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Did we miss a major central bank tightening overnight? The precious metals sector is lit up...

Did we miss a major central bank tightening overnight? The precious metals sector is lit up bright red following the Fed's addition to QE and what looks like the promise of ZIRP for at least 2-3 more years. GLD -1.1%, SLV -2.2% premarket. Copper and oil join in, the red metal -1.4%, and WTI crude -0.6%.
Comments (49)
  • Well, inflation above 2.5% won't be tolerated without tightening. Any real spending at all at this point would cause some inflation, so the wealth effect has a very limited window to work in.
    13 Dec 2012, 07:23 AM Reply Like
  • If you read the statement carefully, it says "the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that....this will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored." They're talking about interests rates, not QE4.
    13 Dec 2012, 08:08 AM Reply Like
  • Gold is perfect example of market manipulation .
    13 Dec 2012, 08:01 AM Reply Like
  • Greetings Res,


    Warren Buffett buying IBM to prop the Dow Jones Industrials is manipulation. Carl Icahn talking up his latest purchase and then selling after a nice gain is manipulation. Central Banks buying gold to justify printing of currency is manipulation.


    The price of gold declining in spite of the CB buying is not manipulation, instead, it is the market saying, "you may want a justification for your massive print machine, but you'll have to find another way to achieve."


    13 Dec 2012, 12:22 PM Reply Like
  • Market doesn't drive any entity ,it is market which is driven by entities .Two basic forces drive market 1. supply and 2. demand .In case of GOLD supply is not proportionate with demand .Central banks have machines to print UNLIMITED money but world doesn't have enough mines to produce UNLIMITED GOLD . This is the basic explanation .


    And if you go by fundamentals ,then remember ,in last 2 months ETFs have purchased record amount of GOLD ,around 2500 tons
    which should drive the gold price higher even if fed does not print any money .


    14 Dec 2012, 02:57 AM Reply Like
  • Actually, they are "printing" unlimited gold. Through naked short selling and, loaning of gold they are creating fake gold. True you can hold physical gold but it seems it is driven by the paper gold price.


    I would not be surprised if the loaning of gold was being done using some kind of fractional reserve system like the banks use for money.


    As seen by the recent HSBC $1.9B fine and nobody going to jail, the bankers and politicians are corrupt to the very core and capable of anything.


    Also keep in mind that the physical gold supposedly held by HSBC on behalf of the GLD ETF is likely to be a bogus scam. Sort of like the old "pigeon drop" confidence game. HSBC is really, really dirty and corrupt. They are the "boogy man" of banking and standing proof that the "boogy man" is real.


    I was thinking today would be one of those days where the short sellers would be covering, but it is very clear from this mornings hard spikes down that they intend to drive the price down another technical level.


    As a clue to this CNBC reported a couple weeks ago of a large number of puts being bought on GLD at a price relative to about $1685 per ounce.


    Here we go again.
    14 Dec 2012, 08:24 AM Reply Like
  • I find it interesting to look at the historical graph of gold and silver, the banks can play the manipulation game but ultimately the price keeps going up. I buy physical pm's on dips whenever I can afford to.
    14 Dec 2012, 09:06 AM Reply Like
  • Printing money causes inflation. Inflation drives the price of gold. the fed fires up the presses and make an announcement, and gold tanks.
    I dont get it. Help me out.
    13 Dec 2012, 08:06 AM Reply Like
  • "Inflation drives the price of gold."


    There's your flaw. Speculation is driving the price of gold, not inflation.
    13 Dec 2012, 08:30 AM Reply Like
  • Price is not determined by economic logic. It's determined by JP Morgan. Hope this helps.
    13 Dec 2012, 08:44 AM Reply Like
  • As "scoops" replied below. Gold and silver are highly manipulated, like temperature in a pressure cooker, but eventually it needs to take into account ambient pressure and let off pent up pressure. Yesterday interday trading charts showed fierce battle between "heavy thumbs" (big shorters, sudden drops) and the "demand factor" (real physical market) which will need to see it rise substantially sometime soon.


    There are several good authors on SA writing about manipulation in the PM markets. Do a search, decide who makes sense.
    13 Dec 2012, 09:05 AM Reply Like
  • Expanding the monetary base i,e "printing money" does not cause inflation. Money supply has had little to no correlation with inflation for a long time. It is all about the velocity of money and growth. If these pick up, then inflation will skyrocket, and the academic empty-suits at the Fed will have no way to combat it without taking heavy losses on their security holdings.
    13 Dec 2012, 11:53 AM Reply Like
  • The price of gold over the last decade has correlated with the debt level, not inflation.
    13 Dec 2012, 01:16 PM Reply Like
  • @AMann: The Fed (along with the Treasury) is pulling many strings, some not discussed on SA much, to kickstart the velocity of money. I have my doubts on how successful this will be. Perhaps they are observing that controlling people's spending and investing habits is a tricky business - so they should just get out of it altogether, eh?
    13 Dec 2012, 02:23 PM Reply Like
  • Whitehawk,


