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... from DrBubb's Diary ...

 

Remember this chart?

Maybe this chart will surprise some others too:

TLT/Bonds versus GLD/Gold ... update : intraday

TLTvsGLD.gif.jpg

 

Like many here, and like Bill Gross, I have not been a big fan of T-Bonds.

Guess what, since Gross was publicly knocking them back in April...

BOnds/TLT have performed almost the same as Gold.

How many here would have guessed that ?

What happened since then?... update

 

TLTvsGLD.gif.jpg

 

TLT peaked 2 days earlier than GLD, and on lighter volume than the prior rally,

giving an excellent early warning.

 

Interestingly, the signals are even clearer using the Intraday charts ... update

 

TvsG-Aug24.gif.jpg

 

I am short Bonds now - through being long TBT and TBT calls.

Perhaps when I cover my positions there, I will move straight into calls on GLD.

It could be an interesting ride !

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How do you know it was speculators and not genuine investors?

 

I know margin requirements have to be increased, I wouldn't argue with that. My bone of contention is the frequency in which they increase margin requirements and by how much. That's 4 times in a month between both exchanges. I am of the firm opinion that they use it to 'manage' the price beyond reasonable expectation. Engineering a drop of $200/t.oz is extreme, especially when the metal rose on fundamental problems in the market. If the underlying problems have been temporarily averted the market would have self corrected, so I see this as manipulation. They claim increasing margin requirements is a mechanism to manage risk and smooth out volatility, but it's clear it causes volatility. Bart Chilton is another shillistic chump IMO.

 

What they should do is price this in to the market on a continual basis, so with every % price rise in the underlying commodity, the margin requirements rise proportionality. Of course they'll never do this, because this is their mechanism to manage the price of the metals. All I can hope is that investors vote with their feet and trade on the Pan-Asian gold exchange, who hopefully manage this process in a more responsible manner.

 

Do other commodities suffer such volatility and excessive margin hikes?

 

They are doing their jobs!

 

When prices "go parabolic", the risks get higher and they SHOULD raise margins.

As the writer said "as we expected".

 

The real problem for the gold market was the one-way speculative move into gold

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They are doing their jobs!

 

When prices "go parabolic", the risks get higher and they SHOULD raise margins.

As the writer said "as we expected".

 

The real problem for the gold market was the one-way speculative move into gold

 

Prec-GLDwk.gif.jpg

 

Don't you think short-covering had anything to do with the mini-parabolas in both gold and silver? Open Interest in silver suggests that was a major factor. Then there's also the issue of collusion and the telegraphing of margin hikes to key players. Definitely lots of speculative froth in gold short term, but I think there was much more at play. And remember, not much real allocated physical will have changed hands this week.

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This really gets my goat. Why would traders receive advanced notice of this... FFS, I thought this was supposed to be a level playing field. I received the CME e-mail about 9PM last night, that's too late.

 

 

 

Then there's also the issue of collusion and the telegraphing of margin hikes to key players.

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They are doing their jobs!

 

When prices "go parabolic", the risks get higher and they SHOULD raise margins.

As the writer said "as we expected".

 

The real problem for the gold market was the one-way speculative move into gold

 

Prec-GLDwk.gif.jpg

 

I wholeheartedly agree with this!

 

 

 

Of course, one can always pick with the referee and a lot of people including yourself are now unhappy but, for goodness sake, haven't we had enough financial bubbles already in recent years? Yes, to some extent their actions represent price engineering but do people really want another bubble in gold?

 

In my opinion, there were enough warning signs: charts, volume data, previous similar actions (silver, oil) etc. that this was a speculative frenzy and that some action was going to be taken.

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They are doing their job?? !!! Covering their asses, that's what :)

 

I think the POG did indeed get a bit out of hand over the last week or two, but who ever heard of coordinated multiple margin hikes in AAPL? (Just to pick one example).

 

It seems that if indeed the leverage in gold is too high (and why, exactly is that a problem, apart from at the CME where the futures paper gets turned into physical?), then they should have a predetermined formula in place if the leverage is too high.

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back to the 38 fib

 

post-1667-0-04781100-1314215716_thumb.gif

 

Next stop, the break out at the 50 fib and the break out at around 1710 ??

 

hmmm could see a bit of a bounce here

 

post-1667-0-89913800-1314297795_thumb.gif

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I bought back in. Gold moving inversely to the share indices, end of options window, moving into september, CDS rising everywhere, sovereign situation out of control, qe3 likely this weekend etc etc

 

What was I thinking trying to cream off a few extra % profit?

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I bought back in. Gold moving inversely to the share indices, end of options window, moving into september, CDS rising everywhere, sovereign situation out of control, qe3 likely this weekend etc etc

 

What was I thinking trying to cream off a few extra % profit?

 

Wise move. I definitely feel more relaxed just holding on. Trading in and out is not for me, I get this horrible, sick, panic feeling!! Whilst it looks like gold is due a correction, the financial situation is clearly getting worse and gold is going much higher, so the correction might not happen.

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Margin: I hope it will be at 100% soon and COnMEX turned into a cash markt. Or even better, just delist all PMs from the COnMEX. Then we'll soon have a proper price discovery process. ;)

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The real problem for the gold market was the one-way speculative move into gold

Hmmm, +$60T in worldwide money start trying to squeeze into gold. Nothing speculative about it, just a precautionary measure. We haven't seen anything yet. Gold is just doing what it has always done.

 

I think the spectacular correction will be the one from $5,000 to $2,500, before taking off towards $10,000. After that, we'll see. Maybe they'll try to peg the Dollar again, but $10,000 is still way too low for that. So, it's going to be very interesting to watch this pan out.

 

Popcorn.

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I'm not the right person to convince gold is a bubble, you'll have to find someone else.

 

Of course, one can always pick with the referee and a lot of people including yourself are now unhappy but, for goodness sake, haven't we had enough financial bubbles already in recent years? Yes, to some extent their actions represent price engineering but do people really want another bubble in gold?

 

In my opinion, there were enough warning signs: charts, volume data, previous similar actions (silver, oil) etc. that this was a speculative frenzy and that some action was going to be taken.

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Using the excerpt from chris_ct's screen shot, aren't we only about 25% off 100% margin? Isn't that roughly one more hike?

 

 

 

Margin: I hope it will be at 100% soon and COnMEX turned into a cash markt. Or even better, just delist all PMs from the COnMEX. Then we'll soon have a proper price discovery process. ;)

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Im not follwing whats going on here...can anyone explain in laymans terms? From my limited understanding, margin calls are when a bank requests capital...are we saying that speculators are borrowing to invest in Gold?

 

Apologies, Im trying to learn..bear with me!

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Sorry I don't mean to seem unfriendly, it's just I'm really tired of hearing this day, I think this is the 50th time...(at least!)

 

 

 

I'm not the right person to convince gold is a bubble, you'll have to find someone else.

 

 

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Hmmm, +$60T in worldwide money start trying to squeeze into gold. Nothing speculative about it, just a precautionary measure. We haven't seen anything yet. Gold is just doing what it has always done.

 

I think the spectacular correction will be the one from $5,000 to $2,500, before taking off towards $10,000. After that, we'll see. Maybe they'll try to peg the Dollar again, but $10,000 is still way too low for that. So, it's going to be very interesting to watch this pan out.

 

Popcorn.

What/How on earth a 5000 to 2500 correction would come about is beyond (my) comprehension. What would the recipe be for that in the climate we are going into? This little blip is causing enough consternation as it is, it would seem.

 

I took Robin Griffiths for his buy 'around 1700' yesterday (1710) and picked up some silver, too. Also in the back of my mind is Venezuala's little move. Hear Jim Rickards on KWN of what that could mean if other countries join in. I don't suspect the West and the BIS will enjoy the prospect of releasing their gold to Russian, Chinese and Brazilizn banks. I dont really understand these margin call things but I do understand a good discount. :) ... so I'd be happy if they did a few more. I think a lot of time can be wasted fretting about a few quid and whilst it is still on the shelf, I'll be buying.

 

I'm looking forward to hearing Bernanke's thoughts and actions. One day he might even decide to say 'oh and btw we are revaluing gold to 7000/oz. Whatever. It doesn't really alter the big picture one iota as far as I am concerned. As you say, its going to be interesting to watch this pan out over the next few months/years.

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One day he might even decide to say 'oh and btw we are revaluing gold to 7000/oz. Whatever. It doesn't really alter the big picture one iota as far as I am concerned. As you say, its going to be interesting to watch this pan out over the next few months/years.

I still think the way Nixon announced the end of convertibility "temporarily" to "stabilize the dollar" funny. It wasn't even the first "element," but the third element.

 

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I am reminded that Jim Rogers has said many times that you wind up making more money owning the underlying asset.

 

Posted for your inspection:

 

mktAug09-Aug11.jpg

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Im not follwing whats going on here...can anyone explain in laymans terms? From my limited understanding, margin calls are when a bank requests capital...are we saying that speculators are borrowing to invest in Gold?

 

Apologies, Im trying to learn..bear with me!

 

I'm not a futures trader but this is how it works how I understand it:

 

One futures contract in gold represents 100oz of gold. If you buy a futures contract you reserve the right to buy the underlying asset when the contract is due. However, at this stage yoy do not have to put down the full amount (i.e. $1,800 x 100 = $180,000) but only a small fraction of the price (margin requirement).

 

As it stands, this margin requirement was raised from $7,425 to $9,450 (initial margin), and from $5,500 to $7,000 (maintenance margin) per contract. Don't ask me what the precise difference is between the two ;) but the margin requirement onlz remains a small fraction of the price.

 

I guess this enables speculators to get leveraged exposure to the gold price.

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I still think the way Nixon announced the end of convertibility "temporarily" to "stabilize the dollar" funny. It wasn't even the first "element," but the third element.

 

 

Modern body-language experts would have a field day with this today: double blinking, looking down, wiping nose.

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Im not follwing whats going on here...can anyone explain in laymans terms? From my limited understanding, margin calls are when a bank requests capital...are we saying that speculators are borrowing to invest in Gold?

 

Apologies, Im trying to learn..bear with me!

 

One way to look at margin is simply that it's a deposit you need to pay to take control of an asset, much like you have to put down a deposit when you buy a house on credit. Some time ago I mentioned that one mechanism that contributed to falling house prices - the requirement for larger deposits - is the same mechanism that could be used to bring down the price of gold, and if margin requirements are repeatedly hiked then gold will certainly get cheaper.

 

You can't buck the market though, if gold wants to continue higher, it will do, margin hikes will just delay it somewhat.

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