GOLD

[romans holiday]

and this from FOFOA:

 

The dollars might not be hyper-inflated, but the prediction sure is.

[marmite]

I repeat my oft-repeated forecast: Gold will be below $1100 in August.

Wait until then to buy=

 

Mark August 27th - 31st in your calenders as the low. Thin markets due to the London close plus future / option expiry dates

[Johan van der Smut]

Why would you be spooked at the prospect of a fabulous buying opportunity? Get the truck serviced!

 

Because I currently have no job and no income, and the kind of fall Bonner is mooting will slash my nominal wealth drastically if I remain heavily invested in gold. Periodically loading up the truck isn't an option for me because I don't have any money coming in!

[dietcolaaddict]

Because I currently have no job and no income, and the kind of fall Bonner is mooting will slash my nominal wealth drastically if I remain heavily invested in gold. Periodically loading up the truck isn't an option for me because I don't have any money coming in!

 

Physical gold is a great way of protecting your hard earned savings from means-testing.

 

If you need to sell physical to provide income - and I have been there - keep dealer transactions under £5k each (and, for completeness, less than £10k per dealer per 365 day period)

[Carlton]

I think Stewart Thomson gets it:

 

Comments?

 

# There is a growing probability that the dollar could be backed by gold to some degree as the slide accelerates. I have categorically stated that if you felt fear that the euro was headed to zero at 1.18, you need to be prepared mentally for exponentially more fear, should the dollar begin sliding below .70 on the index.

 

# I believe a failure of the .70 area on the dollar index will be fundamentally driven by the institutional money manager view that QE (quantitative easing; buying of assets in exchange for printed money) has FAILED or is at least projected to fail. I want to remind you that the difference between pure money printing and QE is that QE involves an exchange. There is an exchange of one item (mostly OTC derivatives in the case of the current crisis) for another (printed US dollars).

 

# Pure money printing involves no real exchange. There is some value to some of the OTCD assets being exchanged now. In the case of money printing, there is no exchange, but simply the printing of money to whatever level is deemed necessary to mathematically raise asset prices. It is not until PURE money printing is utilized that hyperinflation becomes a serious risk.

 

# There is a middle step between QE and money printing, and it is gold revaluation. No confiscation is needed in the current crisis to make revaluation “work”, because so few people own gold. The major central banks of the world are already committed to major long term gold buy programs (the opposite of the 1990s), and these buy programs are the mechanism of gold revaluation under a sort of “guise” of currency reserves diversification. The central “banksters” aren’t stupid; they didn’t get the market all wrong and accidentally sell their gold holdings into the end of the gold bear mkt, any more than the current buy programs are “knee jerk” reactions to a rising gold price. The buy program is about gold revaluation, not rushing to buy gold as an asset. As QE is more and more broadly deemed a failure in the fund community, the central banks will step up their gold buy programs, stepping UP the price they pay for the gold, with tremendous vigor.

 

# The buy programs of the central banks are not about adding gold as a reserve to diversify their forex reserves, they are about devaluing paper money to raise asset prices, as blown marked to model otc derivatives can then be marked to market.

 

http://www.kitco.com/ind/Thomson/jul272010.html

 

 

[romans holiday]

I think Stewart Thomson gets it:

 

Comments?

 

# There is a growing probability that the dollar could be backed by gold to some degree as the slide accelerates. I have categorically stated that if you felt fear that the euro was headed to zero at 1.18, you need to be prepared mentally for exponentially more fear, should the dollar begin sliding below .70 on the index.

Both agree and disagree. I agree with the possibility that the dollar could end up backed by gold. Not because it is sliding towards zero though, but because it will end up spiking against other currencies [even worse than the Yen]. Deleveraging "short-covering" will do this to the dollar despite the "fundamentals". This would crucify the US economy and some kind of international rebooting of the currency system would be required. The dollar could then be devalued against gold while other currencies could be appreciated. This would restore balanced trade by fixing the currencies at the appropriate levels to gold.

 

A national solution is no solution at all. To restore global trade, we may need to see an international solution.

[romans holiday]

# There is a middle step between QE and money printing, and it is gold revaluation. No confiscation is needed in the current crisis to make revaluation “work”, because so few people own gold. The major central banks of the world are already committed to major long term gold buy programs (the opposite of the 1990s), and these buy programs are the mechanism of gold revaluation under a sort of “guise” of currency reserves diversification. The central “banksters” aren’t stupid; they didn’t get the market all wrong and accidentally sell their gold holdings into the end of the gold bear mkt, any more than the current buy programs are “knee jerk” reactions to a rising gold price. The buy program is about gold revaluation, not rushing to buy gold as an asset. As QE is more and more broadly deemed a failure in the fund community, the central banks will step up their gold buy programs, stepping UP the price they pay for the gold, with tremendous vigor.

