GOLD

[romans holiday]

Jim Rickards on China's stealth acquisition of gold:

 

"They don't want really want to buy IMF's 200 tonnes for that would run the price of gold to $1300 odd... and only make it more expensive to acquire the further 3000 tonnes they eventually want, which would take their holdings to half of what the US has."

 

"Whereas China has access to mines, India does not"

 

http://kingworldnews.com/kingworldnews/Bro.../Broadcast.html

 

 

 

Another article of CB buying/ bidding for gold:

 

Competition for the IMF’s Gold?

 

http://financialsense.com/editorials/casey/2010/0310.html

On February 24, Reuters reported that the Reserve Bank of India was “set to be a buyer” of the 191.3 tonnes (6.74 million ounces) of gold the IMF is selling. Although the bank wouldn’t comment directly on the possibility, they did say, “We are closely looking at the gold market... gold is a safe bet.”

 

The article then quoted an unidentified official from the China Gold Association as saying, "It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.”

 

But the next day, Finmarket news agency in Russia reported that China “confirmed its intention” to buy the IMF gold. "Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.”

 

While they’ve been silent since, both India and China have publicly hinted they want this latest batch of yellow bars from the IMF. There’s no way to know if a competitive bid would spring up between these two countries, but...can you imagine the ramifications if one did?

 

When India bought 200 tonnes of IMF gold last November 3, it set off a buying spree that saw gold rise 14.2% in 4 weeks. What if this time around, a couple central banks both want the gold for sale? What if China says to India, “Not so fast, guys. We’d like to bid on that, too...” and word of that clash leaked out?

 

Pure speculation, of course, but competing for gold purchases isn’t a far-fetched idea. This sale is not pre-arranged; it’s an open market sale. Also, there’s only so much to go around. These two countries have only a tiny amount of their reserves in gold. Throw in the fact that central banks worldwide are already net buyers.

 

As Rickards suggests, the Chinese are probably a bit more cunning than setting of a bidding war with India over 200 tonnes.

[Schaublin]

Yes, sorry, Morgan Stanley Not Barclay's. I am sure that Barclay's practices are all above reproach.

[nicejim]

Personally, I think this means Everbank never purchased metal on behalf of their customers, and are terrified of some kind of default in the COMEX.

They provide both Allocated and Unallocated accounts. The Unallocated service charges no storage fee so whether the "metal" is stored in a vault or a filing cabinet is anyone's guess. I'm not the libellous sort, so I'll say Vault.

 

The relevant section of the Ts&Cs doesn't appear to differentiate between Un- and Allocated accounts, but storage is charged on the Allocated accounts. This might mean that the Allocated metal is stored in a more expensive filing cabinet, or a more expensive vault. I'd be mightily peeved if Allocated metal was liquidated to limit my losses, unless the metal was being eaten by a hyperevolved strain of bacteria.

[aliveandkicking]

They provide both Allocated and Unallocated accounts. The Unallocated service charges no storage fee so whether the "metal" is stored in a vault or a filing cabinet is anyone's guess. I'm not the libellous sort, so I'll say Vault.

 

The relevant section of the Ts&Cs doesn't appear to differentiate between Un- and Allocated accounts, but storage is charged on the Allocated accounts. This might mean that the Allocated metal is stored in a more expensive filing cabinet, or a more expensive vault. I'd be mightily peeved if Allocated metal was liquidated to limit my losses, unless the metal was being eaten by a hyperevolved strain of bacteria.

 

I often read Everbanks daily pfennig - usually by Chuck Butler but he is now in Florida and one of the VP's is doing the 'letter'

 

http://www.dailypfennig.com/

 

Gold is was up for a second day, as the dollar slide helped spur demand for precious metals. Gold has had a very close negative correlation to the dollar, moving higher as the US currency drops, and falling as the currency rises. So the drop in the US$ vs. the euro propelled the metals higher. The price of gold was also helped by a report which showed production in South Africa fell 18% in January from a year earlier. As with all commodities, a drop in production causes an increase in price.

 

So they seem to be talking gold up, or observing it going up. Either way they dont seem to want their customers to have gold accounts surely??

