GOLD

[ologhai]

I bought some more silver today...consider it a gift at this price.

 

Yes, I bought some more silver today too. Actually, my holding of silver (in terms of amount of money invested) is now slightly larger than it is for gold... although next time I buy, I'll probably bring it back to about 50:50.

[azazel]

Yes, I bought some more silver today too. Actually, my holding of silver (in terms of amount of money invested) is now slightly larger than it is for gold... although next time I buy, I'll probably bring it back to about 50:50.

 

Hi OJ. What silver did you get? Coins? I'm about 1 gold to 5 silver in weight. Increasing regularly.

[G0ldfinger]

I am not at all concerned about this plunge today. It's all in line with Jim Sinclair's prediction that volatility will reach esoteric levels. In fact, my guess is, that if this volume would have appeared on the buy-side, the price would possible be above $950 right now. This plunge looked like something that has been fabricated by an extremely unsophisticated seller, or, an extremely malicious seller. Both is no reason for concern.

[Justin Thyme]

Although I'm far from pleased with gold's action today, I inadvertently made a cheeky profit on the surprise drop. In an uncharacteristic display of discipline, I set up a sell order at $895 in preparation for any unexpected Fed rate hike this week. Couldn't believe it when I got back in and gold was trading at $879. As the drop was so fast and as I simply couldn't believe that some soft IFO numbers from Europe could cause a sell off of that magnitude, I closed out the trade expecting a bigger bounce than we got.

 

I sincerely hope this is a forced sale situation otherwise, as Marceau says, a heavier correction could permanently scare new blood outta the market. Oil's looking like the only game in town at the moment . . .

[Errol]

All in all this has to be the most bonkers move I've seen in gold in ages. You just don't get a $25 plunge in a matter of minutes for no reason. I'm buying again, but I have to say my confidence is totally shot to pieces. It seems you just can't win in gold at the moment. Never mind, at least I wasn't in heavily at the top.

 

I've been 'in' gold since 2000. This is just normal price action. Nothing particularly special today.

 

Ignore the price noise. Gold is going to $1500+. It will get there with massive swings but it will get there (and a lot more).

[bitbigt]

I sincerely hope this is a forced sale situation otherwise, as Marceau says, a heavier correction could permanently scare new blood outta the market. Oil's looking like the only game in town at the moment . . .

I'd think that those who are gonna be scared out of the market went running during the precipitous fall from 1030. People buying in now will have their eyes open to the increased volatility and the solid floor of 850-900 now established.

 

There are simply too many people now aware of the inflation monster, all of which thereby recognise that in the 850-900 range gold is a stonking buy, regardless of wierd one-day falls and jumps! Todays drop will be balanced out tomorrow or soon thereafter.

 

In general, as I've suggested before on this bb, it seems we're likely to bounce around these levels with some volatility for some time. And come mid-September - at the very latest (when buyers come back from hols) - the BIG run-up will begin.

 

...IMHO

 

[Errol]

A $20 fall is really not what I would call volatility. It barely makes me blink.

 

Within a couple of years we will see swings of $100 a day making the price movement now seem pathetic.

[bitbigt]

Oil's looking like the only game in town at the moment . . .

I was thinking about that today...

 

...Surely, price of oil (POO) has doubled from a strong starting price of 75 dollars partly because of a supply/demand squeeze (solid rise due to fundamentals) which has been dramatically exagerated by speculators.

 

But one has to ask: why has there been so much speculation to create this massive and fundementally-unjustified bubble?

 

My view is that loads upon loads of cash is sitting out there (thanks to last decade of 'cheap money' issuance) with nowhere else to go. Property values tanking, stock markets in bear market (and in middle of another big fall), and even PMs have been knocked down (after getting a bit ahead of themselves, and due to CB manipulations).

 

As and when POO starts to correct back down (this summer/autumn?), then all that oil money will look for a new home. And by that time gold will be looking quite healthy again, and hence very attractive as the next best place to create and chase a bubble. And remember - the oil market is far, far bigger than the gold market - so that redirection of speculative cash from oil to gold will have an absolutely massive positive effect on the price of our yellow friend.

[Compounded]

A $20 fall is really not what I would call volatility. It barely makes me blink.

 

Agree

 

Look at the yearly chart and it looks totally insignifcant.

