bitbigt
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I feel sick,
I think percentage wise this is the furthest gold has ever dropped below the 200dma since 2001.
In sterling its still above the bottom from May.
This is all about the engineered (i.e., unjustified and transient) strengthenning of the dollar, plus a PR campagn to get people to focus on the global slowdown. When it becomes clear that inflation just is not going away anytime soon then gold will recover.
I'm personally planning a big top up in silver
EDIT: ...blood on streets, panick, time to buy etc
....here's where the Buffetts of this world would be buying -
$848 and heading vertically downwards.
Bollocks
Now that that IS manipulation...
Wait until London closes so no-one can interfere, and force gold below 850 where you know lots of automated sell orders will trigger.
So they win this battle, but they'll loose the war.
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It's OK wrongmove. I'm a big girl. I wont be shouting at you if gold falls off a cliff, but thxs
I've lost a pile before* so the second time around should be a breeze.
Being of pension drawing age helps; one can afford to be more philosophical with less long term pain.
Plus I live like a peasant anyway......
Thxs GF, I can see the wisdom of averaging; even though it goes agin my natural instincts.
Edit:- * not PMs
Hi LauraB - I second everything people have said in response to your posted question, and you're clearly on the ball!
But for whatever its worth (and this is NOT investment advice) I think the bottom is in for gold in Sterling, and there or thereabouts for silver.
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Yes, I agree. This inflation/deflation debate rests on a false dichotomy...
I do not think it has to be an either/or proposition....
What does this mean for gold? I envisage monetary inflation to debase the dollar while deflation [credit "crunch"/the withdrawal of debt money] will make money more scarce.
Also, I think some kind of time line is useful to keep in mind. Maybe we will have an extended period of inflation as the Fed attempts to reflate. Once this attempt fails we could then have deflation proper.
Nice informative post! Thanks!
I agree with you on all points, and hope people will soon realise: we've had 15-20% global money supply increases for the last 10-15 years. That implies 5-10 times more money floating around in the system than there was 10-15 years ago. And despite current asset value destruction, a very substantial increase in money supply is still going on today. All that extra money makes currencies worth less (and eventually, worthless).
Two things to then consider:
1) 'What' will currencies become 'worth less' with respect to?
One answer would be the price of living, or the value of one week of work (implying increases in salaries and CPI numbers) - and, of course, ultimate stores of wealth, such as PMs. But at the very same time, assets that depend upon credit/liquidity rather than money supply may well fall dramatically in price, such as houses, various commodities, stock markets (as is hapenning).
2) What's happening to all that extra money?
Well remember, there's masses of it out there, and a very great fraction of it is sitting on the sidelines (in cash, bonds, sovereign wealth funds) looking for a good investment vehicle. But with houses, commodities, stock markets etc all currently falling in price its not likely to be put into such assets in the near term. But that said, it has to be put to work somewhere, and I think it will go into global infrastructure development, commodities (once they're just a little cheaper), land/property empires (once they're cheaper), bluechip companies (once they're MUCH cheaper), and especially gold - in a big way - as soon as it is clear to everyone that inflation is not going away, but instead getting worse.
In short - in terms of real wealth, informed investors will get richer (people and nations) as they put their wealth to work in ways that take advantage of inflation, whilst the blind masses will get poorer due to the way inflation steals wealth and due to the fallout from the credit crunch.
Or to put it another way - there is ever-more money in the global system, and that will do damage to the masses - especially in weaker Western economies. It really doesn't matter whether it occurs quickly (via dramatically expanding Asian economies creating commodity price spikes that cripple the world with hyperinflation ...as people were predicting) or slightly less quickly (via Asian economies growing a little less fast due to the credit crunch but for longer, implying longer term wage-price spiral inflation ...as people will now start to predict). The excess money is there, and it will make its presence felt.
This is a perfect re-run of the 70's but on a gobal scale in a globalised economic system, with everything enlarged in size and intensity. The charts tell us clearly what happened to stocks, commodities, house prices and gold during that decade ...and I think we should learn from history
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The Contrarian Investor feels deflation is here: http://cij.inspiriting.com/?p=514
I think a dangerous misunderstanding is developing... about whether we're experiencing inflation or deflation.