 

 

[Carlton]

... But you want to come up with 'the world is not awash with surplus gold; it is being quietly accumulated in physical form whilst vast amounts of paper gold are played with on margin.' as if you have some great knowledge that nobody else has.

This is common knowledge to people that have seriously studied the gold market. Gold is massively oversubscribed. Each ounce of physical gold held at most of the conventional warehouses and depositories has multiple claims of ownership against it. Various financial institutions engage in fractional-reserve gold dealing. The GLD and SLV ETFs have the effect of reducing demand for physical by directing money into (largely unbacked) paper products. The smart money (including folks like Paulson and Sprott) is acquiring physical.

[LauraB]

GATA Presents New Evidence Of The Fed's Gold Price Supression Scheme, Combing Through Oddly Unredacted FOMC Minutes

 

 

http://www.zerohedge.com/article/gata-pres...dly-unredacted-

 

Contains many gems........I'm still reading it & you guys will absorb it far faster than me; especially as my jaw is still locked open at this:-

 

I think the main part of our problem right now is inflation psychology. It certainly reflects the lack of a nominal anchor. It suggests that it would be helpful to have a politically supported mandate to attain and maintain a stable value of the dollar. If somehow we could achieve the conditions of a true gold standard -- without gold but the steady purchasing power of money in the minds of people -- over time it would make some of these short-term things that we go through a lot easier to deal with."

 

It's just seeing it in print I guess

 

Just wait 'til you get to Greenspan!!!

[aliveandkicking]

This is common knowledge to people that have seriously studied the gold market. Gold is massively oversubscribed. Each ounce of physical gold held at most of the conventional warehouses and depositories has multiple claims of ownership against it. Various financial institutions engage in fractional-reserve gold dealing. The GLD and SLV ETFs have the effect of reducing demand for physical by directing money into (largely unbacked) paper products. The smart money (including folks like Paulson and Sprott) is acquiring physical.

 

You are more or less strengthening the point that Jim Rogers was making and i highlighted that you seem not to understand

 

In a tulip mania there is little underlying demand to plant tulips. Instead people think they are smart for holding tulips.

 

But this smartness relies on finding another smart investor who will buy the tulips who is not interested in planting tulips.

 

Therefore it is only smart while the trend is with you.

 

Fundamentally however gold is already over priced relative to its mining cost and already there is a massive amount of gold above ground that cannot be used maybe for decades? simply because the underlying fundamental demand for gold is much lower than what is available already mined.

 

Some students of gold of course like to make out gold is valueable because it is not useful. Which is rediculous because obviously gold is useful. Importantly however the students will tell you gold does not behave like a commodity and cannot be like a tulip.

[Jake]

You are more or less strengthening the point that Jim Rogers was making and i highlighted that you seem not to understand

 

In a tulip mania there is little underlying demand to plant tulips. Instead people think they are smart for holding tulips.

 

But this smartness relies on finding another smart investor who will buy the tulips who is not interested in planting tulips.

 

Therefore it is only smart while the trend is with you.

 

Fundamentally however gold is already over priced relative to its mining cost and already there is a massive amount of gold above ground that cannot be used maybe for decades? simply because the underlying fundamental demand for gold is much lower than what is available already mined.

 

Some students of gold of course like to make out gold is valueable because it is not useful. Which is rediculous because obviously gold is useful. Importantly however the students will tell you gold does not behave like a commodity and cannot be like a tulip.

 

Rediculous

 

[electroweak]

Rediculous

+1

 

EDIT: interesting that CoinInvest will now buy your coins from you at above spot:

Maple Leaf 2010, 1oz Gold 31.10 Gramm £741.88

Panda, verschiedene Jgg. / different years, 1oz, Gold 31.10 Gramm £741.88

 

 

 

 

 

 

 

[signofthetimes]

+1

 

EDIT: interesting that CoinInvest will now buy your coins from you at above spot:

Maple Leaf 2010, 1oz Gold 31.10 Gramm £741.88

Panda, verschiedene Jgg. / different years, 1oz, Gold 31.10 Gramm £741.88

 

provided you return them to Germany and pay the postal insurance...

