Gatesy

Where can I get info on how to read and understand these bl00dy charts people keep posting.

Nice one HM I needed a chuckle today. They're not the easiest are they. I love a chart unaccompanied by any explanation..

I think this one is suggesting that it's getting very expensive to borrow gold (for the purposes of shorting). Proabably cos the owners are more keen to keep hold of it or want more paper compensation to lend it now that things are looking more and more like a pikey's picnic.

Any rally in gold today may be tempered by some gold selling to raise cash in response to margin calls as the stock markets tumble.

This is my main concern in any apparent strength. The scramble to unwind positive positions to offset losing ones will surely have a negatve impact on gold?

Damn it, I thought I'd invented something there. Still, no change for me, every time I thought I'd invented something new in research electronics I always found out IBM had done it in the 60's.

Blast them all!

Showing my (lack of) class, I once thought I'd invented the word 'crud' but then years later I heard Rambo say it in his first film.

Maybe we need to get away from the assumption that we should have growth.

 

Maybe it's more important to think about a system that would work well in a prolonged contraction, followed by stability.

 

The idea being that growth is not sustainable on a finite world.

Yep, I don't disagree with that or the others comments on this. I think the consequences of an economy which does not seek growth need to be thought through very carefully however in terms of social consequences. I guess everything from population figures to matters of choice in goods and services various markets would need to be considered in an attempt to ensure everything stayed just finely balanced at the right levels of activity. Sounds a it like a command economy.... But maybe to get to that brave new world a small step would be going back to a gold standard whereby we could get used to the limitations on growth which may be ultimately necessary to achiev the new model you propose.

here's a quite bizarre piece I picked up from the kitco forum - link to $ to gold at $500 per ounce? I wouldn't have thought there was anything like enough gold for that..

 

http://www.realclearmarkets.com/articles/2...ize_the_do.html

My bill will not put America on the gold standard, like we had in the early part of the 20th Century. Under the old gold standard, gold was money. Limiting the supply of money to the supply of gold was a huge mistake. It was the basic error that caused the Great Depression.

 

Under my bill, our money will be the same “legal tender” currency that we have now. There will be no limit on the number of dollars except market demand. The big difference will be that every dollar will always be worth the same as one five-hundredth of an ounce of gold.

 

When I became a Congressman, I took an oath to uphold the Constitution. The Constitution commands Congress to regulate the value of our money. My bill will do this. This is why it is essential that it become law.

Representative Poe, a former judge, is a member of Congress serving the 2nd district of Texas.

To me a "half gold standard" as proposed doesn't solve the problem of a fiat system and such a system would not be workable on a global scale either. TPTB would still be in charge of the money supply, even if there was a well intended objective at the outset to control the money supply in relation to the demand for money/goods and services in the (global?) economy. That's how fiat systems start but the temptation to manipulate for political means and greed is too much to resist and the system will start to fail. To me the reference to gold at $500 is a red herring and an irrelevance to the propsed system which is actually just suggesting managing money supply in relation to goods and services.

IMO in an ideal world the best system would indeed be a floating/flexible money supply which does alter in relation to the demand for money (via goods and services), and probably not a gold standard. The main reason I believe a gold standard is not ideal is because with only a 2% or so supply increase per annum it will not always be able to keep up with economic growth and demand for money, hence acting as a drag on growth, limiting capital when it is needed. However, as long as humans are involved in this world it will not be ideal, and as such a gold standard is far better than a fiat system or half way house which will likely always be manipulatted.

BTW... As you might see from the above quotes, I've changed my name (to protect the innocent).

I wanted to do that. How do you do that?

As for all the comments that we'll be OK in the long term with PMs - if deflation is on its way, it'll be around for longer than my investment time horizon, so I'll be down on all my PM investments at the time when I might want to swap some of them back into fiat (3-5 years probably).

That's a very good point. I also have seen a significant welling of opinion on here towards accepting deflation in the medium term, but their seems to be a lot of hope/expectation (form a holding PM perspective) that inflation will be back with a vengeance to wipe it out. That obviously wasn't Japan's experience but I'm sure someone can tell me why this is different this time (inflation in the dollar as global currency no doubt). I've also seen numerous statements that deflation is far harder to deal with than inflation and thus is likely to stick around when it arrives.

Yes, shoring up bank balance sheets that relied on imaginary money that has now evaporated into thin air. The banks are highly constrained in lending that money back out again.

 

Hyperinflation isn't impossible but the levels of money creation we are currently seeing are primarily aimed at preventing a deflationary collapse.