[Steve Netwriter]

One does need wonder what would be the result in the economy if this were to happen however (which it surely will), or god forbid, if the consumer were actually to begin saving money. This is why master planners smash the gold price down every chance they get, because they don't want you doing something sensible, like saving your money. You see, when you buy gold you are saving your wealth, which is a big ‘no no' as far as the banks are concerned. They need money velocities to be elevated in order to keep bank profits growing, which is all these characters are ever worried about. This is why they take such great efforts to suppress its pricing, and why the levels of gold derivatives have exploded, according to the Bank of International Settlements. It's taking increasing effort to keep gold contained however, as reflected in the growth rate (40% annualized) of derivatives required to keep prices contained.

 

The implication here is one of these days, with the increasing amounts of fiat currency necessary to counter a collapsing consumer, a combination of physical buying in gold, along with demand for paper pricing mechanisms, will outstrip all constraints, and the biggest short squeeze in the history of any market will ensue. So make no mistake about it, having a portion of your wealth anchored in precious metals is an absolute financial necessity these days, as this will send gold and silver prices far higher than most can presently contemplate, and in rapid fashion. In the meantime, master planners keep a lid on the situation by monetizing everything that goes wrong, which is evident in the growth of M3 shown below. In the end however, and in classic ironic form, all this liquidity floating around will lead to the demise of the present system of exchange and commerce. (See Figure 3)

......

This is when gold and silver prices will start to make 3 to 5-percent daily gains – maybe more.

 

BIS report: http://www.bis.org/publ/otc_hy0805.pdf

 

from:

 

Jun 23, 2008 - 01:10 PM

By: Captain_Hook

http://www.marketoracle.co.uk/Article5190.html

 

[marceau]

A $20 fall is really not what I would call volatility. It barely makes me blink.

 

Within a couple of years we will see swings of $100 a day making the price movement now seem pathetic.

 

 

It is not the size of the fall which was the problem, but the nature and speed of it. Gold was looking set for a breakout and test of $920-30, yes it was to be expected that there would be a pullback, but for gold to drop that far in just 20 minutes without so much as even pausing at support was, as I said, one of the strangest things I've seen in gold in a long time.

 

I've also been 'in' gold for many years, and believe me I'm used to big drops and big rises. But I've never seen a selling streak run quite as contrary to market signals as today's. Assets do not normally drop that far back from key resistance without at least stopping at support to sucker in more buyers. That leads me to the conclusion that something truly unusual happened today.

 

As for what that was, I've already speculated in an earlier post, so I won't repeat myself, but there is a chance that today's move signals something significant happening to the gold market. I don't believe that is the case, so I bought, as usual, shortly after the end of the pullback.

 

Time will tell, but I'm not going to get to blase about gold's prospects. I've been urging caution on here for the best part of 3 months now and I see no reason to stop at the present time. Traders who've bought blindly on every rise so far will have lost quite a bit of money since April and I've no intention of becoming one of them. Yes, I'm bullish, but not reckless, I would advise those playing short or medium term strategies to carefully consider their moves over the next week or so.

[narco]

Looks like window dressing to me for the FOMC on wednesday. They cannot have gold breaking out to the upside while they announce an interest rate hold.

 

This action merely buys them more time. Nothing more.

[FLASH]

Looking into this a bit more, the suggestion seems to be that it was a forced sale to cover a margin call on oil. That makes sense if you think of what went on at the weekend and the (daft in my opinion) expectation that Saudi would pull a rabbit out the hat and oil would fall today. That backfired and any short would have been squeezed. Dumping gold (and silver) at the open could have provided the funding but, like you say, it would have needed to be a big position.

 

IMO Long Gold and Short Oil is looking like a pretty good trade now. My theory is if both rise Gold will rise much more than Oil so there will be an overall profit same if both fall there is much more potential downside to Oil than there is to Gold. I also can't foresee a scenario that Oil rises substancially and Gold doesn't. As long as you have enough money to maintain the margins this seems like a good trade to me.

[HPCsoYESTERDAY]

It is not the size of the fall which was the problem, but the nature and speed of it. Gold was looking set for a breakout and test of $920-30, yes it was to be expected that there would be a pullback, but for gold to drop that far in just 20 minutes without so much as even pausing at support was, as I said, one of the strangest things I've seen in gold in a long time.

 

I've also been 'in' gold for many years, and believe me I'm used to big drops and big rises. But I've never seen a selling streak run quite as contrary to market signals as today's. Assets do not normally drop that far back from key resistance without at least stopping at support to sucker in more buyers. That leads me to the conclusion that something truly unusual happened today.

 

As for what that was, I've already speculated in an earlier post, so I won't repeat myself, but there is a chance that today's move signals something significant happening to the gold market. I don't believe that is the case, so I bought, as usual, shortly after the end of the pullback.

 

Time will tell, but I'm not going to get to blase about gold's prospects. I've been urging caution on here for the best part of 3 months now and I see no reason to stop at the present time. Traders who've bought blindly on every rise so far will have lost quite a bit of money since April and I've no intention of becoming one of them. Yes, I'm bullish, but not reckless, I would advise those playing short or medium term strategies to carefully consider their moves over the next week or so.

 

 

Good post marceau

 

I'll add my t'penny worth (more like 3p given inflation). I think this week is a crucial week for gold, I would like to see 8.85 become the new floor (as opposed to 850p). If we see consistent support from the mid 880s this week, hopefully the new floor will be set and it will show that gold is becoming more resistant to smackdowns.

 

When I look at the graphs on the elliott wave site, they suggest that gold could fall back to 600p and still remain in an upward channel (present since 2001). However, given a period like the 1970s for the pog, these graphs would be useless. So, in the absence of a 'Volcker', it looks more 70s to me than the eliiott charts would suggest.

 

Like I say though, come close of play Friday, I will have a better idea.

 

 

[Magpie]

I was thinking about that today...

 

...Surely, price of oil (POO) has doubled from a strong starting price of 75 dollars partly because of a supply/demand squeeze (solid rise due to fundamentals) which has been dramatically exagerated by speculators.

 

But one has to ask: why has there been so much speculation to create this massive and fundementally-unjustified bubble?

 

My view is that loads upon loads of cash is sitting out there (thanks to last decade of 'cheap money' issuance) with nowhere else to go. Property values tanking, stock markets in bear market (and in middle of another big fall), and even PMs have been knocked down (after getting a bit ahead of themselves, and due to CB manipulations).

 

Interesting comment on this here:

 

Basically suggests that the banks and funds are diverting the money the Fed lends them into speculative positions to try and make up the profits they lost on the previous bubble.

 

So it's more serial bubble blowing combined with an opportunity for all the poor people in the world to contribute a bit of money to the bankers' resuce fund. No wonder people are rioting.

 

[MattFC]

Interesting comment on this here:

 

Basically suggests that the banks and funds are diverting the money the Fed lends them into speculative positions to try and make up the profits they lost on the previous bubble.

 

So it's more serial bubble blowing combined with an opportunity for all the poor people in the world to contribute a bit of money to the bankers' resuce fund. No wonder people are rioting.

 

You might be interested in reading this

 

The Great Oil Swindle

How much did the Fed really know?

 

By Mike Whitney

 

30/05/08 "ICH" -- - The Commodity Futures and Trading Commission (CFTC) is investigating trading in oil futures to determine whether the surge in prices to record levels is the result of manipulation or fraud. They might want to take a look at wheat, rice and corn futures while they're at it. The whole thing is a hoax cooked up by the investment banks and hedge funds who are trying to dig their way out of the trillion dollar mortgage-backed securities (MBS) mess that they created by turning garbage loans into securities. That scam blew up in their face last August and left them scrounging for handouts from the Federal Reserve. Now the billions of dollars they're getting from the Fed is being diverted into commodities which is destabilizing the world economy; driving gas prices to the moon and triggering food riots across the planet.

 

For months we've been told that the soaring price of oil has been the result of Peak Oil, fighting in Iraq, attacks on oil facilities in Nigeria, labor problems in Norway, and (the all-time favorite)growth in China. It's all baloney. Just like Goldman Sachs prediction of $200 per barrel oil is baloney. If oil is about to skyrocket then why has G-Sax kept a neutral rating on some of its oil holdings like Exxon Mobile? Could it be that they know that oil is just another mega-inflated equity bubble---like housing, corporate bonds and dot.com stocks—that is about to crash to earth as soon as the big players grab a parachute?

 

There are three things that are driving up the price of oil: the falling dollar, speculation and buying on margin.

 

The dollar is tanking because of the Federal Reserve's low interest monetary policies have kept interest rates below the rate of inflation for most of the last decade. Add that to the $700 billion current account deficit and a National Debt that has increased from $5.8 trillion when Bush first took office to over $9 trillion today and it's a wonder the dollar hasn't gone “Poof” already.

 

According to a January 4 editorial in the Wall Street Journal: “If the dollar had remained 'as good as gold' since 2001, oil today would be selling at about $30 per barrel, not $99. (today $126 per barrel) The decline of the dollar against gold and oil suggests a US monetary that is supplying too many dollars.” Wall Street Journal 1-4-08

 

The price of oil has more than quadrupled since 2001, from roughly $30 per barrel to $126, without any disruptions to supply. There's no shortage; it's just gibberish.

 

 

As far as “buying on margin” consider this summary from author William Engdahl:

 

“A conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.”

 

So the investment banks and their trading partners at the hedge funds can game the system for a mere 8 bucks per barrel or 16 to 1 leverage. Not bad, eh?

 

Is it possible that gambling on oil futures might be a temptation for banks that are already underwater from a trillion dollars worth of mortgage-related deals that have “gone south” leaving the banking system essentially bankrupt?

 

And if the banks and hedgies are not playing this game, then where is the money coming from? I have compiled charts and graphs that show that nearly two-thirds of the big investment banks' revenue came from the securitization of commercial and residential real estate loans. That market is frozen. Besides, this is not just a matter of “loan delinquencies” or MBS that have to be written off. The banks are "revenue starved". How are they filling the coffers? They're either neck-deep in interest rate swaps, derivatives trading, or gaming the futures market. Which is it?

 

Of course, there is one other possibility, but if that possibility turned out to be right than it would cast doubt on the legitimacy of the entire financial system. In fact, it would prove that the system is being rigged from the top-down by our friends at the Banking Politburo, the Federal Reserve. Here goes:

 

What if the investment banks are trading their worthless MBS and CDOs at the Fed's auction facilities and using the money ($400 billion) to drive up the price of raw materials like rice, corn, wheat, and oil?

 

Could it be? Could the Fed really be looking the other way so it can bail out its banking buddies while they drive prices skyward?

 

If it is true; (and I suspect it is) it hasn't done much good. As the Associated Press reported yesterday:

 

“The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets. The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.”

 

Another $225 billion for the bankers and not a dime for the struggling homeowner! The Fed is bankrupting the country with their permanent rotating loans to keep reckless speculators from going under. So much for moral hazard.

 

As far as speculation, there is ample evidence that the system is being manipulated. According to MarketWatch:

 

“Speculative activity in commodity markets has grown "enormously" over the past several years, the Homeland Security and Governmental Affairs Committee said in a news release. It pointed out that in five years, from 2003 to 2008, investment in the index funds tied to commodities has grown by 20-fold -- to $260 billion from $13 billion.”

 

And here's a revealing clip from the testimony of Michael W. Masters of Masters Capital Management, LLC, who addressed the issue of “Commodities Speculation” before the Committee on Homeland Security and Governmental Affairs this week:

 

“Today, Index Speculators are pouring billions of dollars into the commodities futures

markets, speculating that commodity prices will increase. ...In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels.8 Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels. The increase in demand from index speculators is almost equal to the increase in demand from china.

 

Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.

 

Today, in many commodities futures markets, they are the single largest force.15 The huge growth in their demand has gone virtually undetected by classically-trained economists who almost never analyze demand in futures markets.

 

As money pours into the markets, two things happen concurrently: the markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing. The CFTC has taken deliberate steps to allow certain speculators virtually unlimited access to the commodities futures markets. The CFTC has granted Wall Street banks an exemption from speculative position limits when these banks hedge over-the-counter swaps transactions. This has effectively opened a loophole for unlimited speculation. When Index Speculators enter into commodity index swaps, which 85-90% of them do, they face no speculative position limits.... The result is a gross distortion in data that effectively hides the full impact of Index Speculation.” (Thanks to Mish's Global Economic Trend Analysis; the one “indispensable” financial blog on the Internet)

 

Masters adds that the CFTC is pressing to make “Index Speculators exempt from all position limits” so they can make “unlimited” bets on the futures which are wreaking havoc on the global economy and pushing millions towards starvation. Of course, these things pale in comparison to the higher priority of fatting the bottom line of the parasitic investor class.