    I think the Fed should have stopped its expansion of the monetary base in 2009-2010. Pumping more and more money into the system in order to goose spending and borrowing for the purpose of trying to skip the natural deleveraging/recession cycle of business will only lead to more pain in the long-run. Let consumers deleverage and the housing market heal naturally, then we can resume the consumption and repeat the cycle.
    13 Dec 2012, 03:08 PM Reply Like
  • I consider recent price action just "trader noise" and would think that gold is better correlated with the Fed's balance sheet(at least recently). Once that starts to expand again with QE4 I would be surprised to see gold not rise also. Technically gold appears mired in a pennant formation in the weekly multi-year chart. Whatever happens is going to be fast and furious. I favour gold exploding higher in the new year especially if the fiscal cliff can gets a good kicking.
    13 Dec 2012, 03:35 PM Reply Like
  • Looks more to me like a technical smackdown. White house wants to look good into the year end and a soaring gold price will not add any confidence. I think that there a lot of forces working here that we do not see. Just one last comment. Bullion coins are trading above SPOT. Not just the offer but also the buy. Check out or others. Central banks ar not selling. So its the futures market playing games...
    13 Dec 2012, 08:10 AM Reply Like
  • If you really believe the White House or other US government agency is worried about the price of gold then you need to get a clue. Very few people are invested in Gold on a relative basis. Gold largely flies under the radar in the US. In China and India it's a different story. China I do believe have incentive to knock down the price of gold as they are in an accumulation phase.
    13 Dec 2012, 09:12 AM Reply Like
  • Of course they are worried about the price of gold. At some point, the world will tire of Bennie's printing and move into something that can't be debased...whether its oil, gold, silver, who knows. Some of the banks also have trillions in derivativies inked at a gold price of $ JPM smacks the market whenever it approaches that level. You can't be taking loses there when Warren's trying to shoo you in as his next T. Secretary
    13 Dec 2012, 10:43 AM Reply Like
  • what's the spot price on a clue, and is that market manipulated also??


    13 Dec 2012, 11:10 AM Reply Like
  • The spot price (aka the melt price) is what the rate is for plain, bulk metal. Different products have different markups they try to justify as being from different mints, collectable coins, etc. The most bogus part of the entire gold market is that the published price is now based on the manipulated paper shares - not real physical metals.
    13 Dec 2012, 12:00 PM Reply Like
  • who says inflation higher than 2.5% will not be tolerated? we have had it much higher than that for years which is why the pm's have been in a bull market. inflation will rise ever higher and it will not be reported as such. furthermore, it is the intended fed policy and ecb policy of the western trading system to inflate ourselves out of the mess the pols and cb's got us into in the first place. the fed and the ecb's have never been problem solvers. they are problem creators. that, in fact, is the only thing they do create. they are all Nimrods who build towers, create confusion, and destroy the peace and harmony among people. they are modern day alchemists, who think themselves capable of creating value, wealth, out of worthless paper, now just electronic postings. the mind of man apart from the life-giver can function only as life taker. witness the last 42 years.
    13 Dec 2012, 08:11 AM Reply Like
  • There is so much money already printed and on the sidelines that the Fed will not be able to control inflation. Government keeps growing. They will keep printing money no matter whatever blather foams out attesting otherwise. If the economy did heat up and that money starts coming off the sidelines, it will be an avalanche. Interest rates will rise. Debt service costs will spiral out of control. The government will be forced to print more and more money. Then inflation will spiral out of control. Bernanke is like the little Dutch boy holding his finger in the levee. How long he can hold it nobody can predict. One thing for sure is that it will break.


    Let me say also on behalf of each one of us who understand this, that there are 10 or more people who don't. That is why the gold price seems so irratioanally low to us. To them, it's over priced and in a bubble. And well, since the only thing that really drives the market price is perceived value, then it can drop, drop, drop and not increase until the crisis has fully unfolded before everyone. It is not likely to rise much before then because people get spooked over the technicals. Markets can behave irrationally for a very very long time.
    13 Dec 2012, 08:23 AM Reply Like
  • Thank you, Denney.


    Could not believe my ears during the Bernanke speech yesterday. Holy Cow! Let's see...printing what--46 billion dollars a month---anybody see a problem with that?


    But, most likely, the crash will be on someone else's watch. Not Obama's. He has to be betting on that one. I cannot begain to tell you how much I hope the precious metals prices drop. I really would like to back the truck up again......but can stand these rates given the inevitable outcome.
    13 Dec 2012, 09:44 AM Reply Like
  • This is manipulation...pure and simple....the Government can not have people running to an old relic and dumping the dollar...or so they think....but people will...unfortunatly this just transfers much of the western wealth to they will buy up the manipulation....they can see it too....
    13 Dec 2012, 08:27 AM Reply Like
  • The powers that be don't want the precious metals to appreciate, which could lead to a loss of confidence in fiat currencies. This is a coordinated manipulation. It can't last forever. Ask yourself, was the Fed's action supportive of hard assets?
    13 Dec 2012, 08:31 AM Reply Like
  • This talk of manipulation in the gold market is ridiculous.


    Governments around the world are buying up gold to justify their massive printing and hope that gold will continue to appreciate. Without a higher gold price, there is little to justify the balloning paper in the system.


    Those who argue the manipulation theory (are always right no matter the outcome regardless of "facts") are clearly unfamiliar with the same talk in the 1970's about gold being manipulated as indicated in the Richard Russell comment below:


    "But the important thing about the Republican gold platform is that it is a dramatic departure from the Governments position on gold. It is a definite step toward freeing gold from political manipulation, towards letting the market determine what it is worth, towards allowing all who want to trade or own gold to do so. At such time, gold will move towards and to its real market price and its true value (source: Russell, Richard. Dow Theory Letters. September 8, 1972. page 6.)"


    Now that gold is moving "...towards and to its real market price and true value..." nobody that is spouting off about manipulation wants to believe it that it isn't being manipulated. The GATA argument which has been bought hook, line and sinker has been proven wrong since the price of gold rose from $252 to $1,700.


    It seems that arguing manipulation is just an excuse for not doing the legwork to understand what is really happening in the market. With gold allowed to freely float and not set at an artifically low price (the true definition of manipulation, as opposed to conspiracy theory), usually called a gold "standard", governments are all in on the rising price of gold.


    Good luck at always being right.


    13 Dec 2012, 04:32 PM Reply Like
  • Nobody is always right. Just go ask Nelson or Bunker Hunt. :)
    13 Dec 2012, 04:50 PM Reply Like
  • Just another day at the office for some nameless market participant, from Reuters: "Nearly 27,000 lots already changed hands, an usually
    high number for early Asian trading hours."


    "They" just saw a window of opportunity to trigger some stops and make a few bucks in the dark of night. This is their typical MO.
    13 Dec 2012, 08:49 AM Reply Like
  • Of course there is manipulation. If you notice every sharp increase is immediately batted back down. Not only government but banks. Banks and governments go out and either "loan gold" on a fractional reserve basis which multiplies the supply of "paper gold." Also banks go out naked short sell gold and silver. They sell gold and silver that they don't even own.


    Imagine there is this bucket that is filling up. That is the gold price. We know, left unmanipulated it will rise and rise. That is predictable and reliable. A predictable and reliable natural behavior is all you need to be able to significantly manipulate for profit. Because you know, when you stop your manipulation which direction the price will go. Back up.


    So these guys watch the bucket until they see it get almost full. Then they knock a hole in the bottom and siphon off the gains. They know it is going to fill back up so there is little risk in their actions. Prior to driving down the price, they buy puts and sell calls. They cash those in like milking a cash cow. They are cleaning up in both directions because they know the next move is then back up.


    Okay so other's see this going on. They know they can't wait long to tap the bucket otherwise the other guy will tap it first. So the bucket size gets smaller and smaller as the manipulators become more and more aggressive. That's why the trading channel is becoming more and more narrow and why the price can't breakout like it would otherwise.
    13 Dec 2012, 08:50 AM Reply Like
  • Denny - Well put.
    13 Dec 2012, 11:04 AM Reply Like
  • Don't fight the Fed, they say, but in this case I can wait, years, decades. Of course Bernanke has declared war to gold, and ST he and GS are on the winning side.
    However, I expect the first crack in this rigging to appear sooner or later. They can't make physical gold.
    In my country PM's ownership is anonymous, not taxed, contrary to stocks or bonds. I expect a tsunami of tax hikes on those vehicles. Gold offers good shelter.
    13 Dec 2012, 02:17 PM Reply Like
  • Yes, GLD and AAPL are the milk cow of the Hedge Funds. Everyone is on the same side of the trade, so they can leverage by selling calls the short the metal. When it falls, they reverse their position, take their profit and wait for the price to go back up 80% of the way. Then they repeat the process. After a while, there is a downward "Trend" and the charts make the investment look awful. However the gold bugs (and APPL bugs) continue their predictable behavior.