[d2thdr]

http://www.zerohedge.com/article/gata-pres...dly-unredacted-

 

The Fed expressed the utility of having the virtues of a gold standard without using gold itself. Greenspan later confirmed that the Fed was behaving as if it was on a gold standard, as if there were "real reserves" underneath the system. This supports GATA's claims that the gold price has been suppressed by an increase in the supply of "paper gold" -- gold that investors believe they have bought and own but is really no more than a certificate saying they own the gold. This is the case with the London Bullion Market Association's unallocated gold accounts, unbacked exchange-trade funds, pool accounts, and gold derivatives.

 

The demand for real physical gold bullion is surging in the face of an impending daisy-chain of sovereign debt defaults. This threatens to expose the confidence trick -- that much more gold has been sold than exists. I have explained this in a previous essay, "The Tiny Market that is the World's Biggest":

[TW11]

This is great from Faber, not just on gold.

I find his media appearances can be too brief, it's good when he gets longer to discuss things.

Faber March 10th

 

 

 

 

[Jake]

This is great from Faber, not just on gold.

I find his media appearances can be too brief, it's good when he gets longer to discuss things.

Faber March 10th

Excellent. Thanks for that.

 

Faber ''the last place you want to be is in cash''

Prechter ''cash, the actual notes in your wallet, is the place of maximum safety''.

Faber ''the last place you want to be is in the Cities. Get to a farm in the country''.

Kunstler ''walkable communities with good transport links is where you wanna be''.

Gordon ''Gold stocks is where you'll see a few 10 baggers''

Faber '' Your physical bars won't go bankrupt, but your gold shares might''.

Faber ''I'm looking for a house and land in Canada''

Bubb ''Canada is a high tax country''

Faber ''they will print print print before going bankrupt''

Prechter'' No matter how much they print it cant cause inflation''.

Faber '' somehere in the near future it has to be inflation''

Faber ''I have seen starvetion in Buenos Aries. The distribution network falls apart''.

Prechter '' the S and P will break 666 in the next leg down''

Gordon '' 1000 on the Dow is not a silly number''

Faber ''I think we have seen the low. If the S+P goes to 900 they will print print print''

 

All. Get out of the stock markets now.

All. Get some Gold, Silver.

All. Gold is the ultimate currency.

All. They can't print gold and silver.

Prechter. ''Gold will go down before up'.

Faber. ''Gold is now trading range 950-1250''.

Prechter. ''Have cash ready to switch over to gold''.

Hommel.'' Get gold and silver while you still can''.

Schoon. ''Have faith. Buy gold and silver''.

Bubb. ''Time to get some physical. I missed the summer lows''.

Soros. '' Gold is the ultimate bubble'' (aside, ''fill up the trucks lads'')

Prechter ''timing has eluded me for 10 years''. (Great!) ''but now I'm sure. Kinda''

Embry. ''It's gold and inflation, stupid''.

Walyat '' its a stealth bull market''

Richard Russell ''No it's a mother of a bear market rally''

All. Its a print fiesta.

All. Bernanke is an idiot.

 

Me. ''Pass me the aspirin''.

 

[jinbal]

Excellent. Thanks for that.

 

Faber ''the last place you want to be is in cash''

Prechter ''cash, the actual notes in your wallet, is the place of maximum safety''.

Faber ''the last place you want to be is in the Cities. Get to a farm in the country''.

Kunstler ''walkable communities with good transport links is where you wanna be''.

Gordon ''Gold stocks is where you'll see a few 10 baggers''

Faber '' Your physical bars won't go bankrupt, but your gold shares might''.

Faber ''I'm looking for a house and land in Canada''

Bubb ''Canada is a high tax country''

Faber ''they will print print print before going bankrupt''

Prechter'' No matter how much they print it cant cause inflation''.

Faber '' somehere in the near future it has to be inflation''

Faber ''I have seen starvetion in Buenos Aries. The distribution network falls apart''.

Prechter '' the S and P will break 666 in the next leg down''

Gordon '' 1000 on the Dow is not a silly number''

Faber ''I think we have seen the low. If the S+P goes to 900 they will print print print''

 

All. Get out of the stock markets now.

All. Get some Gold, Silver.

All. Gold is the ultimate currency.

All. They can't print gold and silver.

Prechter. ''Gold will go down before up'.

Faber. ''Gold is now trading range 950-1250''.

