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Gold, the Comex and Exchange For Physical

 

This report comes from John Cheney of Service Analytics.

 

We would not conclude that you cannot get gold from the Comex in the exercise of your futures contract. "Cash settled" is nothing new, and we ourselves have done this in the past. But we also have taken delivery, and have been speaking with other traders and funds, and many are spotting a trend.

 

Comex is putting forward the offer of paper in the form of money or ETF positions very aggressively, and making it the much easier alternative. Delivery of physical gold from the Comex is no longer as straightforward or even as semi-convenient as it had been in the past. In fact, it is difficult, and one must be very persistent and wait long periods of time.

 

We would like to know if there has been a recent independent audit of the Comex stores, with a clean sheet of bar numbers and the status of same. From what we hear it is a mess, as bad or worse as the recent scandal in Canada and the missing bullion.

 

Some months ago a chap described changes in the comex rules for futures contract deliveries. Therein it was described that the EFP, exchange for physical, rules were amended to allow for delivery of GLD shares in lieu of bullion.

 

Well take a look at something new, at least for me, in Monday's comex preliminary volume and open interest report. On page 3 of the attachment, notice that in addition to futures contracts listed under the EFP category, a new category is listed: "Delivery Cash Settled" = 2866 december gold contracts. Just so happens 2866 was exactly the number of delivery notices issued on FND as reported in the Nov 27 vol and op int report.

 

Conclusion: guess you can no longer get bullion via using comex contracts. This apparently is the next step in the evolution of gold trading.

 

comex.PNG

 

 

The conclusion we reach for now is that if one is counting on the ability to receive delivery of physical gold from the Comex for whatever purposes, then don't. You will wait and fight and stand in queue to obtain the goods from Enron nation.

 

The theme of the day is 'appearance versus reality' in the lair of the vampire squid.

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Did you not stock up during the recent 18 month correction/consolidation in Au just prior to the recent breakout above $1000?

 

Sadly funds did not permit much stocking up. Now I'm waiting for a correction before I buy again. Quite sanguine though - I've been in since 2000 and have a relaxed attitude to prices.

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Sadly funds did not permit much stocking up. Now I'm waiting for a correction before I buy again. Quite sanguine though - I've been in since 2000 and have a relaxed attitude to prices.

If you think gold is going to $5000 what's a few dollars drop?

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If you think gold is going to $5000 what's a few dollars drop?

 

Indeed. I do think that we must get a correction though. Either that or we go parabolic right here - in which case so be it.

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Indeed. I do think that we must get a correction though. Either that or we go parabolic right here - in which case so be it.

A consolidation soon would be good and many are saying the same:

This chart shows some of the past doji candles and what happened to the price of gold soon after. What this candle is telling us is that the buying and selling pressure is equal. So we know momentum is slowing and we should expect a consolidation or correction.

 

Because gold has rocketed higher, indeed going almost straight up in the recent weeks, I expect a pullback to be very quick. A drop to the $110 or even the $100 level in the coming weeks is not out of the question, but we all know commodities can go parabolic for several months (straight up). This is why we continue to tighten our stops and keep holding out long positions.

http://www.gold-eagle.com/editorials_08/vermeulen113009.html

 

And Technically Precious With Merv:

http://www.gold-eagle.com/editorials_08/burak112909.html

 

Jim Sinclair talked of a "Swiss stair" which seems to have occurred over the last few weeks. The idea being that big buyers have moved in fairly rapidly on each small correction making a sort of "stair".

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Just a reminder that the average seasonal factor is still very strong for Dec, Jan and Feb at least.

gold-monthly.jpg

 

As a largely buy-and-hold guy I expect just to hold and sit through these winter months.

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Following Armstrongs' recent paper on gold...

 

Now that we have made fresh highs in December we can expect a rally going into April. Armstrong gives a turn date of April 16, 2010. This would be followed by a 6 month correction with a low in Oct./Nov. 2010.