 

Brimming oil tankers are presently sitting off the coasts of Iran and Louisiana. The Strategic Petroleum Reserve has been filled. Demand is flat. The world's biggest consumer of energy (guess who?) is cutting back . As CNN reports:

 

“At a time when gas prices are at an all-time high, Americans have curtailed their driving at a historic rate. The Department of Transportation said figures from March show the steepest decrease in driving ever recorded. Compared with March a year earlier, Americans drove an estimated 4.3 percent less -- that's 11 billion fewer miles, the DOT's Federal Highway Administration said Monday, calling it "the sharpest yearly drop for any month in FHWA history." (CNN)

 

The great oil crunch is another fabricated crisis; another "smoke and mirrors" fiasco; another Enron-type shell-game engineered by banksters and hedge fund managers. Once again, the bloody footprints can be traced right back to the front door of the Federal Reserve. Don't expect help from the regulators either; they've all been replaced with business reps like Harvey Pitt or Hank Paulson. The only time anyone in the Bush administration finds their conscience is when they're offered a multi-million dollar “tell all” book deal

 

[ologhai]

Hi OJ. What silver did you get? Coins? I'm about 1 gold to 5 silver in weight. Increasing regularly.

 

I used GoldMoney. By weight, the silver/gold ratio of my holding is about 55 to 1!

 

I wonder if I'm overdoing silver...

[woody]

This is curious given yesterday's moves:

 

SPDR Gold Trust gold holdings rise 2 pct on Jun 23

 

24 Jun 2008 - 09:31

LONDON, June 24 (Reuters) - The volume of gold held in the

world's largest gold-backed exchange traded fund, SPDR Gold

Trust, rose by 2 percent on June 23, the fund said on Tuesday.

The fund, formerly known as StreetTRACKS Gold Trust, added

an extra 12.26 tonnes of gold bullion on Monday to bring its

total holding to 628.21 tonnes, its highest level since April

21.

 

 

[woody]

IMO Long Gold and Short Oil is looking like a pretty good trade now. My theory is if both rise Gold will rise much more than Oil so there will be an overall profit same if both fall there is much more potential downside to Oil than there is to Gold. I also can't foresee a scenario that Oil rises substancially and Gold doesn't. As long as you have enough money to maintain the margins this seems like a good trade to me.

 

I'm long both currently and suspect there's a bit to run yet but I'm inclined to agree on a couple of month view. Taking the scenario that the investment banks are ramping oil and suppressing gold, both of which make sense and I've read in a number of places, it makes sense that at some point they will switch. They'll cease being long or more than likely short oil to fund closing shorts and going long in gold (and silver). Joe Public who has followed them in (read/heard lots of talk about 'hedging your fuel bills by buying ETFs') will be left holding the baby, they replenish their coffers with profits from Fed capital and move on to the next victim. They have too much capital to fight but by second-guessing, or at least trading with the trend, we can do ok.

 

All of that said, I do still fundamentally believe in higher oil due to the supply/demand equation and a belief that Saudi's capacity to pump more indefinitely is not nearly what it has suggested and doubt we'll return anywhere near previous lows.

[Magpie]

You might be interested in reading this

 

The Great Oil Swindle

How much did the Fed really know?

 

By Mike Whitney

 

Ah, thanks. That's the exact link I meant to put in but forgot.

 

[sossij]

Good read, thanks matt. I'm a bit confused buy this part:

 

Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.

 

If speculators in the futures market don't actually take physical delivery how can this be a stockpile as such? Surely the oil ultimately goes somewhere (and then burned)?

 

[wren]

If speculators in the futures market don't actually take physical delivery how can this be a stockpile as such? Surely the oil ultimately goes somewhere (and then burned)?

That's just what I was wondering.

 

Am I wrong in thinking that all oil contracts are real and somebody has to take delivery on maturity?

 

To what extent and for realistically how many months can speculators hold up the price by their sentiment alone?

 

[ologhai]

This time yesterday, the POG dropped by $25... Will it happen again?

[Joe90]

That's just what I was wondering.

 

Am I wrong in thinking that all oil contracts are real and somebody has to take delivery on maturity?

 

To what extent and for realistically how many months can speculators hold up the price by their sentiment alone?

 

If the writer of the article stopped to consider what he was saying, he would realise that ultimately all those contracts must at some point be closed, resulting in the mother of all price collapses. The only thing which cannot be predicted with accuracy is the timing of the collapse, but I would guess it will be when there is actual as opposed to verbal monetary tightening. Could be huge.

 

 

[ChrisP]

That's just what I was wondering.

 

Am I wrong in thinking that all oil contracts are real and somebody has to take delivery on maturity?

 

To what extent and for realistically how many months can speculators hold up the price by their sentiment alone?

 

Mostly likely when things get really bad the exchanges will change the rules so that contract holders can settle in case. It makes perfect sense in the context of this story (given it's true). What a twisted world.