Prechter. ''Have cash ready to switch over to gold''.

Hommel.'' Get gold and silver while you still can''.

Schoon. ''Have faith. Buy gold and silver''.

Bubb. ''Time to get some physical. I missed the summer lows''.

Soros. '' Gold is the ultimate bubble'' (aside, ''fill up the trucks lads'')

Prechter ''timing has eluded me for 10 years''. (Great!) ''but now I'm sure. Kinda''

Embry. ''It's gold and inflation, stupid''.

Walyat '' its a stealth bull market''

Richard Russell ''No it's a mother of a bear market rally''

All. Its a print fiesta.

All. Bernanke is an idiot.

 

Me. ''Pass me the aspirin''.

 

Fantastic post - Thanks -

[aliveandkicking]

Excellent. Thanks for that.

 

Faber ''the last place you want to be is in cash''

Prechter ''cash, the actual notes in your wallet, is the place of maximum safety''.

Faber ''the last place you want to be is in the Cities. Get to a farm in the country''.

Kunstler ''walkable communities with good transport links is where you wanna be''.

Gordon ''Gold stocks is where you'll see a few 10 baggers''

Faber '' Your physical bars won't go bankrupt, but your gold shares might''.

Faber ''I'm looking for a house and land in Canada''

Bubb ''Canada is a high tax country''

Faber ''they will print print print before going bankrupt''

Prechter'' No matter how much they print it cant cause inflation''.

Faber '' somehere in the near future it has to be inflation''

Faber ''I have seen starvetion in Buenos Aries. The distribution network falls apart''.

Prechter '' the S and P will break 666 in the next leg down''

Gordon '' 1000 on the Dow is not a silly number''

Faber ''I think we have seen the low. If the S+P goes to 900 they will print print print''

 

All. Get out of the stock markets now.

All. Get some Gold, Silver.

All. Gold is the ultimate currency.

All. They can't print gold and silver.

Prechter. ''Gold will go down before up'.

Faber. ''Gold is now trading range 950-1250''.

Prechter. ''Have cash ready to switch over to gold''.

Hommel.'' Get gold and silver while you still can''.

Schoon. ''Have faith. Buy gold and silver''.

Bubb. ''Time to get some physical. I missed the summer lows''.

Soros. '' Gold is the ultimate bubble'' (aside, ''fill up the trucks lads'')

Prechter ''timing has eluded me for 10 years''. (Great!) ''but now I'm sure. Kinda''

Embry. ''It's gold and inflation, stupid''.

Walyat '' its a stealth bull market''

Richard Russell ''No it's a mother of a bear market rally''

All. Its a print fiesta.

All. Bernanke is an idiot.

 

Me. ''Pass me the aspirin''.

 

Jake

 

That was an interesting post you did on prices in the Japanese deflation so you know about deflation and what it can do.

 

So it is then curious that you are describing Prechter views inaccurately.

 

What does 'print fiesta mean' in the context of Prechters view that the banks will hoover up the cash and hold it because they are frightened they will need this cash to support their deposits?

 

Also Gold cannot have much meaning as the ultimate currency when the banks are now desparately wanting to gain cash in the prechtarian view, during which time gold will fall in price towards his 650 target.

 

Prechters view is fairly clear that you should be in interest paying cash equivalents now like US treasuries until deflation has ended and at that point move to gold and presumably other assets like property shares and commodities etc.

[warpig]

Why would you back a horse that's failed to win a race in the last 10+ years...?

 

Prechters view is fairly clear that you should be in interest paying cash equivalents now like US treasuries until deflation has ended and at that point move to gold and presumably other assets like property shares and commodities etc.

[aliveandkicking]

Why would you bet on a horse that's failed to win a race in the last 10+ years...?

 

My point was mainly that we can still understand a point of view even if we dont agree with it.

 

Prechters argument seems to be that cash or ability to pay or liquidity is being provided to the banks as if liquidity was the problem. But many people like Roubini or Stilitz say liquidity is not the fundamental problem but rather insolvency is the problem.

 

Therefore because insolvency might be the problem it tends to make Prechters views possible unless the banks are nationalised.