Think of it this way - my house has been half knocked down by a hurricane and is about to fall over. The gubbermint gives me enough bricks to shore up the lower levels so it won't collapse. Hey, now I have loads of inflationary bricks I can sell or lend to other people who suffered storm damage, right?

 

Wrong.

You could swap them for gold bricks.

But the banks are deleveraging all the time - that money is only leaking out in small quantities - most of it is just shoring up their balance sheets to keep their insolvency from being too obvious.

Hmmm, I will ponder this overnight in my sleep and possibly post tomorrow.

So far, it seems the banks have just dumped rather dodgy assets on the BoE to shore up their books. So the taxpayer will eventually get stung, but no new lending to actual customers seems to have occured.

I go along with GF on this one, that money in banks pockets doesn’t need to find it’s way to joe public as credit in order to stoke inflation. The money will sidestep JP straight into whatever asset is flavour of the week. The money supply and credit is created by the CB giving the money to the bank.

We are 6 months into this correction, yet gold still needs 25% gains to exceed old highs. Is this typical of earlier bulls?

Totally. If you take the EW model of waves, even Large waves will correct 20-30%, let alone Major waves. For me the hypothesis that this is corrective Large Wave II of up leg Major wave 3 has not yet been disproved.

So it's a mess and that sort of mess is bullish for gold.

"If it ain't it'll do till the mess get's here"

When markets are irrational, only the irrational make money. Best to get used to it, I guess.

Then I must be rational.

A further comment from James Turk regarding paper v physical:

Also, it is important to remember that the manipulations in the paper market are making gold and silver very cheap. So as I often say, by making the prices of paper gold and paper silver very cheap, central banks are doing a favour for everyone who understands the essential nature and true value of physical gold and physical silver. Central banks are enabling us to exchange overvalued fiat currency for undervalued physical metal.

 

The demand for physical metal now is not unlike what happened in 1967 to early 1968 when the US dishoarded 8,000 tonnes from Ft. Knox at $35 per ounce. Back then gold was being exchanged for dollars at the fixed rate of 35 dollars for one ounce. Today gold is being exchanged at a fluctuating rate, that changes from minute to minute. But the point is that gold is as cheap today as it was back in 1968 and central banks have to keep supplying physical metal to keep the paper price this low. Or they will throw in the towel like they did in March 1968 with the two-tiered gold price -- they stopped dishoarding from Ft Knox.

I just sent this to goldmoney:

 

Dear Mr Turk

 

GATA, with whom you are closely associated, have published the view that the US Mint's suspension of silver and now gold eagles is "overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price". Please could you lay out for me your plan for ensuring that the mechanism for selling physical gold and physical silver via Goldmoney reflects prices for the physical metals rather than 'paper' markets as we see further divergence between the two. I would like to post your response on the Global Edge Investors (globaledgeinvestors.com) website with which you may be familiar, for the benefit of members there.

 

ref:

http://www.gata.org/node/6489

 

Kind regards

I have a response from James Turk, with my repsonse below that. Very impressed with the personal attention given to my query.

Hello xxxxx

 

Sorry for the slow response, but I have been travelling.

 

GoldMoney only offers to its customers gold and silver in the form of LBMA bars. Consequently, GoldMoney always bases its prices on the spot market for LBMA bars. This spot market is comprised of several major bullion banks, and they quote throughout the day from Monday-to-Friday from their various branch offices in different time zones throughout the world.

 

When a transaction is completed, the seller has the obligation to deliver to the buyer -- upon payment by the buyer -- physical bullion in the form of LBMA bars. To my knowledge there has never been a default by any trading member selling LBMA bars in the spot market.

 

Transactions in GoldMoney are never priced off the futures market or any paper-based trading market. Further, we have no intention to ever price them off the paper market. We will only transact in a market where we will receive LBMA bars, not paper promises.

 

There is also another aspect to your question. It is, what is the relationship between the market for LBMA bars (which is a market made by LBMA trading members, http://www.lbma.org.uk/assocn/mktmembs) and the market for coins and small bars (which is a market made by thousands of coin dealers, jewellery shops and bullion retailers globally)?

 

Right now, the market for coins and small bars is largely frozen as GATA, me (http://www.goldmoney.com/en/commentary.php) and others have written. However, the LBMA market continues to function normally as near as I can tell (not being a trading member myself). LBMA bars (both gold and silver) can still be had in reasonable quantities. Barring any government intervention and/or government dictates, I would expect the LBMA market to continue operating, regardless what happens in the paper market for gold.

