Seeking Alpha

Precious metals slide as taper set to grow

Comments (29)
  • If unemployment, or rather the Labor participation rate will be one of the criterions to taper or not, I guess, the taper-camp hasn't won yet.
    21 Jan, 09:25 AM Reply Like
  • i am no gold bug, but i have yet to hear an intelligent explanation as to why QE is so bad for gold, but has no impact on the stock market.

     

    when i look at a chart, since QE infinity was announced in the Fall of 2012, gold has done nothing but go down while the stock market has done nothing but go up so why would its removal be bad for the asset class that has nothing but gone down but good for the one that has done nothing but gone up?

     

    I still think the party most directly affected by the end of QE would be banks since it is banks that seem to have benefited most, not the general economy. I don't really believe QE has had any effect on the real economy, either positive or negative.
    21 Jan, 09:28 AM Reply Like
  • Because the cessation of QE would coincidentally remove additional risk of an inflationary environment in the future. Just as a continuation of QE would increase additional risk of an inflationary environment in the future.
    21 Jan, 11:49 AM Reply Like
  • This fails to address the point as to why gold and silver plummeted with QE4 prior to taper...?
    21 Jan, 12:16 PM Reply Like
  • to date, how has QE been inflationary in any way?
    the cash sits on the balance sheet of a bank that collects interest for doing nothing.
    i strongly believe that QE actually has a negative effect on economic activity and is actually deflationary-real estate and stock speculation the exceptions-because if anything, it creates a disincentive for banks to take any risks by lending out money. Therefore, money velocity is anemic and inflationary conditions with QE in place are next to impossible.
    21 Jan, 12:40 PM Reply Like
  • gw, we are in the midst of a deflationary credit contraction that the Fed is trying to battle with QE. The QE is in fact inflationary, but it is being swallowed up by the contraction. In a sense, we are keeping things buoyed for now because of the QE. The Fed buying up assets from the banks (mortgages) has helped their balance sheets and some of that money is creeping into stocks. But with the Fed keeping rates artifically low, and at record lows at times, money has flowed from CD's and low interest bearing accounts into anything that might produce an income, like dividend paying stocks.

     

    Gold is falling somewhat because since 2011 when it was at its high, the dollar started to get stronger. This year, so far, however, we have had both gold and the dollar moving higher. I expect this to continue, but I do think Market Makers will take gold to test the lows before we are off and running again.

     

    I also believe the Fed has no choice but to do more taper despite what Seeking Alpha editors try to post on their site to bash gold any time they can. Notice how gold is down today yet the mining stocks, which can be viewed as leading indicators, are up nicely despite of it? Nothing from Seeking Alpha on GDX or NUGT from them. NUGT is only up 30% or so this year and second only to JNUG which is up 70%.

     

    Watch interest rates for clues as to what happens next.
    21 Jan, 12:49 PM Reply Like
  • You have a point gwaterloo, in effect all QE does is enrich banks and that's why the economy and inflation are not affected. It is a perfect solution for the federal reserve which is essentially head of the banking cartel. The problem is it ruins the Us Treasury bond market in which foreigners are protesting by refusing to buy long term maturities until the Federal Reserve stops rigging the auctions.

     

    The reason why they want to keep rates low is because if rates rise much further the federal reserve can't justify loaning out money to banks at zirp which is higher than even the Us government borrows at and has enabled the TBTF banks to finance themselves without regards to wooing or paying a decent rate of return to depositors. In the end QE is designed specifically to ruin the wealthy and those and transfer the wealth into the banks pockets.