 

So I expect strong movements with gold over the winter with a move towards US$1380 - 1500. Looking at Wren's chart, December, Jan. and Feb. are strong months for upward price movements in gold so this would seems to fit.

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Looks like the $1200 mark didnt offer much resistance?

 

Anyone want to put their d*ck on the chopping block and predict a top in this rally?

 

For me, I am lookin for $1300, then I will be ligthening up in stages

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Looks like the $1200 mark didnt offer much resistance?

 

Anyone want to put their d*ck on the chopping block and predict a top in this rally?

 

For me, I am lookin for $1300, then I will be ligthening up in stages

Things could go ballastic once the hot money jumps in.... I'll keep my eyes on the gold/silver ratio as a guide as opposed to prices. When the ratio nears 50 will jump to gold with say a half my silver while both keeping some and also selling some to raise more dollars. Will not sell any serious amount of gold.

 

The faster it goes up, the greater the likelihood of a sudden reversal at a later date.

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http://www.equitymaster.com/ht/detail.asp?...009&story=1

 

Yes, I wish gold falls by -50%

 

 

I wish gold falls by -50% to Rs 9,000 per 10 grams.

 

Now, don't get me wrong: I own some units of the Quantum Gold ETF (QGOLDHALF is the scrip code on the NSE) and have no plans to sell it in the near future. And I think that Chirag and the team at Quantum AMC are doing a fabulous job as the fund manager of the Quantum Gold ETF and keeping you informed of their views on gold via The Golden Truth

 

So, you may ask, I am "long" gold - and yet I wish that the price of gold declines by -50%?

 

Yes, that is correct. I want the value of my investment in gold to fall by -50%.

 

Why?

 

Because if gold declines in price, it will mean that the world is a safer place to stay invested in.

This means that the value of my investments in the Quantum Long Term Equity Fund could appreciate steadily over the long term.

 

And since I have some 70% of my investments in stock markets, a price appreciation in stocks will offset the sharp -50% decline in the value of my relatively smaller gold holdings.

 

An agitated reader asked me why I only write about the price of gold increasing.

Why don't you write that gold could fall to Rs. 10,000? - the reader wanted to know.

 

Well, the way the central banks of the world have behaved over the past few years it seemed logical that people would lose faith in paper currencies and turn to gold.

So, that is why we wrote about gold being a good place to park some of your savings.

 

 

But, yes, the agitated reader is right: I should write why and how gold can fall to Rs 9,000 - even below the Rs 10,000 level that he suggested!

 

So, here is my case for the price of gold declining by -50%.

 

What will make gold fall in price?

Let's say there is an election in India next month and we are all asked to vote for one of two candidates.

 

Candidate Dreamer tells us that - if we vote for him - we will all get free water, free food, free power, and free schooling.

And to make his promises even more real and tangible he will promise us nice air-conditioned buses and trains to travel on - with a high degree of safety.

And our taxes will be lower.

 

Candidate Realist tells us that - if we vote for him - we will have to pay more for water, more for food, more for power, and more for schools. And even after we pay more, he cannot guarantee that we will actually get all the stuff we paid for.

There are too many people that need the government's help and so those of us who have a lot - will get a little less.

And there may be fewer buses and trains for us to use, warns Candidate Realist.

Oh, yes, and everyday that you leave for work, hug and kiss your family as if it is the last time you will see them. No, it is not the swine flu or malaria or Al Qaeda or LeT that will get you - there is no guaranty that you will survive the bus and train rides.

And, just to ensure that you really cast your vote correctly, Candidate Reality promises you that he plans to increase taxes.

 

The efficient Election Commission - the unsung heroes of India's democracy - organise the electronic voting machines for the 440 million votes that are cast.

 

Guess who wins?

 

Candidate Dreamer, naturally.

 

A vote to print money

So what does the new government run by Prime Minister Dreamer do?

 

They do what all politicians everywhere in the world have done for 40 years: they go about trying to fulfil some of their election promises.

 

But that is a costly exercise.

And there are wars to be fought and borders to protect.

And the salaries and expenses of the government bureaucrats to be paid.

 

But - as promised in the election campaign - taxes have been reduced a bit.

So the government is spending Rs 100 and collecting only Rs 70 in revenues.

Every year.

From where does it get the other Rs 30?

 

Aha, the government is a magician.

It produces the Rs 30 out of thin air!

 

Actually, it is a monopolist: it has an agency called a Central Bank which owns something called a printing press which, when placed on special marked paper in special print with special designs, magically turns into currency notes.

 

Year after year, decade after decade, country after country, continent after continent: every government in the world has resorted to allowing Candidate Dreamer to use the printing presses of the central banks to fulfil a false promise.

 

And every voter has been guilty of letting it happen,

Sorry - of wanting it to happen.

Of wanting to believe in the dream and not accepting the reality.

 

So paper money - backed by nothing - circulates around the world and results in inflation.

A Rs 50 note today probably buys you the same amount of goods that Rs 5 bought you in 1980.

A US one dollar note today probably buys you what 50 cents bought you in 1980.

The value of the paper currency is debased.

 

Gold, meanwhile, cannot be printed by a monopoly printing machine.

You cannot create gold out of thin air.

 

What do you think it costs the US government to print a billion dollar bond?

Maybe USD 10 for the special paper, USD 10 for the special print, USD 10 for the watermark to prevent a counterfeit, and maybe USD 100 for the depreciation cost of the printing machine (they use it so often, they need to replace the machines very often!).

 

So, an investment of USD 130 gives the US government a USD 1 billion dollar bond that they can give to China in exchange for USD 1 billion worth of stuffed toys and microwave ovens.

What a racket.

What a scam.

And the US has spread this lie that blondes are dumb!

And we think the Chinese are smart!

The Chinese (and other exporters to USA) just got conned into the biggest Sting in the history of finance - but that is another Honest Truth!

 

The point is that, while the central banks can print paper, the central banks cannot print gold.

They need to find it.

Then dig it.

And there is not enough gold of it for all the Candidate Dreamers in the world to dig up every year.

And pay for all their election promises.

That is why gold has been a "store of value" over centuries.

 

That is why when people wake up and realise how they have been conned into accepting paper, they move to buy gold.

That is why the Reserve Bank of India decided to buy 200 tons of gold for USD 6 billion.

At what was considered a "peak price".

And it may be the "peak price".

It may be the worst investment that the RBI has ever made.

 

Because we, the voters, may finally have become smarter.

 

And now the case for gold declining to INR 9,000 for 10 grams....

 

We may finally elect Candidate Realist.

We may accept that we need to have less consumption - and more modest needs.

We may accept that we need to pay more for things that we take as our birthright.

We may accept that promises eventually come back to haunt us.

That, as the economists say, there is nothing like a free lunch: what you get, you need to pay for.

Somewhere, somehow, it comes back to get you.

 

We all elected Candidate Dreamer and it came back to haunt us - via inflation and the declining value of every rupee or dollar or euro that we earn.

 

So, yes, I want us all to elect Candidate Realist.

Then the printing presses will not be needed.

Because the government of Prime Minister Realist will not be spending on any false promises.

In fact, they will be collecting more from us in the form of taxes.

They will no longer need to use the printing press.

 

And, most importantly, all those financial geniuses who use this freely floating paper money to create dangerous financial cocktails that blow up the world will be digging roads with spades for a living.

(Hopefully, I will still be writing these columns in between digging irrigation canals. The more stupid amongst us in the finance field will be given lowly agricultural work.)

We will all need to do some real work and earn a modest income.

No more pushing fake paper to generate even more fake profits of the financial companies.

 

With the financial geniuses out of the way, companies will be more focused on building profitable businesses.

Businesses with less risk and no casino-like derivative products populating their balance sheets.

 

Those that succeed will see their share prices rise - and stay up!

 

Hopefully, the research and investment management process at Quantum Long Term Equity Fund will show some decent returns (past performance is not any indication of future performance and no investor must invest in any mutual fund till they read and understand the Offer Document.)

 

So, yes, Candidate Realist's election can be a turning point for gold prices.

And I really hope he wins.

As much as I hope we all vote for this realism.

And the price of gold will collapse because paper currencies will finally start to have more value.

The Rs 100 note of the year 2025 will buy what Rs 200 of today's money can buy.

 

And my investment in Quantum Long Term Equity Fund will increase, so I will offset the decline in my investment in gold.

 

Do I believe it will happen?

Well, I have one vote: there are billions of people choosing between Candidate Dreamer and Candidate Reality all over the world.

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Just a reminder that the average seasonal factor is still very strong for Dec, Jan and Feb at least.

gold-monthly.jpg

 

As a largely buy-and-hold guy I expect just to hold and sit through these winter months.

Yeah it a nice chart that one, released by the Aden sisters. I am now starting to think that my $1350 target by April, might be to conservative and should have been $1500.

 

As I have been saying for months, all those not in over the last few months will be missing their chance to buy at under $1000. Holding on for a discount ticket has made them miss the train.

 

 

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Looks like the $1200 mark didnt offer much resistance?

 

Anyone want to put their d*ck on the chopping block and predict a top in this rally?

 

For me, I am lookin for $1300, then I will be ligthening up in stages

 

It's always fun to make an arse of myself in public (:blink:), so... Sure! Why not? :)

 

Gold will go more or less sideways for about a month (although, it may be pretty choppy, so it won't feel like sideways necessarily), then there'll be another jump early in the new year, then a slower climb up to a local top around the end of Q1 -- at which point, I would expect to see £850/oz (I was going to say £900 knowing that what seems like 'wild prices' now can seem almost normal when they arrive, e.g. how wild did $1200-before-year-end seem a couple of weeks ago?). In dollars, it'll be more like $1400 or so by then[1].

 

*places d*ck on block* :unsure:

 

[1] And if you believe all that, you can knit fog... I sounded pretty confident, though, didn't I, eh, eh? :lol:

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It's always fun to make an arse of myself in public (:blink:), so... Sure! Why not? :)

 

Gold will go more or less sideways for about a month (although, it may be pretty choppy, so it won't feel like sideways necessarily), then there'll be another jump early in the new year, then a slower climb up to a local top around the end of Q1 -- at which point, I would expect to see £850/oz (I was going to say £900 knowing that what seems like 'wild prices' now can seem almost normal when they arrive, e.g. how wild did $1200-before-year-end seem a couple of weeks ago?). In dollars, it'll be more like $1400 or so by then[1].

 

*places d*ck on block* :unsure:

 

[1] And if you believe all that, you can knit fog... I sounded pretty confident, though, didn't I, eh, eh? :lol:

 

:lol::lol:

 

Great post.

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Looks like the $1200 mark didnt offer much resistance?

 

Anyone want to put their d*ck on the chopping block and predict a top in this rally?

 

For me, I am lookin for $1300, then I will be ligthening up in stages

 

I will answer this question the way the shills of wall street do when asked. Gold is going higher, however in the short term correct; or, Gold is going lower, however in the short term continue its rally.

 

Also, how about the media whore and wall street shill Gartman. His new fund is supposed to be market neutral, which means it doesn't go up or down with the market. I have a market neutral fund which does not have any fees or counter party risk. It's called a mattress.

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Gold will go more or less sideways for about a month

 

unlikely IMO given that the USD entered hyper-inflation in late June - gold has been making a nice upward curve since then except for 2 major takedowns, both around options expiry day - and it appears that central banks have recently lost their ability to bring about falls on these days.

 

post-2733-1259757183_thumb.png

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unlikely IMO given that the USD entered hyper-inflation in late June - gold has been making a nice upward curve since then except for 2 major takedowns, both around options expiry day - and it appears that central banks have recently lost their ability to bring about falls on these days.

 

post-2733-1259757183_thumb.png

 

 

Contrarian indicator I think...Hyper-inflation? There is buy positions being built in the USD over the last couple of months. I expect sellers to wane in the not too distant future...

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