 

Right now the demand for physical metal in the form of LBMA bars has been very strong. I can only wonder where all the bars are coming from to meet the soaring demand at the current low price. For example, Resource Investor notes http://www.resourceinvestor.com/pebble.asp?relid=45611 "In fact, just since August 15, SLV has added a huge 308.839 tonnes to hold 6,474.04 tonnes of average 1,000 ounce silver bars." There are only about 25,000 tonnes of silver mined in one year. Yet over the past 10 days, SLV reports that it has added 308.9 tonnes, which is an annual rate of 11,120 tonnes, or 44% of this year's newly mined silver. And that's just SLV, not to mention all the other LBMA bars acquired by other sources during this same 10-day period.

 

Lastly, paper is used by the gold cartel acting under the direction of central banks to force prices lower. When prices in the paper market drop, prices in the physical market follow paper prices lower until prices become too cheap. We've reached that point with coins and small bars. We may also some day reach that point in the LBMA market, which means that gold would go into backwardation, i.e., the price in the spot market is above a future price of gold.

 

I trust this answers your question, but please let me know if I can be of further help.

 

Regards

James

Thank you James for your comprehensive reply and taking the time personally to attend to my query. I take much confidence from your clear explanation and guess I hadn't really thought this through fully. My immediate reaction to recent price action in the futures markets vs coins/small bars was "here's the divergence yet Goldmoney is tracking paper prices", which had me a little concerned. Of course, a continued supply of the LBMA bars explains why there actually is no such gaping divergence visible between goldmoney spot rates and futures prices, yet.

 

As I mentioned in my initial query I will post your response on GEI as I think it will be of great interest to members there.

 

Kind regards

Grrrrr. Head hurts now.

Panic Selling in Gold: What's Next?

http://www.minyanville.com/articles/index/a/18537

The panic selling in gold and mining shares has accelerated and the Gold Miners ETF (GDX) is the clearest example of how sharp the selloff has been, down more than 2.5% midd-day as I write. On Minyanville's Buzz and Banter on July 24, I noted the potential head and shoulders pattern that was forming on the weekly chart:

 

Buzz and Banter, July 24:

 

Here's a weekly chart of the Market Vectors Gold Miners ETF (GDX) showing a deferred potential TD-Sequential 13 sell signal.

 

 

Click to enlarge

 

As well, we could be seeing a potential head and shoulders pattern form. A key to identification would be neckline violation on expanding volume. The right shoulder has already recorded a weekly volume bar that was greater than the left shoulder volume bar peak, and that increases the probability of the formation completing in my interpretation. I should also note that the GDX has given a double bottom point and figure sell signal (1x3 chart) and violated a trendline from the May lows.

 

Now that this has transpired, the question is: What's Next?

 

The GDX has blown through another retracement level that could have served as a potential stopping point. This is an important session today. A close below 34.43 would increase the probability that the selloff is not done and note we still have an unfulfilled DeMark TD-Sequential buy countdown in place, this bar currently on 8 of a potential 13. A close above that level and next week the ~33 area may provide a trading point for longs as the fulfillment of the downside count from the head and shoulders.

 

As for gold, I would like to be more positive on the metal itself, but I believe this selling is related to a buildup of longer-term deflationary pressures in the credit markets that will dwarf the inflationary mask of (formerly surging) food and energy costs.

 

When debt and leverage are this excessive, cyclical inflation simply accelerates the deflationary outcome and makes the unwind more severe. Watching the Consumer Price Index is like driving over a cliff with your eye on the rear view mirror. Deflationary pressures will cause bids to evaporate and disappear as financial assets that must be sold to repair balance sheets and destroy debt overwhelm the capital available to compete for them.

 

Few see this coming because the leveraging of debt in our economy simply to get it to work has been so massive, so all-encompassing, that the vast majority of market participants have forgotten what normalcy is.

 

I most certainly believe gold will eventually be an asset to own in coming years. However, at the onset of deflation, gold will be sold indiscriminately - like all assets - to pay down debt and repair balance sheets.

 

The initial asset price inflation and central bank reflation efforts that made gold seem attractive during the building of the asset price bubble sow the seeds of the selloff as speculators attracted to the metal simply as a detached, non-fundamental momentum play will need to unwind their leveraged bets. Weak holders will be shaken out and ultimately replaced by those seeking a store of value. That is why the selloff won't make sense on a fundamental basis.