     

    Until people figure this out the Federal Reserve will keep wanting to resurrect and grow QE. It's in their best interest and gives them more political power than anyone including the President.
    21 Jan, 01:38 PM Reply Like
  • If they are afraid of deflation what better way to help inflation than stop Nightly Naked Bombing raids on Precious Metals on Comex and allow the price of silver and gold to rise giving people earned sense of wealth to go out and spend money?
    21 Jan, 02:33 PM Reply Like
  • It lowers income through the paying of interest, and so does ZIRP. They are deflationary. You're supposed to cut taxes and increase spending to offset the loss. We didn't, so the policy is missing a vital piece. Bernanke has made it clear this is the case. Low interest rates have to be paired with spending increases and tax cuts to work, or they are deflationary and hold growth back. That's why the Fed can't hit its inflation target and that's why growth is slow. The economy is growing in spite of rather than because of QE. ZIRP is likely a net plus, a weak one, QE a weak negative.
    21 Jan, 04:02 PM Reply Like
  • It's helpful to think of gold as a reflection of the dollar's value. When we hear the price of gold has gone up we should not think in terms of gold's value having increased, rather, the unit of currency used to purchase it has declined in value, therefore it now takes more currency units to obtain the same amount.

     

    The steady decline in the price of gold over the past year or so is not so much a decline in its value as an increase in the value of the currency unit used to acquire it. In other words, since the dollar has appreciated (or has depreciated less than expected) it now requires less dollars to obtain a given amount of gold.

     

    When you can remove the dollar from the equation and think in terms of how many barrels of oil, or bushels of wheat can be obtained with one once of gold, throughout history, you find those ratios remarkably constant. The relationships are not perfect, and some variation in price is driven by other forces, but a significant portion of the variation in the dollar-denominated price of gold is explained by this idea.

     

    That understanding eluded me for a long time, and perhaps I did not do it justice in this short reply, but it is a deep & significant concept-- one I encourage you to explore through better writers than myself.
    21 Jan, 07:02 PM Reply Like
  • Doug you said:
    "I also believe the Fed has no choice but to do more taper despite what Seeking Alpha editors try to post on their site to bash gold any time they can."

     

    Is that accurate? Did you actually mean more QE and not more taper?
    21 Jan, 07:07 PM Reply Like
  • I hate when I don't proofread rodh7858! Thanks for catching. You are correct.

     

    I am writing my next book and I type way faster than I think sometimes, but I do proofread my book! More than a few times! lol...

     

    More QE, yes!
    21 Jan, 10:05 PM Reply Like
  • Doug,
    "More QE, yes! "
    That makes sense.
    I thought you had changed camps.
    22 Jan, 06:21 AM Reply Like
  • They should correct that to read that 'paper' gold is sliding in the market, not physical if your lucky enough to find it. I'm currently paying a $3 premium over spot price for silver bullion and consider myself blessed for still able to get some that cheaply.
    21 Jan, 09:35 AM Reply Like
  • gold did actually go from $250 an ounce to $1,000 before anybody knew what the phrase "QE" even meant.
    21 Jan, 09:40 AM Reply Like
  • When folks use a one day slide for the end of any market, questioning those folks reasoning must be brought to the fore. Please look at a daily gold chart for the real thing. The buzz word for gold is GLD, the ETF for the precious metal. The real price out there in the world is what one needs to watch, not a paper mill.
    Gold, the real thing baby, is in an uptrend, I say stay long gold in any form, physical being the best, and I continue to say Ag will be better than Au percentage-wise this year. For sure, I predict the PM's will outshine the general stock market this year.
    Numismatics, and I mean high grade coins, will probably out pace all of the above.
    Before rushing into numismatics, be sure you know what you are doing. There are ways to price them and save getting scorched.
    Capt. Brian
    The Lost Navigator
    PS From a purely technical slant, I would stay long gold until it breaks below $1,180.00 and closes below that level. if it is over that, stay long.
    21 Jan, 10:06 AM Reply Like
  • Brian Bobbitt said; "Numismatics, and I mean high grade coins, will probably out pace all of the above."

     

    Couldn't disagree more Brian. History has shown, that outside of the late 80's bounce, and a few "rare" coins traded by muliti-millionaires among each other, gold and silver rare/numismatic/collec... have only returned their bullion value after paying a 15% to 30% mark up to acquire.

     

    Better to buy bullion gold and silver coins instead. There's a reason why these gold dealers can afford all those commercials on Glenn Beck, Sean Hannity and many other mostly right wing news shows.