M3 in the US (total mney supply) is still, today, increasing at a rate of about 15% per year (see http://www.shadowstats.com) and this is strongly inflationary. Plus the same is happening in other countries, especially Asia. In fact, in Asia the wage-price spiral effect is also now in play, pushing up inflation further. And just as we exported our inflation pressures to Asia and they absorbed it all for a decade or more, thay're now passing it back to us - with a vengeance. Look at the data at the shadowstats website, it shows that real Western inflation is now about 10%, and even the massaged CPI is at 5% and still increasing. In short INFLATION IS HERE, NOT DEFLATION.
However, liquidity is most definitely down (credit crunch), and so the amount of 'cash available for spending now' (M2 money supply) is indeed falling. To make an analogy with a househod budget, imagine that dad is putting more money into the household bank balance each month (M3 going up), but more needs to be spent every month as prices are rising (inflation), and hence there's less left over as cash or savings (M2). But that is NOT deflation - that's a credit crunch, and it will probably cause a recession.
Hence, what we're looking at is stagflation - incredibly bullish for PMs, once the reality (and the resulting fear!) becomes clear to everyone. Thus all currencies will weaken wrt gold, but which weakens the least (i.e., strengthens wrt other currencies) will depend on many factors, not least interest rates and CB manipulation.
We must not fail to see the forest for the trees!
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Worth a read: concerning gold, deflation, inflation...
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Trying to understand THESE LAST TWO WEEKS (since the CBs undertook a concerted effort to strengthen the dollar) I like to reflect upon why we've seen:
Oil price falling as far as it has:
> no surprise here, as a tight market was being bid up by weakenning dollar and some speculation. Dollar strengthenning lowered prices and terminated those speculative longs. But there is still limited supply and low supply growth, for a rapidly growing global demand (even if growth might slow a little, it not going to become a reduction), and add in peak oil for good measure. So at point soon people will start buying again (100-110 dollars is my guess) - exactly the price where economies don't need to slow, with obvious impact upon the deflation/inflation balance
Gold price falling as far as it has:
> could be similar buying fundamentals as for oil, but I note lots of evidence that the public globaly is buying like crazy at these reduced prices. So why is the price falling so much? Perhaps it is the big players ('hot money' perhaps, or CBs more likely) that are selling. But again, there comes a price where its too cheap not to buy, given global money devaluation - and I suspect we're at or close to that price about now
Stock Markets behaving in contradictory ways:
> US DOW - going up, of course, due to the strengthenning dollar and increased confidence that inspires in the US
> UK FTSE - going up, perhaps because the pound has also been strengthenning with the dollar
> European markets - going up !!!???, even though the dollar bulls are telling everyone the Eurozone is about to collapse and the EURO has been tanking
> UK small cap market - going down, suggesting that fear is high and rising for Joe Bloggs investor
> Emerging markets - going down bigtime, whereas they've been in lock step with western markets for the last several years! This suggests the basal level of fear is increasing in those who know and place longer terms investments
> 'Informed Investor' indices - going down, relentlessly ...say no more!
In summary, I feel the manipulated dollar is a charade that has convinced very few, and changed absolutely nothing in reality. Some hot money is chasing the short terms trends this manipulation has spawned, but joe sixpack investors, long term institutional investors, and the commodity investor will benefit from not falling for this futile (and expensive) deception.
But don't listen to me - listen to Warren Buffett ..."If our current account deficit keeps running at present levels, the dollar I think is almost certain to be worth less five to ten years from now compared to other major currencies" ...and I don't see the US doing much to dramatically cut that deficit
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I've seen various indications of this kind of buying this last week, showing that many people are diving in at this discount prices.
However, I can't rationalise that with the fact that the price has fallen steadily - at a faster rate than the dollar has been strengthening.
Anyone got any explanation for this contradiction? ..is there some major CB selling also taking place?
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It sounds plausible, but there seems to be a bit of self-inconsistency about the argument, or rather, it only makes sense if you are American. A rising dollar (which seemed to start several weeks after commodities began their fall) is going to wipe out all the "benefits" for everyone else. So why would the central banks (outside of US) collude?"rising dollar...seemed to start several weeks after commodities began their fall"
...indeed. I would not argue that the strengthenning dollar is the only reason for commodities to weaken, its just one of the more important influences at the moment. Slowdown fears, and the pullback of speculative funds probably caused the initial move downwards.
"A rising dollar...is going to wipe out all the "benefits" for everyone else. So why would the central banks (outside of US) collude?"
...it will only partially wipe out the benefits. Sentiment has (temporarily) been changed and so the oil price is also falling in other currencies as well (i.e., dollar price of oil is falling faster than other currency exchange rates to the dollar).
But I suspect the CBs colluded on this dollar manipulation regardless of questions of oil price for them, I think they all realised that we're getting close to there being a run on the dollar - and that would be financial armageddon for the world!! They are very scared, and starting to pannick. They've avoided disaster for now, but there are many more pressures in the pipeline. ...plus black swan events. I think they know they've just fed the inflation monster, but that perhaps seems like a price worth paying given the alternative.
In short - the CBs seem to have decided to go down the stagflation route, as that has a predictable and tolerable outcome for the West. They are avoiding the deflation option at all costs, as that would involve loosing the dollar as the worlds reserve currency, China becoming the pre-eminent economic superpower, geopolitical turmoil, and probably war!
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...some of the optimism is being driven by falling commodity prices, in particular oil. This is considered "good" for everyone.
Absolutely, and on this point I would add two additional comments
- "falling commodity prices" has been triggered by the strengthening USD, which has been dramatically manipulated recently. The CBs probably feel this targetted manipulation was a smart move, since by concentrating on altering one parameter (USD) they've induced 'beneficial' changes to many others (EUR, oil, gold, stocks,...). But its still all false. 1 + 1 still equals 2, even if they've made people now think, at least for a while, that 1+1=1.5
- however, oil at >140 was acting as the brake on global economies that was needed to quell inflation (and represented the only hope of achieving that, since CBs cannot put up base rates). But by getting it down to <120 people can afford it again, and so growth will not slow. Quite simply while oil is in an affordable price range then increasing its price promotes inflation, but above that range it actually has the opposite effect. So the clever CBs have now helped feed the inflation monster.
In short - we all know the worlds got some incredibly hard times ahead the next few years, but the big economic question is whether the world will suffer an inflation spiral and crash that way (stagflation - great for gold), or just go straight into a massive slowdown (deflation - perhaps great for gold). Recent events make it much more likely that the former will occur,
So yet again, the clever CBs forgot to think about "the law of unintended consequences" that Perishabull and others keep mentioning
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Repeat after me:
There is no manipulation in the US-Dollar. There is no manipulation in the US-Dollar. There is no manipulation in the US-Dollar. There is no manipulation in the US-Dollar. There is no manipulation in the US-Dollar. There is no manipulation in the US-Dollar. ...
Thanks for that chart.
This makes it clear - the orchestrated buying came first in order to cause the dollar strengthening (i.e., manipulation), not the other way around (reactionary buying a rising market)
I am fully convinced, and withdraw the doubts I posted earlier.
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Although the long term trend holds, you really wouldn't consider your wealth to have been preserved if you bought at any of the troughs in this chart and sold at the subsequent peak.
http://en.wikipedia.org/wiki/Image:Longter...ldlogtr1800.png
Brilliant chart - thanks!
Its an exponential scale - WOW!!!!
...and current ratio is already down to 12-13
Not sure I'd believe in the long term straight line though...
- up to 1970s, it had to rise linearly since there was a gold standard
- after that, you could make a case for various slopes, but most likely it should be a flat line at a ratio of about 10. If so, the last 40 years have involved a 10-year massive overshoot to the downside due to 70s inflation, a 20-year major overshoot upwards due to excessively loose monetary policy, and now we're starting down the final inflationary payback slope for those last 20 years of decadence. That implies a possible drop back down to the low single digits: e.g., DOW falling to 8 or 9 thousand, and gold rallying to a few thousand. ...all in the next few years.
It all depends upon the inflation monster - watch this space....
...and think "70's style inflation, happening across the whole of Asia, being exported back to the West"
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well, 1 euro is 1.5000 right now, 15.25 / 1.5000 is 10.16 euros , however, 2 weeks ago it was 15.25/1.5900 = 9.59 , but... how did you get it at 7.50 ?
Pounds not Euros
GBP 7.50 is the price at which I will double up my silver investmenttodays close left me with thougths that today was not the bottom, they bottom probably will be at 14.80 , when oil hits 110, yes, definitely all the traders wait this milestone to enter the marketGold may have bottomed (at least in pounds), silver may have a little more downside as its more of an industrial commodity than gold. I see so many clues around indicating that this rally in the dollar is artificial and temporary, and increasingly recognised as so by the masses.
What's more, I think the pound will collapse in next few weeks/months. Many others are predicting the EURO will be the next big faller, but I think that honour will go to the pound. So even more reason to put ones pounds into PMs and oil sooner rather than later.
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...I even waited ...but have still managed to make a significant paper loss.
...their control over the markets is making me doubt there is anything an individual can do to protect themselves from their master plan to resolve this mess.
First - yes, a paper loss, so don't loose any sleep
Second - it would be interesting to discuss (or on a related thread) with the very well informed posters whtehr what they are doing is actually a good or a bad thing. ...my views might surprise you
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What vehicle for the oil if you don't mind me asking?
Currently thinking of a sterling based oil ETF, but may do something a little more complicated via Switzerland - where I may be able to receive any profits tax free.
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this silver at 15.25 looked to me an absolute bargain and I took some
Well done! That's about £7.95 right?
My next buying target is £7.50 if it gets there ($14.5 at current exchange rate), whereupon I'll double up my investment. My existing wadge averages out at £8.56, so that'll bring my overall average down to todays price range. If it doesn't drop that far (and I don't actually think its likely to) then I'm still very comfortable with my existing holdings.
But I'm planning to invest a lot more in oil if/when it falls to 110, then double up at 100, then again at 90, and then again at 80. I have reserved the funds accordingly. If all those buys happen, I'll be in big time with a break-even of below 90 ...and I'm damn sure oil is going a long way above 90 in future years - so a 'risk free' investment! (and possibly a way to make a lot of money)
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That some people are more emotional about investment coins...
I'm extremely emotional ...about my family and doing all I can to support them to give my kids a good future. That costs money!
So that's why I spend so much time reading and trying to be objective about my investment (plus as someone here said recently - we have a front row seat for an amazing show just now - so its damn interesting to follow it in detail).
But all of this is why I have NOT bought coins - I probably would fall in love with them, and that's dangerous
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I find your comment rather condescending. I, like many others on this site, have studied long and hard before putting my money where my mouth is. I have a view of the economy which I believe is coherent and have taken a position reflecting this. Of course, there is always a chance I may be wrong, there are no certainties in life, but I would rather use my own intelligence and be proactive rather than sit like some dumb deer in the headlights.
You should keep in mind, that many here have invested a lot of time and thought and funds into metals. On this thread, people are not seeking to debate with each other whether gold may or may not be a good postion to be invested in, but are rather looking to gain further insight and offer encouragement to a position already taken.
If you want to debate the virtues of gold, then, once again, why don't you open another thread on this topic?
Hi Romans - I agree that many of us spend loads of (too much??) time reading, analysing, and debating - in order to make the most rational investments we can
...but little friendly digs from the likes of 'wrongmove' are no bad thing in reminding us to keep emotions out of it?
(S)He probably also sees the wisdom in owning gold
I suspect the market volatility may be getting to us all at the moment, and so now is precisely the time we must remain objective and focussed on the bigger reality!
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Mystery Solved
On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. This index was in the process of breaking down, and in fact it had actually fallen out of its uptrend channel on the following chart....
I don't doubt there is intervention, and even more so recently, especially in oil and the US dollar
However, is an annualised 17% doubling to 38% really a strong piece of evidence?
If anything, I'm more surprised that the dollar holdings have been increasing 17% while the dollar was falling during the last year. That seems like intervention, as what sense in their buying more dollars when the dollar is tanking?
But when it looks (to some) like the dollar maybe in a rally period, then it would make sense to buy more - just as in indicated by this 17% to 38% change.
So which is cause and which is effect ...USDX rising or the increased bond paper in custody for central banks?
In either case - the whole show is being rigged, and as the author says, it's all ephemeral and the market forces will eventually win the day.
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Those gold and silver lease rates have just gone positive again - as happened last time before the rally!
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Some people have always good reason to sell a lot of gold.
...I wonder if one of those reasons recently involves big institutional longs on margin that are having to sell? If so, the recent spike down will bounce back with a vengeance once those sells are finished with
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The thing that is annoying me is that as fast as Gold is dropping so is stirling. Its not getting any cheaper to buy physical
We are here
872 / 1.94 = 449 + 6% = £475.94We could at least be here
872 / 1.99 = 438 + 6% = £464.28I wish we was here
872 / 2.06 = 423 + 6% = £448.39Agreed - but remember, the UK is 1 year behind the US in its economic collapse, so the pound will probably fall a lot further still against the dollar. So my view is that it makes sense to buy now, and not wait. And indeed, I did just now top up ...buying my 3rd wadge of silver 1/2 hour ago at 16.14
In pounds that gives me
1/3 at 8.65 (USD 17.0, GBP:USD 1.965)
1/3 at 8.57 (USD 17.10, GBP:USD 1.995)
1/3 at 8.30 (USD 16.14, GBP:USD 1.945)
So breakeven = GBP 8.56 (USD 16.65 with todays exchange rate)
...so I need 3% improvement to get into profit - and stirling could easily fall that far even if silver doesn't go up in dollars
EDIT: just realised this matches my gold purchases in 2006 (when the gold market all looked to have topped),
1/3 at 620, 1/3 at 620, 1/3 at 580 ...and very glad I did it
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You asked for raw data in a previous post, I don't have it, but I'm sure it can be found.
The correlation goes back further than one year, for the moment I'm of the opinion that gold is acting as a magnifier on EUR:USD. I think it could take time for this correlation to leave the markets as I expect that it's ingrained in trading strategies.
I think we must be careful to distinguish causal from correlative associations (that's actually a large part of my day job). In the former, A causes B, and so they track each other. In the latter, A and B track each other by pure chance or because they are both being influenced by some other factor C.
When it comes to PoG ('A') and EUR:USD ('B'), I suspect we're looking at a correlative association, where factor C is a combination of influences such as USD strength (vs basket of currencies) and POO, and.... [fill in the blank]
Here's some graphical evidence of that, for the US Dollar Index (USDX)...
http://hgvbase.bioc.le.ac.uk/temp/GoldDriver.bmp
[sorry its tatty, I don't have access to other tols from this 'puta! - perhaps someone else could make a better version, going back further in time]
Bottom line - watch USDX, don't watch EUR:USD to better predict the price of gold
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I believe in the bogey man up to a point, and don't dismiss all of GATA's arguments. But I think the interventions are more likely to be occasional and focussed and that any cartel with any sense would avoiding trying to hold gold at 50% of its natural market value for a period of decades. The alternative theory, that the gold price is completely manipulated and has been throughout the last two and half decades, I find implausible. Markets are pretty hard to buck indefinitely.
I think it was me that posited the 50% figure yesteday.
But I did not say PoG had been artificially held so low for decades (and I agree it hasn't). I think that has all happend in the last two or three years, and especially the last 12 months. This is the period where a major inflation problem was on the horizon or (more recently in your face) and the powers that be wanted to suppress this. They do it by manipulating the inflation statistic itself, and by suppressing indicators of inflation - ie, gold price.
...and I think they plan to keep doing it until the inflation monster is back in its box, and golds 'natural' price has fallen to the acceptable levels where they can afford to let market forces take over again. This is a wise and believeable plan for the economy, IF you believe they have the resources to fight this absolutely massive inflation monster. If they do, then gold will still rise, but just no where near as much as it w/should have. If they do not, then a massive peak in golds price will occur as market forces swamp the PPT manipulations. ...and I predict this happenning in the next 6-12 months!
....here's where the Buffetts of this world would be buying
GOLD
in Gold, FX, Stocks / Diaries & Blogs
Posted
This could even be a good signal today...
We'll have squeezed out all the automated sells set at 850 (of which there were probably many!!!) and at the same time the dollar rally seems to be faltering and gold is still above its May bottom in Sterling. But we may end just 2% down from last Friday.
Plus, overnight it was clear that Asians would rather buy than sell gold at these prices.
What a ride