Gold catches bid as EU peripheral issues wake up


Portugal's 4% decline today brings its 7-day dive to 11% as the parent of Banco Espirito Santo reportedly is considering bankruptcy protection. Banco Espirito is off 17% today and more than 50% over the last month.

Spain's IBEX 35 is down 2.4% and Italy's FTSE MIB is lower by 2%.

Gold is higher by 1.5% to $1,344 per ounce and silver by 2.4% to $21.58.

In other news, India disappointed gold bulls by leaving in place recent increases in gold import taxes in its just-released annual budget. The previous government over the last two years had boosted the import tax to 10% from 2% and mandated that 20% of imports had to be re-exported.

GLD +1.1%, SLV +1.9%

ETFs: GLD, SLV, AGQ, IAU, USLV, SIVR, SGOL, ZSL, UGL, DGP, GLL, UGLD, DZZ, SLVO, GLDI, DSLV, DGL, DBS, DGZ, AGOL, DGLD, OUNZ, TBAR, USV, UBG, GLDE, GYEN, GLDL, GLDS, GEUR, GGBP

From other sites
Comments (28)
  • David at Imperial Beach
    , contributor
    Comments (4382) | Send Message
     
    Indians don't let a little thing like government intervention get in the way of their gold buying. Smuggling will increase. There was a temporary lull in Indian gold buying while the people hoped for lessening of the repressive taxes and restrictions. Now that hope is removed, they have no reason to hold back on the smuggling.
    10 Jul 2014, 07:54 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
     
    The junior miners are on FIRE!
    10 Jul 2014, 09:10 AM Reply Like
  • ceristeare
    , contributor
    Comments (1105) | Send Message
     
    $JNUG down 8% I hope you didn't get hosed my friend.
    10 Jul 2014, 06:15 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
     
    $JNUG up 21% today...like I said...FIRE!!
    17 Jul 2014, 11:40 PM Reply Like
  • WaveRider007
    , contributor
    Comments (650) | Send Message
     
    This time there will be no QE to hinder the PM's true inflation.
    10 Jul 2014, 10:59 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    Ummmm .... I thought it was QE that WAS causing inflation. Now stopping QE will cause inflation?

     

    So confusing.
    10 Jul 2014, 04:06 PM Reply Like
  • 6151621
    , contributor
    Comments (1172) | Send Message
     
    @MI: yes this is confusing. Perhaps what was meant was without QE the financial repression of savers will be undone and government debt interest rates will be higher. QE won't directly impact CPI so this is confusing. QE seems to have had a bigger impact on asset prices. Higher asset prices ultimately lead to higher consumer prices (with significant lag).
    10 Jul 2014, 05:11 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    But but but ... isn't the central argument of goldbugs that money printing via QE causes inflation and hence gold should go to the moon?
    10 Jul 2014, 05:27 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    QE has created massive asset price inflation which has had spilover effects into real goods prices (but not an inflation tsunami).

     

    However, what concerns goldbugs is the following: ending QE doesn't remove the excess reserves on commercial banks balance sheets which stand at roughly $2.5trillion. Said otherwise, this is circa $25 trillion that is available to be lent out (via the fractional reserve system). The Fed has already admitted this is a problem for them but have said to the market they won't sell down their portfolio to shrink bank reserves (although if they did, this would be deflationary). In short they are trapped between severe deflationary and inflationary outcomes. History tells you that the central planners choose the inflationary route every time. Why? Because severe deflation would bankrupt everyone with large debts: governments, banks, businesses and private individuals.

     

    The developed world is currently at unsustainable levels of indebtedness and the only solution is high inflation. Period. There is no other way out and this is what Joe Blow and the vast majority of the media fail to understand. But they will do soon enough.
    10 Jul 2014, 07:01 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    So QE does create inflation. Can you please explain this then:

     

    "This time there will be no QE to hinder the PM's true inflation."

     

    This seems to indicate that QE is somehow suppressing PM's "true" inflation (whatever that is). How does that work, if QE is inflationary after all?

     

    I am just trying to make sense of goldbug logic here.
    10 Jul 2014, 10:34 PM Reply Like
  • ceristeare
    , contributor
    Comments (1105) | Send Message
     
    Many ways to word this:

     

    Money supply has increased, output of goods has not.

     

    The value of money has decreased (more of it) so you pay more for things because the supply (output) has not increased but remained steady.

     

    The money is worth less but there are the same amount of goods available so you pay more for them because the money is in huge supply while goods are not.

     

    Walking the precarious line between deflation and inflation is highly difficult so the Fed has a full time job with many many people at the task.

     

    eg. If output increased by 5%. and the money supply increases by 7%. Then inflation will be roughly 2%.
    10 Jul 2014, 11:29 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    I get all of that, but how was QE hindering PM's true inflation, as was claimed earlier?
    10 Jul 2014, 11:35 PM Reply Like
  • ceristeare
    , contributor
    Comments (1105) | Send Message
     
    I see gold and vix both as fear gauges. There is so much gold (and oil) would smuggling and hoarding drive up the price at all especially since there is so much unaccounted for how do you put a price on it??
    10 Jul 2014, 11:46 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    I would have to be able to read Waverider's mind to understand his angle but this is mine:

     

    QE does not create inflation (not immediately anyway) but it does goose asset prices directly. Therefore if inflation is somewhere in the future but rising stock and high yield bond prices are very much in the present then investors would shun gold in favour of stocks and risk assets (this is entirely rational). If the end of QE signals the end of the run-up in risk assets then gold should/could benefit from the switch out of risk assets (along with Treasuries). Bear in mind too that gold has been in the process of a substantial correction from a high of $1,900, one which now looks as though it's run it's course.