     

    Disclosure: I sell gold and silver bullion at 1% over my cost, and am therefore biased against numismatics in any shape or form. But I'm also right.
    21 Jan, 03:02 PM Reply Like
  • This looks like manipulation and short covering on the gold/silver "paper" markets. Just wait until Germany's investigation of manipulation by the London Gold price "fixing" leads them across the Atlantic directly to the doorstep of our Fed Reserve and major Central Bankers like JPM. The gig will be up soon. Manipulators will scurry for cover, just like DeutcheBank is doing now (i.e. they immediately put their London Gold Fixing seat up for sale when the German accusations story broke on Friday).
    21 Jan, 10:35 AM Reply Like
  • I see this price action as short covering on the 'paper' GLD and SLV markets. The PM market has the jitters after Germany announced it's investigation into the price manipulation of the London Gold "Fixing" group. DeutcheBank immediately responded by putting their seat up for sale (no guilt there...). I suspect if Germany continues its investigation that it will lead them across the Atlantic to the steps of our Fed Reserve and other central banking co-conspirators, such as JPM. This should be interesting to watch, though I doubt we'll get much media coverage here in the States.
    21 Jan, 10:35 AM Reply Like
  • I do feel that what happened may be the action of some other Jamie Dimon / Jon Corzine like character who think that they are untouchable & are now showing their defiance to the German Authority. Anyway, will be interesting to see how will the situation develop from here.
    21 Jan, 08:43 PM Reply Like
  • I also dont really follow this whole paper gold versus real gold argument.
    do you make the same distinction for paper natural gas vs real natural gas or paper corn futures vs real bushels of corn ? When gold rose to $1900, did you say the real gold is actually much lower because the demand for paper gold was pushing up the price of real gold?

     

    I think there are plenty of bullish arguments that can be made for gold (and some negative ones also) but this whole paper vs real distinction seems the weakest one of all
    21 Jan, 10:43 AM Reply Like
  • gw,
    There's a slight difference between NG and gold.
    When paper NG drags the price down (it doesn't for the moment, but suppose it does), no one starts exporting more NG to China f.i.
    China only imports as much NG as it needs for it's industry.
    When paper gold drags the price of gold down, the Chinese and everybody who has a crunch for gold, starts buying because the price levels at his financial possibilities. Consequence: the physical stuff drains out of Western warehouses direction East to never come back again.
    21 Jan, 02:50 PM Reply Like
  • These ludicrous comments about QE3 Tapering this morning by Jon , some self-appointed "Fed Watcher", at about 7 a.m. EST, was his desperate attempt to prevent another leg down in xx:TNX (U.S. 10 yr Bold Yields) on a measured move basis, but will only be a temporary effect, as DXY has already gone negative after a brief upward move, and xx:TNX will follow suit. Look to it ! Jan 21, 2014 at 9:12 a.m. PST.
    21 Jan, 12:13 PM Reply Like
  • Makes PERFECT sense…”..taper set to grow..”, …supposedly based on WSJ story from Jon HIlsenrath. Gold down -1.2%. Silver -2.3% AND ES Futures up! +0.5%, 10yr. flat!
    21 Jan, 02:29 PM Reply Like
  • Stockmarket is all about being on the right side the manipulation !
    21 Jan, 02:34 PM Reply Like
  • It is price busting naked short bombs on Comex which knock the price down - press release is just a cover up. people, americans have wealth locked in precious metals and are being deprived of that wealth by price manipulations using electronic warfare under the radar of SEC.
    21 Jan, 03:37 PM Reply Like
  • When will SA observe that the miners like GDX, GDXJ are breaking out even as gold is pushing hard to overcome 1250? This still feels very positive for the price of gold going forward. I'll stick with NUGT for now.
    21 Jan, 04:47 PM Reply Like
  • Agree 615...mentioned it in my comment above. Every play JNUG?
    21 Jan, 04:59 PM Reply Like
  • Don't underestimate banks manipulating precious metals. i would not be surprrised if its bigger than the 'libor'manipulation we have see last year. Word is that banks are preparing to take their hands off it before probes are being started by the regulators
    22 Jan, 06:26 AM Reply Like
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