TinBrick

You don't have to be a card carrying member of GATA to recognise that there is something very peculiar about this price action - a picture is worth 1,000 words! (By the way, those are Dan Norcini's comments on the chart, not mine.)

Pot . . . kettle . . . black In any case, Fuller does substantiate his opinion - this guy is of course free to disagree with his interpretation, but at least Fuller provides some facts.

Merkel rejects ally's call to use gold as bailout loan collateral. DEREK SCALLY in Berlin GERMAN CHANCELLOR Angela Merkel last night gave short shrift to a political ally’s call for the use of gold as collateral for all future euro zone bailout loans. Labour minister Ursula von der Leyen’s suggestion yesterday caused ructions in Berlin and prompted an immediate denial that it represented government policy. The solo run appeared a calculated effort by the minister to boost her domestic profile ahead of an emergency Bundestag sitting of the ruling Christian Democratic Union (CDU) last night. Dr Merkel, without mentioning her minister by name, said making new ideas via the media was “not the way to get things done” in the euro zone crisis . . . ("Irish Times", 24/08/11 - more here.)

This morning's London fix was $1,886.50, $9 higher than yesterday's p.m. fix - I don't think the fat lady has sung yet . . .

It'd be nice to think it was over £1,800, give it time! In another little milestone, although the spot price touched $1,814.95 on Aug 11th, the London fix exceeded $1,800 for the first time this afternoon (Aug 18th) when it was fixed at $1,824.00.

Today (August 15th) marks the 40th anniversary of the closing of the gold window by President Nixon - ending the convertibility of dollars to gold. The fiat dollar is now officially middle-aged . . . http://www.youtube.com/watch?v=iRzr1QU6K1o

I've watched this twice and I still don't get the significance of the $1,764 figure, except that Sinclair says it is derived from a 1920s newspaper article by Jesse Livermore and "it's mathematical". It would be nice to think Jim's right, but his justification of the significance of the $1,764 price level in this interview could hardly be any vaguer . . .

Gold in Euro past €1,200 - now at €1,201.52 (4:27pm)

Interesting straw in the wind! I recall reading a couple of years ago, I think on James Turk's blog, a comment to the effect (I'm paraphrasing here) that one Monday morning we'd wake to find the price of gold in Asia is $5,000 bid, none offered. Could this be the Monday? We can always hope!

Essentially, van Eeden's thesis is that jewelry demand is an insignificant component of the gold price, whether that demand is high or low. As a proportion of the total supply of gold, jewelry demand is not enough to make any difference either way. I'm sorry, I can't reconcile the above with this: Why would a bank (or anyone) hold 5% to 10% of their assets in a metal which has very limited industrial/commodity uses and is otherwise only used as jewelry, unless that metal was also considered to be money or money's equivalent? (EDIT: I should also have pointed out that not all CBs are selling gold, and some - notably the Russians - are buying.)

This seems a bit self-contradictory to me. As I already noted, gold has very limited industrial/commodity use. I can see the logic of CBs divesting themselves slowly so as not to cause huge price falls, although similar logic didn't seem to trouble Gordon Brown when he flogged the UK's gold at rock bottom prices. Paul van Eeden has convincingly argued jewelry demand has only minimal impact on price. (Have a listen to this interview on CWR from last year: http://commoditywatch.podbean.com/2007/10/...chael-hampton.) So why would banks hold 5% to 10% of their assets in gold, if gold is not money or money's equivalent? (EDIT: Incidentally, van Eeden has been spot on in his calls on the PoG this year. In April he said "I would not be surprised to see the gold price drop $150 an ounce, taking it well below $800 again" and in a newsletter from mid-July he gave his estimate of the theoretical "true" price of gold based on the money supply and gold supply growth at $757. I just wish I'd paid more attention! )

The "barbarous relic" argument has some merit and it is indeed hard to see how we would return to gold backed currencies anytime soon. However, if gold is not "good money" why do central banks continue to hold large stockpiles (notwithstanding sell offs in recent years) and why does the market place any value at all on it, especially given that its actual usefulness as an industrial metal/commodity is very limited?

Speak for yourself, I've no idea where it's going!

Casey Daily Resource also cites an improved supply situation in South Africa as a factor in driving down the price. http://www.caseyresearch.com/displayDrp.php

I think the rationale is recession = fewer car sales = less demand for platinum in catalytic converters

It is, if (and it's a big if) you can persuade the market that it's all the bad news and everything's now out in the open. Markets hate uncertainty. Personally, I'm not persuaded!

As of this morning (Jul 28), long gold is the only open position he has listed.

Another reason I came across somewhere recently, but can't find the link to, is that if the gold price at rollover is, say, sub-$920, any call options for prices in excess of that expire worthless. It is in the interests of the institutions which wrote the options for the price to be lower at rollover time (assuming they have written more calls than puts). They may therefore heavily short the gold future price in order to depress the price.

A little more insight into this topic from the Casey Daily Resource: Instead of the usual NY gold commentator that I post most days, here's an e-mail that was sent to me by a very good friend. It was sent to him...and I'm including it here completely unedited for spelling, grammar, punctuation...or capitals. The guy that wrote this certainly knows his stuff...and probably knows more than I do...so I thought I should share his insights... "two time frames am working with... "gold options expiration is on monday, so da boyz are shooting for that close, but think they might have shot their wad a bit early here. i bought 1 part (of potential 4 parts total) on today's (Wednesday - Ed) close... will buy every lower close thru rest of july (thursday) when gold rollover has done. "but for the *big* move, am trying to hold out til end of august to go "all in"... as that will be silver's last roll before the longer time frame (3 months) for the December contract. any and all big lows by then will be expected to be bullet proof. "thru the summer, they get to one-two punch the metals with alternating rollovers each end of month, but gold will enjoy December as front month for 4 (count em!) months straight after aug 1st... and silver will join in for 3 months. that's so key to the futures market. everything waxes and wanes with the rolls. and December is only time both gold and silver are on same wavelength. "luv it. "just gotta hang in there about 6 more weeks of this silly summer season. " http://www.caseyresearch.com/

Not quite true - the September silver contract rolls over in three weeks on Friday Aug 15th.

Just as a contrarian voice to the conventional wisdom on this forum, Paul van Eeden, respected contributor to Commodity Watch Radio, produced a revised version of his gold price model for his newsletter last week. Paul estimates the theoretical price according to his model at $776 for 2008 and $843 for next year. Now, he accepts that there is plenty of scope for an overshoot and says the actual price could easily reach $1,500 or more, but believes gold is overvalued and advises due caution in gold investment should be applied. Personally, since the upward trend is intact I will remain long gold, but have no particular target price in mind.

FWIW, this has been mirrored by Mark Shipman, who opened a long gold position last week (Jul 14) and this week closed his long oil position. Mark Shipman's investment diary

Some discussion of the gold/oil price ratio in May (look through posts around the 18th) Gold comments - May 2008 Suffice it to say there was some skepticism that the ratio had to revert to the long term average.

George Soros--Croesus was told--has covered much of his shorts in financial stocks. Why chance another public policy move by regulators to shut off this automatic feeding trough? Soros finally shorted oil at $137 a barrel and put on a long position in gold; he expects to see gold hold its ground even if oil continues to decline. Soros sells oil to buy gold - Forbes report

OK, makes sense, thanks for the clarification. (I'll stick to my long term trades - less stressful!)