes About Political Union [View article]
    I have discussed this at the time on It has become a sort of running gag ever since.
    Aug 21 05:41 AM | 2 Likes Like |Link to Comment
  • Dividend Investors: Beware Of Payments In Gold [View article]
    As a general remark on the dividend payers: South African gold stocks have a long tradition of paying sizable dividends when the times are good. HMY has also declared a 50 cents (SA cents) final dividend today. The biggest surprise is probably DRD, a company that was at death's door more than once. Its business has been restructured completely, and it is now the biggest surface treatment company in the world, retreating the old sand dumps of the mined out Witwatersrand gold mines. This business model has evidently worked well, as it has been paying a dividend ever since it was adopted.
    Aug 16 05:29 PM | 1 Like Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    For more on the sentiment and technical situation, including charts:
    Aug 16 03:19 PM | 2 Likes Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    Actually, in euro terms gold is only a smidgen away from breaking out to a new all time high - and as experienced gold traders should know by now, the euro gold price has tended to lead the dollar gold price for the past five years.
    Meanwhile, net speculative long positions in gold futures are at their lowest since 2008 and gold sentiment is also at its lowest since 2008. The Hulbert Gold Investment Newsletter index has spent most of 2012 in negative territory (investment advisors on the whole recommended a net short position in gold for most of this year). Bull markets don't end when everybody turns bearish after a few months of consolidation.
    Aug 16 03:17 PM | 4 Likes Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    Jewelry demand has no influence on the gold price at all. Do you know when jewelry demand was at its record high? In 1999, with gold at $250. The LBMA alone trades more gold in just three days than the jewelry sector demands in an entire year. The main driver of gold's price is investment demand, and within the investment demand portion of gold demand it is reservation demand that is most important.
    What exactly determines the gold price can be read here in detail:
    Aug 16 03:10 PM | 2 Likes Like |Link to Comment
  • The Consequences Of Financial Repression [View article]
    I have a suspicion you're just repeating a sound bite you picked up somewhere. There is in fact no economic theory more strongly anchored in reality. Why not actually investigate Austrian theory by reading some of the works of its major proponents? They can all be downloaded for free at the Mises Institute's web site.
    Aug 14 05:18 PM | 3 Likes Like |Link to Comment
  • Is This A Buying Opportunity For AuRico Gold? [View article]
    The mine that was shut down due to labor problems was El Cubo, which was recently sold to EXK. There were never any labor problems at Ocampo (up until now),but the mine had to adopt a new mining method to fulfill its potential. That has however been achieved a while ago. As to Young Davidson, agree with the assessment.
    Aug 8 12:42 PM | Likes Like |Link to Comment
  • End Of An Era For Gold Investors [View article]
    The only form of money that actually survived from 'ca. 1613' is in fact gold. Most currencies extant since then have been repudiated (some more than just once!), and so have most government bonds . And if memory serves, a single bank that was around in 1613 has survived to this day: Monte Dei Paschi di Siena. Unfortunately it just had to be bailed out twice in succession, so by rights it should be considered bankrupt as well.
    Aug 6 04:38 AM | 9 Likes Like |Link to Comment
  • An Unintended Consequence Of The Crisis: A Free Market In Interest Rates Emerges In Parts Of The Euro Area [View article]
    My comment on the effect the accumulation of voluntary savings has on interest rates must be seen in isolation - of course it is a bit hypothetical in the actual situation we face because there is a central bank system which surreptitiously finances capital flight and current account deficits via the TARGET2 payments system and keeps the banks alive with ELA funding.
    It isn't up to me, but if it were, then I would reduce the central bank's interventions to the protection of depositors. Bond and shareholders of insolvent banks should take the losses that are rightfully theirs. The problem with propping up unsound credit is that it becomes like a millstone around the economy's neck - no competitors to the zombie banks will arise knowing their competition is subsidized. And so the worst stewards of capital remain in charge of the credit intermediation process. I agree that there is a 'pain threshold' for society, but one must not forget, the losses were already made during the boom - the bust has merely unmasked them. The main question is therefore: who shall bear the losses and how quickly can all the unsound economic activities be written off. Delaying tactics will only serve to make the situation worse.
    Aug 2 01:29 PM | 1 Like Like |Link to Comment
  • Switzerland's Money Printing Orgy [View article]
    Fiat currency can be properly described as 'credit money'. It is a remnant, in essence: once bank notes were akin to warehouse slips that promised the bearer to be able to exchange them for actual money (i.e., gold or silver). People got used to using banknotes, so the transition from backed to completely unbacked ones was fairly easy to achieve. Yes, England issued 'tally sticks' as a fore-runner of fiat money. I might remind you that they were all burned in a grand ceremony in 1834, on the occasion of which parliament also burned down by mistake. Their use was ordered to be discontinued in 1724 already, but the remnants kept circulating until the early 19th century. Naturally English Kings misused tally sticks to the most egregiuos excess (Charles the second relieved all of London's goldsmiths of their gold and left them with these worthless pieces of wood to wage his wars), which was the reason for abandoning them.
    Fiat money is not 'a form of equity' as you claim, although I would agree that the only reason why it acquires value in the secondary market (similar to tally sticks) is that government accepts it as payment for taxes. In other words, it 'works' entirely on the basis of coercion - legal tender laws and the sovereign's taxation power. Money is however not a creature of the State - it has been usurped by the State. As to why it could turn out to be a problem when Switzerland prints gobs of money from thin air in order to buy up unlimited amounts of foreign currency, I refer you to monetary theory and business cycle theory. An unhealthy boom/bubble has begun to take hold in Switzerland due to the major suppression of interest rates this surfeit of money on the loan market has produced. It will end in tears and leave Switzerland impoverished, not richer.
    Aug 2 01:15 PM | 1 Like Like |Link to Comment
  • Switzerland's Money Printing Orgy [View article]
    I agree with your assessment of the Fed.
    Aug 2 01:03 PM | 1 Like Like |Link to Comment
  • It's Crunch Time Again [View article]
    My feeling is that treasuries were rather ripe for a correction and just waiting for a trigger. Usually a seasonal high is made in June, so they're already 'late'. That said, the bond market did not break any significant support levels yet.
    Aug 1 01:29 PM | Likes Like |Link to Comment
  • It's Crunch Time Again [View article]
    Thank you for the detailed comment. I would agree that the formation shows some similarities with the 1970's correction/secular bear. The good thing is that the market is close enough to new highs both in the short term and the longer term picture that it will fairly soon either validate or invalidate a number of assumptions.
    Aug 1 02:26 AM | Likes Like |Link to Comment
  • It's Crunch Time Again [View article]
    Well, not necessarily. If a large scale triangle of the form 'A-B-C-D-E' is about to be built, the C wave would also be a three wave structure (although it may internally, at one lower degree, still be comprised of a 5-3-5 zig-zag). However, a lot can be said for the larger scale 5 wave count (with wave 2 in progress). One interesting argument made by Bob Prechter in this context is that the current secular bear market should have a form that alternates with that of the 1929-1942 bear market (where wave A was the biggest wave down, while wave C was comparatively mild and failed to produce a new low).
    Generally I'm very careful with corrective structures of all sorts, even such large scale ones, as they often resolve in unexpected ways. I think this is especially true today with a pure fiat money system in place that gives the central bank far more latitude with regards to keeping monetary inflation going.
    Aug 1 01:58 AM | Likes Like |Link to Comment