 

The other angle here is that Prechters deflation can be delayed with massive coordinated efforts for years but that does not mean the forcast of deflation was wrong.

[romans holiday]

The dominant theories today of inflation and deflation are "incommensurable". Equally intelligent people [unless you belong to the other camp] believe in theories which seem to be irreconcilable. In the history of science, this "school dynamic" has usually been resolved by the emergence of a new school and a new theory that can incorporate/ synthesize the insights of the previously exclusive theories into a unified whole [this is not a simple or straight forward rational process as people are often attached to their theories]. A good theory should have both explanatory and predictive power. Kuhn thought good theory should satisfy the following. It suggests that good theory should be outward looking, dynamic, evolving, practical and taken to be only provisionally true...the imaginative and flexible "as if" of hypothesis:

 

http://en.wikipedia.org/wiki/Thomas_Kuhn

- Accurate - empirically adequate with experimentation and observation

- Consistent - internally consistent, but also externally consistent with other theories

- Broad Scope - a theory's consequences should extend beyond that which it was initially designed to explain

- Simple - the simplest explanation, principally similar to Occam's Razor

- Fruitful - a theory should disclose new phenomena or new relationships among phenomena

 

 

 

On incommensurability:

Proponents of competing paradigms have different ideas about the importance of solving various scientific problems, and about the standards that a solution should satisfy.

The vocabulary and problem-solving methods that the paradigms use can be different: the proponents of competing paradigms utilize a different conceptual network.

The proponents of different paradigms see the world in a different way because of their scientific training and prior experience in research.

[aliveandkicking]

The dominant theories today of inflation and deflation are "incommensurable". Equally intelligent people [unless you belong to the other camp] believe in theories which seem to be irreconcilable. In the history of science, this "school dynamic" has usually been resolved by the emergence of a new school and a new theory that can incorporate/ synthesize the insights of the previously exclusive theories into a unified whole [this is not a simple or straight forward rational process as people are often attached to their theories]. A good theory should have both explanatory and predictive power. Kuhn thought good theory should satisfy the following:

 

http://en.wikipedia.org/wiki/Thomas_Kuhn

 

 

 

 

On incommensurability:

 

Just as likely the flat earthers become such a minority they are regarded as irrelevant and no new theory is thought to be needed.

 

 

[romans holiday]

Just as likely the flat earthers become such a minority they are regarded as irrelevant and no new theory is thought to be needed.

Ah, but you are talking about the dogma of progress here. What came before has to be inferior, even absurd, to what we have now. So we have the common misconception that all thought the earth was flat before modern times. Yet most knew the earth was round before Copernicus and Galileo... it had been around for ages since ancient Greek times. What was new was the idea of heliocentrism, that the earth revolves around the sun... though, if I remember correctly, Aristarchus suggested the hypothesis 2000 years before.

 

....no new theory is thought to be needed

Then theory would have become dogma. And people would mistake the figments of their scientific imagination for reality. I think you are onto something here... ours is a profoundly ideological age. Satre called it the [intellectual] sin of seriousness.

[Jake]

Why would you back a horse that's failed to win a race in the last 10+ years...?

Contrarian investor.

[Jake]

Jake

 

That was an interesting post you did on prices in the Japanese deflation so you know about deflation and what it can do.

 

So it is then curious that you are describing Prechter views inaccurately.

 

What does 'print fiesta mean' in the context of Prechters view that the banks will hoover up the cash and hold it because they are frightened they will need this cash to support their deposits?

 

Also Gold cannot have much meaning as the ultimate currency when the banks are now desparately wanting to gain cash in the prechtarian view, during which time gold will fall in price towards his 650 target.

 

Prechters view is fairly clear that you should be in interest paying cash equivalents now like US treasuries until deflation has ended and at that point move to gold and presumably other assets like property shares and commodities etc.

Print fiesta simply means printing up a lot of money.

There's 'ultimate' though and then there is Prechter and the Grand Super Cycle ultimate. Prechter has said time and again that gold is the only real money. He is a gold bug best friend basically, at the right times. But for now it is better to wait in dollars cash, ready to pounce when gold reaches is nadir in deflation. 680? You're a bit behind aren't you? His bottom is 200 something I think. As regards cash his top of the bill is plain simple cash. Vaulted. Under the bed. Behind the wall. Just cash bills.