     

    You have to remember that gold is ultimately always going to go up (in the long run) because the monetary base will only ever go up. That is the way our monetary system works and that is the way fiat currencies evolve. Those calling for the death of the dollar by the end of this decade are probably not wrong.
    11 Jul 2014, 09:05 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    That logic is rather convoluted.
    11 Jul 2014, 10:22 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    It's okay. Most of the mainstream media don't understand and certainly the man in the street hasn't a clue. You either get it, or you don't.
    12 Jul 2014, 02:20 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    So you have to be a true believer to understand why QE __suppresses__ gold price inflation, when all the goldbugs routinely say that it is QE that should __cause__ gold price inflation?

     

    That makes sense.
    12 Jul 2014, 12:53 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    I give up.

     

    It may be that a stocks cheer-leading news sheet is more within your intellectual grasp (as is the case with most 'investors' and day trading sorts).
    12 Jul 2014, 06:12 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    LOL. I was hoping that one of the gold bugs here would understand what Waverider really meant.

     

    Waverider is a conspiracy theorist. He believes because of QE people are buying other stocks than gold stocks, which is why gold is not rising. He wants QE to stop, so that the economy falters, other stocks become less valuable, there is rush to safety, and gold soars.

     

    He is not thinking of inflation at all. He is thinking pure, unadulterated, wolrd coming to an end doom and gloom.
    12 Jul 2014, 06:30 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    Wave rider may well be a conspiracy theorist but his support for (or belief in) higher gold prices is entirely correct even it's by complete accident or for the wrong reasons.

     

    You appear to think gold supporters are (by default) conspiracy theorists, however, I could name any number of high profile people in the investing world who see the case for much higher gold prices. The investors I refer to are ones who have actually 'made it' in their field, as opposed to the drones (asset collectors) who manage money in the long-only business: the drones who lost 50% of their clients' money in 08/09 and who will lose an even greater amount in the next meltdown.
    12 Jul 2014, 07:41 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    Over the past 60 years, what do you think has been a better inflation hedge? Gold or S&P500?
    12 Jul 2014, 07:46 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    Why pick 60 yrs? Why not 100? Or 10? Would you have asked this same question in March 2009? Of course not.
    In 6 - 12 months' time, when the S&P is testing resistance at 600, will you be crowing about the inflation hedge again? It's a proven fact that stocks are useful as a hedge only in periods of relatively mild inflation. In periods of high inflation they're next to useless. As Kyle Bass pointed out, the Harare Stock Exchange was the best performing of all while the Zim$ was being inflated to the moon but the proceeds from your stock portfolio would have bought you three eggs.

     

    You evidently: a) don't understand the arguments for gold b) having nothing useful to say on the subject and c) think that trolling the web trying to prod goldbugs is a useful use of your time.

     

    Can I humbly suggest you become more useful to society and the economy as a whole by going out and getting a real job.
    12 Jul 2014, 09:12 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    I picked 60 years because S&P500 has only been around 60 years. But even if I asked the same question in 2009, the answer would be that S&P500 is a better inflation hedge than gold. I know. It hurts.

     

    You know for a fact that S&P500 is going to 600 in 6-12 months time? Wow. Gold bugs always know so much.

     

    What kind of job would you suggest? Trading gold coins?
    12 Jul 2014, 09:20 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    Deary me, he's back for more.

     

    Why don't I (hypothetically) buy some gold stocks today and you buy the S&P 500 at today's level and we'll circle round in two years to see who's ahead.

     

    Until 2016..
    12 Jul 2014, 11:22 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    What happened to 6-12 months?
    12 Jul 2014, 11:34 PM Reply Like
  • nooseah
    , contributor
    Comments (709) | Send Message
     
    I hate to do this to you but let me put it like this:

     

    In the anti-gold camp we have a wannabe Wall St trader who describes themselves, rather self-importantly, as 'Macro Investor'. Perhaps on your internet dating-club account you call yourself 'The Stud'? Joining you is a plethora airheads, empty suits and talking heads (who have achieved little more than notoriety as stock pumpers).

     

    In the pro-gold camp we have: George Soros, Kyle Bass, John Hussman, Jim Grant, Paul Singer, Marc Faber, John Paulson (I could go on but I'd get bored).

     

    Now then, I just wonder which of those camps may contain the greater aggregate credibility? Answers on a postcard, champ.
    13 Jul 2014, 06:50 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9252) | Send Message
     
    I don't trade. I just know that over the long run SPY is a better inflation hedge than gold. Do you dispute that?
    13 Jul 2014, 11:27 AM Reply Like
  • filipo
    , contributor
    Comments (4648) | Send Message
     
    If one considers the exponentially increasing gold imports of all India's neighbouring countries, one can only conclude: there's huge smuggling, as I predicted would happen, and the Indian taxes are obsolete and completely inefficient.
    10 Jul 2014, 02:17 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs