marceau

If these banks didn't have immense problems, various governements could solve this crisis overnight by ordering independent audits through their regulatory systems. That would be guaranteed to restore public trust and bring things back to normal if it was all just negative sentiment and rumour. Sadly though, it's not just sentiment, these banks have real problems, and many are on their knees. Publicly acknowledging this would spell catastrophy. The lack of government-enforced enquiry is the biggest indicator of the underlying facts.

The only consolation I can see from this is that if it is profit taking, most of the miners won't get hit too badly, as they didn't show much profit in the first place.

Maybe I won't step in after all. All commodities are taking a severe pounding. I knew they'd hit us again today, but I didn't think they'd be so successful.

I think we're going to test $960 today. If it holds, I think I'll hop in. Edit: Silver taking the beating of a lifetime, down below $19.40 already.

Smackdown commenced, by the way.

Sad really, but very true. What gets me is that the herd includes people from all backgrounds and of all levels of intellect. It's not just the case with finance though, its the same with politics, fashion, culture and a million other collective activities. Chances are we all adhere to the ridiculous in some aspect of our lives, simply because everyone else does. I joked to a friend recently that the advertisers have the young adult market sewn up so well that they could probably convince an entire generation that jack boots and well-starched brown shirts were fashionable in less than a month. You needn't look too far to see how Hitler did his brainwashing before WW2, so long as the message is made to seem desirable, people will join voluntarily.

What do we think, an early morning NY gold dump? I think so. I'll be looking for a place to buy.

I actually found myself agreeing with Nadler today. I think I must be ill or something. Still, it's not our opinions which will drive market direction, it will unfortunately be driven by the 'thinking' (I use the term loosely) of the mainstream, so it's worth staying vigilant in the short term. Kitco Gold Analyst (or Bear) John Nadler Still think he's placing way too much emphasis on Indian jewelery demand though.

As is usual at times like these I've been watching the mainstream media to see how it has been spun. Obviously they've pretty much all fallen hook line and sinker for the 'Fed is strong/Fed will save us' line, but the one that really got me was analyst who justified the commodity selloff on the basis of the Chinese raising interest rates to combat inflation. Fair enough, you'd think, on face value that would appear to combat one of the biggest sources of world inflation. But then you remember that China has already done this about 20 times over the past few years with barely any effect, it seems laughable to suggest that this particular cut will be the one to halt the inflation monster in its tracks. Brought the message home to me, they are desperate and will clutch any straw to support their unjustified optimism. Gold is quite possibly going to get kicked a fair few more times before reality returns, as the muppets fail to see the underlying reason for the rises in the general indices. It's not growth, its inflation. Short term, and ultimately highly destructive, the rate rises do nothing to address the underlying problem, which is the effective insolvency of the world's biggest base level consumers. Anyway, I'm keeping my guard up for a while now. The short term risk to gold is higher now than it has been for many months. I know its not justified, you know its not justified, but with the twisted logic of the markets black can indeed be white and 2 + 2 can equal 5. Love the dead cat, by the way.

Why they would do so is beyond me. I disagree with myself. And therefore agree with you. So there.

Very well put. I can't see how today's move can possibly be made to stick. It was so false, I doubt even Nadler will get pulled in by it.

Today's action will have scared away the herd for some time to come, I believe. Sure, they'll come back, but not until we've hit $1100 or so and are due a proper selloff. The presence of the herd is best delayed until the last minute. At the moment I'm more concerned about the presence of the speculators and funds. If they bugger off in search of pastures new, however short term, gold will lose a significant amount of rocket fuel. Why they would do so is beyond me. The main indices aren't exactly a bargain compared to gold at the moment, so I know where I'd be going for greater gains. I thought your point was quite valid though Doraemon, the mainstream always get them in too late and set them up for a good shafting by the big boys. So herd bullishness is a good contrary indicator in my book.

You can bet he'll be banging on like he was right all along tonight though. I suppose he should make the most of it, dollar rallies are becoming less frequent than solar eclipses.

Whoops. Double post.

China will move away from exporting anyway as the West's currency devaluation means there will be much less demand as peoples paper wealth evaporates and incomes don't keep up with hyperinflation This is exactly my point. It will have to happen, but it won't happen overnight. China won't suddenly find other buyers with the purchasing power of the western economies, either inside or outside its borders. New demand will not suddenly appear once the west stops consuming, it will have to be built up, almost from scratch. Once the inflation nonsense finishes, massive deflation and recession/depression kick in. Do you really think the demand for China's goods will somehow be immune to a worldwide downturn? what makes you think there will still be huge demand for China's exports? Nothing at all, that was never my point. You should maybe have read my original post more carefully. China will, like everyone else, have to deal with inflation first, then deflation. Its economy and growth are very dependant on exports, so it will be forced to play the currency valuation game. As you say, 10-15 years from now it will be in a great position. But I'm not going to invest in it today based on that assumption, that would be like buying a house in the UK now in the knowledge that it would be worth more after this property cycle has played out, crash and all.

All of this is correct, but it is much further down the line. China will be the world's economic 'big cheese' and it will have one of the strongest currencies. But first we must get through the inflationary actions of the central banks, the deflationary cycle when they fail and China must then find new buyers both domestic and foreign. This process will take years and will take you through many periods where a strong China position will lose you money in gargantuan quantities. I'll be the first into China when the time is right, but that time is not now. A lot of water needs to go under the bridge before it presents an opportunity as good as gold does at the moment.

I'm racking my brains at the moment. I know this is a cartel driven sell-off, but how will the media be able to justify it? I can't think of a single plausible reason they could give. Even the old classic, profit taking, doesn't fit given the inflationary news and the persistance of the sell off. Seems the cartel's hand is a bit too obvious in this one for its own good.

This is amazing. Gold down $50 in two days. And not just any old days either, one saw a .75% rate cut and the other the bear sterns bailout, both massively inflationary events. Hard to believe really. Time to buy some more physical I think.

It won't take long to unwind. Just the market playing games to trick suckers out of their money, normal service will soon resume. As I said above, I think this afternoon's action will prolong this leg of the bull run for much longer than it would have had otherwise. It's knocked out the weak hands and leaves the lingering threat of more cuts over the commodity shorts. They've had their fun today. As soon as the dust settles, the shorts will realise how little they've achieved and their fear will return.

On the bright side, this is creating a great opportunity for another set of bank shorts. Looking at today's action, JPM and Merrill are looking ripe for a short-powered kick to the balls. I only hope I don't have to use my spare cash to bail myself out of a gold or silver position. Edit: The Merrill share price makes it look like they just announced record profits. What a massive overreaction.

Yet more action most politely described as 'counter-intuitive'. It's either inflationary or it's not. Why then, on an inflationary bailout for the DOW, which at the moment the markets are lapping up (currently up over 300 pts), is gold again selling off? Can't use the margin call excuse this time, it's an up day. Wonder what the pundits will pull out of the bag to explain this one?

A prime example of the power of expectation management. A few months ago the dollar would have dived and gold would have rocketed on a .75% cut. Because of the way this has been spun over the past few weeks, the Fed can actually claim that this was a prudent, inflation fighting move, just because they didn't go all out with a full 1%. Pure sophistry, but effective nonetheless.

Looks like someone just dumped a bomb on gold at $1003. Immediate $3 downtick. Lets see if the buyers soak it up.

Commentators are already saying this leaves room open for more cuts over the next few months. We may not get the gold spike today, but this move may have prolonged the longevity of the upmove before it hits a significant correction. Edit: And in my opinion it also makes a large correction less likely. Who, apart from price managers, is going to sell with the clear prospect of more cuts around the corner? A full 1% would have said 'that's it boys, your getting no more'. .75% says 'we're keeping some dry powder for the future'.

I'll hold with caution I think.