G0ldfinger

http://www.guardian.co.uk/money/2009/sep/0...-mortgage-costs Such a pity.

Ah, you're shipping to the UK - OK, understood. You should possibly just leave them in Euroland if you had the possibility.

Grumpy, why don't you buy the 1kg Aussie silver coins?? They are BEAUTIFUL, 20 pounds cheaper, and have a 5 pounds higher buy-back price!! Here:

I would disagree. It could actually be very clever by China to let the price of gold increase by a lot and then keep prices very stable at a very high level (just like Jim Sinclair thinks it will happen). It could be a way to mop up excess currency (an inflation outlet) and at the same time it would be a valuable (and very safe since government backed) savings instrument for the population. So, how would it work? OK, let's assume the Chinese government wants to get rid of some circulating Chinese(!) currency. They can do the following: take their USD reserves and buy gold. Then they sell the gold on to their people. Then they destroy the incoming Yuans. That's it. Simple and effective, they get rid of two very bad things: too much USD and too much CNY. The USD will be toast-a-licious afterwards. The good thing is that the procedure is not really manipulative since it is in the direction of the natural equilibrium price - i.e. the markets want to move into this direction anyway. So, this can not be compared to the current or former gold suppression schemes a la London Gold Pool.

I'd say it is nice to see that people start realizing that $1,000 is just a price like any other (e.g. $834). It's NOT either off to the moon or "all bets are off". IMO, people should get a grip.

More and more celebrities getting wiped out by real estate: http://www.bloomberg.com/apps/news?pid=206...id=aOYQzpAp2o9w http://www.bloomberg.com/apps/news?pid=new...id=adNhjptoZJn0

http://www.bloomberg.com/apps/news?pid=206...id=aOYQzpAp2o9w More jumbo defaults coming our way. Get ready for impact.

I think so too. The actual focus is on $1,400.

http://jsmineset.com/2009/09/08/barrick-mo...te-gold-hedges/

GoFo = gold forward rate Equation 1: Lease Rate = LIBOR - GoFo Example A (maturity = 1 year): -------------------------------------- LIBOR = 6%, GoFo = 4%, Lease Rate = 2% This means if spot gold is $1,000/oz, the one year forward price is $1,040/oz. If you enter such a contract, you agree to exchange in 1 year's time 1 oz of gold for $1,040. The contract itself comes at no cost (in an ideal world). Imagine now someone wanted to borrow 1 oz gold for the length of one year and then give it back to you. How much should you charge for this service? Well, the person could borrow your gold and sell it for $1,000 and put the money in an account that pays LIBOR. At the same time the person could enter a gold forward (which costs nothing, is only an agreement about a future transaction). At the end of the year, the person gets $1,060 paid (6% LIBOR account), but only has to pay $1,040 (the future now matures) to get the 1 oz gold back for you. RISKLESS PROFIT: $20. This is also called ARBITRAGE. Why should you give that person this profit? Well, you won't. That's why you charge the person a Lease Rate of 2% (exceptions: you're stupid or a central bank). That way the person has to pay you these $20 you would have otherwise lost out on. You might want to charge a fee anyway because of the risks and administration costs that you carry. Similarly, if for some reason the GoFo is higher than LIBOR, then you would pay the person to borrow your gold. This seems somewhat strange, but for instance getting rid of the gold for a while could save you storage costs. So, if LIBOR is tiny (zero?) and storage costs are high, this can actually make sense. The GoFo itself usually reflects price expectations and storage costs. BACKWARDATION is given if for a certain maturity the GoFo is negative. In particular, this means that the Lease Rate will be higher than LIBOR, i.e. you definitely want more than LIBOR for renting out your gold. This means that you don't worry so much about storage costs anymore. What you worry about is the return of your gold. NOTE: If the Lease Rate is as in Eq. 1, no arbitrage (riskless profit) is possible for the borrower. However, backwardation might be a sign of increased default risk. If Eq. 1 is violated, arbitrage is possible. Only stupid entities (central banks?) would get their Lease Rates wrong and would make arbitrage for the borrowers (commercial [gold suppression] banks) possible. Correct. Negative Lease Rates mean that you can expect (because of high forward prices) to make more money with gold than with cash (GoFo higher than LIBOR). So why would you exchange your precious for cash? BUT there is NO GUARANTEE that this strategy will work other than actually entering a forward. So, not selling now but wanting profit higher than LIBOR for sure means that one has to sell in the future (enter the future contract). It can still make sense to lend the gold out (see above). Example B (maturity = 1 year): -------------------------------------- LIBOR = 4%, GoFo = 6%, Lease Rate = -2%, spot gold = $1,000/oz Get a LIBOR loan at 4% over $1,000. Buy 1 oz of gold and enter a gold forward. After one year, get $1,060 from selling your gold, pay your loan back with $1,040. RISKLESS PROFIT: $20. Now you only have to hope that storage of your gold did not use up these $20. Examples B shows that in the case of a negative lease rate arbitrage might not be possible because of storage costs. Example A showed that in the case of a positive Lease Rate arbitrage (for the borrower) can prevented by the pro-active charging of the Lease Rate. In an ideal world (no default risk, no storage/admin costs), both examples would indeed lead to riskless profit. That's why in theory/in a perfect world GoFo = LIBOR and Lease Rate = 0%. Expressed differently, if storage fees are small and/or central banks charge very small Lease Rates, then commercial banks or hedge funds can make arbitrage by doing what is outlined in these examples. IF however the commercial bank/hedge fund does NOT enter a future and instead takes on the price risk (which is very well possible) then Example A (positive Lease Rates) is a bet against gold, and Example B (negative Lease Rate) is a bet on gold. In this sense, negative Lease Rates (which we see now) could be a bullish sign. NOTE: Above, I used Lease Rates in currency, not in gold. The difference is only theoretical as long as there is a proper futures market.

Yes, this is correct. See my correction above and explanation below.

EDITed: Sorry, no, I got this wrong earlier. This negative lease rate thing has been so for quite a while. See http://www.lbma.org.uk/?area=stats&page=gofo/2009gofo (right hand side). It means that the corresponding gold forward rate (=GoFo, the interest you pay for borrowing gold) is smaller than the corresponding inter-bank interest rate (LIBOR). Lease Rate = LIBOR - GoFo

We will possibly first have to go through gold $1,200 / silver $25 (g:s = 48:1) before we move on to gold $1,400 / silver 40 (g:s = 35:1).

Silver is indeed quite cheap. According to older patterns, one would expect silver to be much higher by now. http://gold.approximity.com/gold-silver_watch.html

Ratio sitting nicely on 60:1. Where next? http://gold.approximity.com/gold-silver_watch.html

You could say so. Here is the bias in numbers in recent times: http://gold.approximity.com/since2008/Gold_USD_AMPM.png

My take is: gold had just another boring day at the $1,000 level. Everyone and their dog knows anyway that it will soon go off to higher levels, so everyone is bored out of their heads and just waiting for it to happen. The USD got somewhat ignored by Au today, but that is nothing new, they don't always move at the same time.

BTW, who else thinks that the (obvious(ly)?) limitless Chinese buy order (in gold) has possibly been moved to the $900 level?

Banksters have just pushed gold down to $996.13.

London PM Fixing at $1,000.75. Banksters have tried hard, but not yet succeeded.

$999.80 now, banksters pushing hard.

The banksters have now almost pushed it back below the magic number.

The COMEX banksters are now at work. Gold down $6 already.

Kitco chart has gone dead.

I think that if gold has a run-up to $1,400 now, we might see silver at $40/oz (i.e. gold:silver at 35:1). That would still be below the all time high. http://gold.approximity.com/gold-silver_watch.html