He also recommends gold and silver coins. A few. Just in case (he's wrong and you are hungry).

[Jake]

The other angle here is that Prechters deflation can be delayed with massive coordinated efforts for years but that does not mean the forcast of deflation was wrong.

Is this not the best thing you have ever said? (to my ears). i agree. BUT the timing of the forecast was unfortunate. 2002? He should have seen the gold bull galloping along. Not deny it as a visage. Make the trend your friend or whatever. But the prolem with fundamentalists is that they are fundamental and even if they are right eventually they have drawn a few short straws.

 

I like Prechter because I think his forecast SHOULD be correct. (except for gold). I think we have maybe got/had deflation in gold already. I mean it should be WAAAAY higher if adjusted for inflation. So maybe this is as deflated as it gets? Who knows?

[warpig]

By proxy of Pretcher, you appear to be advocating US government debt as an alternative investment to gold at this time. With a real risk of a Gilt/Bond market collapse, IMO you're suggesting people play with fire.

 

If we were simply discussing the merits of inflation/deflation (monetary/asset) that would be one thing, but we're not. Many here think the situation is grave and what was once a banking crisis, has clearly escalated to a level of sovereign solvency. The economic model for the last 50+ years is going to be tested and it is clear to all, government spending is not a substitute for traditional productivity. C + I + G + X - M = Y

 

Gold for many, is a perfect investment/protection solution as a non-trader can find. It responds well to monetary inflation and even better to deflation when swapping one asset class for another. The ultimate quality of gold is it hedges against political/social unrest and governments insistence on debasing their currency as a means to dig their way out of a hole.

 

You seem persistent in trying to disprove gold's worth in such a situation, is this really your intent?

 

My point was mainly that we can still understand a point of view even if we dont agree with it.

 

Prechters argument seems to be that cash or ability to pay or liquidity is being provided to the banks as if liquidity was the problem. But many people like Roubini or Stilitz say liquidity is not the fundamental problem but rather insolvency is the problem.

 

Therefore because insolvency might be the problem it tends to make Prechters views possible unless the banks are nationalised.

 

The other angle here is that Prechters deflation can be delayed with massive coordinated efforts for years but that does not mean the forcast of deflation was wrong.

[aliveandkicking]

Jake

 

Well it makes no sense to hold cash produced by the same people who produce the treasury bills which earn interest and reject the treasury bills. The central banks used to enable interbank settlement with huge denomination banknotes. For the banks these notes are probably still as good as cash. And if the government want to they can issue one billion legal tender notes tomorrow. Is he really favouring cash over treasuries?? One of the reason treasuries are sought after is because they are effectively interest paying cash that can be used as cash by the banks with the federal

reserve.

 

Edit:

 

http://stephenlaughlin.posterous.com/barro...robert-prechter

 

Q and A by Barrons with Prechter

 

Q: You've been quoted as suggesting people invest in Treasuries, considering them "safe cash proxies," but you've also said skeptical things about Treasuries given massive borrowing and the threat of deflation. Which is it?

 

A: It's a matter of short rates versus long. The best investment stance for conservative investors has been simple: safety. My primary recommendation is safe-cash equivalents. This means Treasury bills*, Swiss money-market claims, some New Zealand bonds, some gold and some cash. There has been no change there. Cash has been good. Today you can buy twice the house, twice the stock shares and twice the gasoline that you could a short while ago.

 

* Treasury bills mature in under one year to pay cash.

 

Warpig

 

I am more interested in discussing what is likely to happen than attacking some side just for the sake of it.

If Prechter turns out to be right people who bought gold with mortgage debt will be poorer or ruined. I am assuing he will not be right, but it is still interesting to try and understand why he has created the beliefs he has. One thing is for sure as time goes on the man gets a bit more credibility from people like me who only thought inflation was coming.

 

Meanwhile it appears true that gold can be mined at a fraction of the current price and there is many years of supply already above ground as i understand it. Gold will probably carry on rising in price for maybe some years yet before those simple economics alter the price much. And those economics dont go away because some guy on the internet thinks i am a troll or whatever gets thrown at me by people who appear to have some vested interest in ramping gold