Joe

5% drop last week in a day and now an 10% gain in a day... what is going on?

Someone's bullish on silver...

http://www.youtube.com/watch?v=uMma7pP5Eik&feature=player_embedded#!

These look amazing. I am year of the snake. Can I order these from Switzerland.

Notice how the lower graphic in percentage/ logarithmic terms puts the 2008 and 2013 declines on a parity. Yet the parity is distorted in the upper chart, where the decline looks to be of a larger magnitude thanks to that darn use of the linear. Anyway, no call for panic stations yet.

I am not panicking as I am still well up in gold and silver... as I am sure most on here are. When will be the best time to buy again is what I am worried about....

Hi Pd,

 

I did, I think we will see $18-19 silver, $1275- $1349 Gold

 

I posted these figures some time ago.

 

Regards

 

ML

Hi ML

Can I ask why you thought they would drop to these levels?

Yes, I think the detail needs to be checked before we man the barricades, but I think Meralti might be about right.

 

I would also assume they are referring to Eire as RBS & Lloyds are heavily exposed there. Their Housing Market is generally accepted to be about 50% down from peak and more than 25% of the loans given out by RBS and Lloyds have gone bad.

Stepping back from this, surely it is far more efficient and cheaper for the banks to do this rather than, repossess the properties, auction off with all the fees and time lapse, receive the auction funds and sort out where all the money left goes. I know its a win for landlords that overstretched themselves but even at 25% off would anyone else actually buy these properties anyway. What about the idea that the forgiven debt is taxed on the landlords at 50%?

Why I think it might not be doomsday. (from Br B's property cycles)

 

I think a steady, slow reduction in prices over a few years (10 to 15% maybe) coupled with continued ultra low rates (which is currently a high probability) and inflation bubbling away in the background, would put things on a much more sustainable path.

 

This would still hurt a few, but would not result in the death-cycle of falling prices = bank losses = bank bailouts = more pain for tax payer = more cuts = higher unemployment = more falls = more repos = more bank losses........ etc etc.

 

Who benefits from this? No-one, no-one at all, and the banks and (most importantly) the bondholders and the government and most of the country realise this.

 

We are not Ireland or the US, we never had the massive oversupply (I know it's not just about supply demand etc and all about credit, but it still does have some effects) and new building (which wasn’t keeping up even in the boom years) has practically stopped in the UK now. There is a housing shortage in the UK, there has been for years, this is one of the causes of the high rents.

 

The vast majority of people who buy houses in the UK are not investors. They have a simple understanding that you get a mortgage then buy a house, live in the house and then, after ~25 years your house is yours, no landlord, no rent to pay, ever.

 

This is a simple and very effective idea. Unless you are one of the poor soles to lose their jobs, and not be re-employed before your benefits/savings expire, you will not lose your house.

 

If you are an investor, then yes, Dr B's arguments make perfect sense. Sell properties and buy them back cheaper later. But the vast majority still won't, and after all the discussions he has had with them, he must know that now. That’s their problem, but again, if they have tenants paying the mortgage, after 25 years, the landlord owns the property.

 

I don't see a major problem arising from the sov debt either. Europe will mess about, but then will bailout Portugal and Spain if they have to. They are not going to let them go down.

 

It took a once in a lifetime global meltdown to cause the last crash. Even with all the global imbalances and problems still existing from the, the most likely course is a gentle muddling along again for several years.

I agree completely. I dont think the gov or banks will let this happen. Esp in London and the SE. Maybe in real terms the drop may be a bit more but nothing scary. Remember the UK IS still a tax haven for the rich, and when you add to this all that the UK and London has to offer, its still very attractive for the big overseas money. If you are making £60k a year on your non CG investments, and keep them offshore, you are a winner in the UK. Even if you are living here for more than 7 years and have to pay the 30k charge. This will trickle down the market and screw the FTB.

They can hedge their stock via the futures market.

This is the PRIMARY purpose of any Futures market (which was invented by the Chinese or Japanese for Rice I believe - and I speculate there was not much market manipulation by PPT teams there ).

 

Lets say I am a dealer, today I buy all my stock of 100,000oz in the Cash market at $12. At the same time I would sell the same amount in the Futures market (which should more or less track the spot price) so Short 100,000oz at ~$12

Tomorrow the spot price is $11: my stock has lost $100,000 but my futures contract has gained $100,000 - I havent lost anything.

I sell 10,000oz at a 5% premium and this is my profit - no profit or loss on the silver itself as it is hedged. As my stock is now 90,000oz I can reduce my short Futures position by 10,000oz

and so on until the stock is finished...

 

I recommend this article from Antal ekete which contains a part on the silver basis which also covers agricultural futures explained as a hedge:

http://www.gold-eagle.com/gold_digest_04/fekete050404.html

Thanks. That makes a lot more sense but I now have another question.

Say the furtures market thinks that the price of gold is going to go down. So they charge a high premium for a short contract. Or no one wants to cover the short postion as they think they will make a loss. Is it possible that the premium for the futures contract can be more than the commission that they can charge on the sale of 10,000oz of gold in your example?

Dealers make a profit on each sale, so why would they turn away customers? There is no need to keep people buying, there are more buyers than sellers now, plain and simple. We keep tossing it back and forth on this site, but maybe the most obvious answers are best. Gold is one of the few practical stores of wealth, in times of financial crisis its value will increase.

You didnt answer my question. If they have to pay spot price for the stock. And the next week the spot price drops $100. How can they make a profit. They make a loss. I am not interested in theories but hard facts.

I think we need to step back a little and look at what is actually happening here.

 

1. In the past week physical gold has gone from being in plentiful supply to, at times, practically out of stock. When is the last time that happened?

2. BV has posted a warning that the market is very thin and it is trading on wide margins. When is the last time that happened?

3. Gold as a safe haven is now being discussed in the mainstream media, on chatshows and by people on the bus. When is the last time that happened?

4. Gold spot price this week came close to year high in EURO, and very high in STG. Price for coins is at year high.

 

So what does all this mean? We know that there are a myriad of factors influencing the spot price of gold, and gold is a manipulated commodity. So prices will fluctuate depending on those factors. But one thing is for certain, when gold becomes scarce its value will rise. I think the talk of waiting for the dip to buy is irrelevant, the shortages we saw this week may become the norm. And at the rate that things are unfolding, and with the growing shortages, there is a real risk of being caught out. You have been warned.

Question - how do the gold coin dealers pay for the coins? At spot price on the day they purchase them? I was thinking that if that was the case, and I was a gold dealer, and I thought that prices were going down, I would not stock up on gold coins, becuase they will be cheaper next week and I would make a huge loss. So why not reduce your stock to the bear minimum and say there is a shortage to keep people buying?

Who knows. But the longer this goes on the more I think that people prefer deflation to hyperinflation.