 

I show on the metal itself DeMark exhaustion sell signals on the long-term quarterly and monthly charts. But, the only people that should really be concerned about whether gold is going up or down right now - other than in the macro sense - are those very people who will likely need to sell and therefore be resonsible for it overshooting on the downside. I expect in the next few years for gold to retrace part of its long-term move, perhaps coming below 600 and, in the worst case, possibly even coming below 500. A 50% retracement of this major bull move would be about 458. But that doesn't change the long-term, secular bull market for gold.

The author (a former racehorse tipster and philosophy graduate !) seems to think deleveraging will neutralise and overpower inflationary pressures. Anyone like to comment on that?

http://www.gata.org/node/6489

 

The U.S. Mint has suspended sales of American eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday.

 

The mint's suspension of gold coin sales follows its tight rationing of sales of silver eagle coins, begun in May, when sales to the public were terminated and sales to the mint's 13 authorized dealers were tightly limited.

 

Word of the mint's suspension of gold coin sales came from the American Precious Metals Exchange in Edmond, Oklahoma, and from Centennial Precious Metals in Denver, Colorado.

 

The suspension is overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price and that, indeed, the commodities exchanges are being used as GATA long has maintained -- as part of a massive scheme of manipulation of the precious metals, currency, and bond markets.

I just sent this to goldmoney:

Dear Mr Turk

GATA, with whom you are closely associated, have published the view that the US Mint's suspension of silver and now gold eagles is "overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price". Please could you lay out for me your plan for ensuring that the mechanism for selling physical gold and physical silver via Goldmoney reflects prices for the physical metals rather than 'paper' markets as we see further divergence between the two. I would like to post your response on the Global Edge Investors (globaledgeinvestors.com) website with which you may be familiar, for the benefit of members there.

ref:

http://www.gata.org/node/6489

Kind regards

My goodness. This is the biggest wash-out I have ever seen in precious metals. All support levels have been broken.

To me as I posted last night before TSHTF if gold holds $790 then technically Elliot Wave threory holds the bull together; the ABC correction from 1033 to 790 will have had two identical(ish) nominal (A&C) drops. I chose $790 to give a slight margin of error as ideally it would have held at $800. This for me is the only thing holding this bull together technically right now; if ew went 50% down like in the 70's then there is no more reading it technically which will mean this market can only be invested on fundamentals goign forwards (if you believe them).

Silver has shocked the bejesus out of me this morning and all I can say is "well done" to those that say physical 100% as this would appear to be the point at which physical prices and paper prices diverge significantly.

Goldfinger - how does this play to your gold/silver ratio upspike before the downspike? Is 63 too high?

So at what point to Goldmoney start quoting silver at physical prices rather than "market spot" then?

Think I'll ask.

I don't feel that gold will close much lower than say $790 tomorrow. If it does then I think this bull is pretty sick and a BIG rethink will be required. In addition, should we stay above $790 then I don't feel there will be any further meandering moves as in 2006/07. The correction we have just seen appears to be in reaction to a much shorter upleg of about 18 months, compared to the correction of March 2006 which appeared to be fixing the 5 year run up from 2001 to 2006; thus a longer correction required.

IMO we may see $1200 by March and c. $1500 by Feb 2010, with doldrums in between.

I dont know that I would call it exciting. I get more excited when it goes up! Perhaps you could explain? Do you think this violent move down will precede a massive move up?

GF is looking for a singificant lowering in the gold/silver ratio. ie. silver appreciates relative to gold such that if say gold was $1000 then silver could be say $28 if the ratio fell to 35 ounces of silver to one ounce of gold.

edit: "jinx"

Are you buying an actual silver future there, or are you just betting/are they just shorting something to you?

Buying (or selling) futures.

If the contract expires, how do you usually take physical delivery?

Chance would be a find thing...

Is it real, or just paper?

Real enough until the system blows up, then it won't matter will it.

Error, or their way of making money?

And it's back again. $14.65 v $14.79 now. I've never seen this before. I can't see how etrade could be manipulating this as the prices should reflect what's available in the market, certainly on the actual futures contracts themselves.

Strange divergence on silver here since NY pre trading at 1.30 between spot futures prices (via etrade) and spot prices on IG index. What gives?..

 

$14.57 on etrade versus v $14.82.

 

edit: $14.57 on etrade

Gap now gone. Weird. There was a c.$0.25 gap for about half an hour. I think the error was on etrade as well.

Strange divergence on silver here since NY pre trading at 1.30 between spot futures prices (via etrade) and spot prices on IG index. What gives?..

$14.57 on etrade versus v $14.82.

edit: $14.57 on etrade

Anyone feel that the progress shown in silver this morning is bullish for a bottom, or just irrelevant?

ps. mods - any chance this Silver thread and cgnao's Watch Silver can be merged?