    Long term, these guys will get tired of this and move on to something else. But at the moment, this is working.
    13 Dec 2012, 08:30 PM Reply Like
  • AAPL like gold is way undervalued. I have traded AAPL for a couple years. Made money on every trade. Some buy and hold. Some buy and sell covered calls. Sometimes puts. Overall I made lot more money than just buy and hold. This last time I got back in at $539. Watched it drop by $19 or so and bailed out for a loss. That was the first time I ever lost money on an AAPL trade. Right after that it jumped about $60. Now back down some again. Kicked myself. I am just going to stay out of AAPL and all stocks right now. I think we are going to see NO resolution to the fiscal cliff. That being the case, it may fall along with other stocks. I am looking to get back into AAPL at $490. But I won't bet on the fall by buying puts at this point because it could go either way 50/50. But if it does drop below $500 I will be buying strong.
    14 Dec 2012, 12:56 AM Reply Like
  • Wow. I see AAPL now getting closer to that $500. Quicker than I thought. I still won't pull the trigger at $500 because the overall risk of a crash due to the fiscal cliff is too great. It has to be below $500 and past either the resolution or the crash for me to risking buying back in. If it sounds like I am "playing not to lose," then you are understanding what I am trying to do. I am not advising anyone here. I am not qualified to advise others. Everything I do is relative to my situation and risk tolerance. Nobody understands my situation better than me. Just laying out my thought process for comments or ideas. Buying back into AAPL has those two conditions.
    14 Dec 2012, 08:51 AM Reply Like
  • Central Banks must protect the Bond Market at all costs. Should gold become the preferred safe haven (which is should be) then the Bond Market will tank and its game over for the western financial system, this makes it necessary for them to squash gold on any gold supportive news.
    13 Dec 2012, 08:53 AM Reply Like
  • True that blowforhome. Let me add if there is a real bubble that it is in bonds.
    13 Dec 2012, 08:55 AM Reply Like
  • - The Zombies continue to rule the markets.
    13 Dec 2012, 09:01 AM Reply Like
  • All I know is I'm buying as much physical gold and silver that I can afford to, it's just going to go back up.
    13 Dec 2012, 09:23 AM Reply Like
  • Look at golds chart today, there are clear steady regulated movements in each spike. Break each spike down and it has a saw tooth shape, like a machine operating.
    13 Dec 2012, 11:04 AM Reply Like
  • Well the gamesters had a great couple of days. Seizing on the anticipated spike. They were able to drain enough of the bucket to trigger a technical breakdown and cause some traders and maybe even a few investors just to jump off the roller coaster. I wonder if at some point we don't just see a capitulation. I bought $30 Jan 2014 calls this morning on SLV at $4.40. Will happily sell at $5.40. We will see how that trade goes. If we have reached that capitulation point, then I am sunk on that trade. Am thinking capitulation is not in the cards for now.


    Given my target gains, I really should be doing spreads to reduce my amount at risk.
    13 Dec 2012, 11:31 AM Reply Like
  • Buy low sell high in not what PM is all about...your buying real currency that protects like insurance. Just hold it...
    13 Dec 2012, 11:48 AM Reply Like
  • That's true Marvin. Absolutely. I do some of that also. But you can trade it too. People will trade anything from horses to Pokemon cards.
    13 Dec 2012, 11:57 AM Reply Like
  • Just wait the bond market is debt, and the printing of additional money is more debt. The debt is a bubble that will pop, and when it pops there will be no soft landing until a lot of altitude is lost.
    The funniest thing about the Fed printing money and buying all these mortgage back bonds (from the Banks) and US bonds (The Government) is eventually inflation will creep in and they will be forced to raise rates, which will force the fed to dump the bonds back out on the open market at a discount absorbing loses on the sale, and the American tax payer will be left holding the bag again while the bankers get rich.
    13 Dec 2012, 12:32 PM Reply Like
  • The gold futures market drives the price action, and it is a volatile market with the pronounced effects of thin, large block trading. Also, the gold futures options market (and other metals futures options) is essentially broken, not following standard pricing models and adversely affecting underlying price action.
    13 Dec 2012, 02:33 PM Reply Like
  • We got to stop thinking of gold as expensive at $1690 per ounce. It cost miners about $1000 per ounce just to get it out of the ground. So you have only $690 of speculation or what ever you want to call it. In my mine that is not very high for something that is rare.
    13 Dec 2012, 03:39 PM Reply Like
  • Great perspective, Muddy. I wish I could click "like" twice. BTW, I have seen this debate play out a few times on SA. I am not sure how many are following this post, but it could get interesting. What you say makes too much sense for you not to get poo-pooed by the PM naysayers. :)
    13 Dec 2012, 04:54 PM Reply Like
  • Muddy's comment about the actual cost of mining gold should not
    be forgotten when judging the current price of gold. One should also
    compare the gold price with the retail price index to gauge its real value.The froth on the futures market should be ignored. PS I wish
    I knew what AAPL stands for.
    15 Dec 2012, 03:38 AM Reply Like
  • I think AAPL was a major technology company some time ago,
    15 Dec 2012, 07:33 PM Reply Like
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