 

# The buy programs of the central banks are not about adding gold as a reserve to diversify their forex reserves, they are about devaluing paper money to raise asset prices, as blown marked to model otc derivatives can then be marked to market

 

Gold is not revalued. It itself becomes the basis of valuation. The higher price of gold only reflects the devaluing/ depreciation of currencies. Gold is pricing currencies now rather than the other way round. The rationale for Central Banks to buy gold is basically the same as it is for investors. A diversity away from too high an exposure to other currencies which have an uncertain future hanging over them. I don't think though that higher gold prices will push asset prices up. Gold prices will go up while other major currencies also strengthen as investors liquidate assets and go into the strongest forms of liquid capital.

[marmite]

Gold Bears Are Wrong, Smart Money Isn't Selling

 

http://www.minyanville.com/businessmarkets...7/2010/id/29327

 

Last week I was told that we were going to see more gold weakness in the days ahead because big money had to sell their positions. Folks, smart big-money traders don’t sell into weakness. These kinds of investors don’t think like the typical retail investor who's forever trying to avoid drawdowns. Big-money investors take positions based on fundamentals and then continually buy dips until the fundamentals reverse. The fundamentals haven’t reversed for gold so I’m confident in saying that smart money isn’t selling its gold, it's using this dip to accumulate.

 

With that being said, there are times when big money will sell into the market and it's why technical analysis, as used by retail traders, often doesn’t work. They sell into the market to accumulate positions. Let me explain.

 

When a large fund wants to buy, it can’t just simply start buying stock like you or I would. Doing so would run the market up, causing it to fill at higher and higher prices. Unlike the average retail trader, smart money attempts to buy into weakness and sell into strength (buy low, sell high). In order to buy the kind of size it needs without moving the market against itself, a large trader needs very liquid conditions. Ask yourself, when do those kind of conditions exist? They happen when markets break technical levels.

 

If big money is selling it's because it's trying to push the market below a significant technical level so all the technicians will puke up their shares. By running an important technical level it can cause a ton of sell stops to activate, allowing it to accumulate a large position without moving the market against itself in the process. We saw this very thing happen in the oil market recently and also in February as gold bottomed.

 

(Today, in early afternoon trading, Iamgold (IAG) is down 5.2%, Buenaventura (BVN) has fallen 4.9%, and Newmont Mining (NEM) is down more than 5%. On track for its lowest closing price in 3.5 months, Goldcorp (GG) is also down more than 5%.)

 

 

Click to enlarge

 

 

Click to enlarge

 

Technical traders wrongly assume these breaks are continuation patterns but the reality is that very often they're just smart money “playing” the technical crowd so they can enter large positions. The key to watch for is an immediate reversal of a technical break. When that happens you know there was someone in the market buying when everyone else was selling. Nine times out of 10 it was smart money.

 

At that moment everyone is jumping on the bear side for gold. Remember we saw this exact same sentiment in the stock market three weeks ago. I knew the bears were going to be wrong simply because the market was way too late in the intermediate cycle for there to be enough time left for a significant decline.

 

The gold bears are going to be wrong also and for the exact same reason. It's just too late in the intermediate cycle for there to be enough time left for anything other than a minor decline.

 

I'm now waiting and hoping for a break of the May pivot. I want to play that break, if it comes, like a smart money trader. That means I want to buy into the break instead of panic sell like most dumb money retail traders will invariably do.

 

 

Click to enlarge

 

The reason, of course, is that gold is still in a secular bull market. In bull markets you buy dips.

 

Also, the dollar, with the break below 82 this morning, is starting to show signs that it's now in the clutches of the three-year cycle decline. Every Gold C-wave so far in this 10-year bull market has corresponded to a major leg down in the dollar. I'm confident this C-wave will inversely track the dollar’s move into that major cycle low due early next year.

 

Sentiment wise, gold has now reached levels more bearish than at the February bottom. That means gold is at risk of running out of sellers.

 

Finally, and most importantly, it's simply too late in the intermediate cycle for gold to have enough time for a significant drop. This is the 25th week of the cycle and the intermediate cycle rarely lasts more than 25 weeks. That puts the odds heavily in favor of a major bottom either sometime this week or next. And don't forget, gold is about to move into the strong demand season. Like clockwork, gold invariably puts in a major bottom in July or August before the run up into the strong fall season.

 

The bears are going to be wrong again.

[GatheringStorm]

Because I currently have no job and no income, and the kind of fall Bonner is mooting will slash my nominal wealth drastically if I remain heavily invested in gold. Periodically loading up the truck isn't an option for me because I don't have any money coming in!

 

Gold price forecasters are a dime a dozen. In truth, none of them have a clue. I would like to see Bill Bonner's supporting calculations. Or perhaps he's using that most useless of all indicators, his gut feeling.

 

Unless you're leveraged this routine pullback is a non event imho.

 

I'm sorry to hear you have no job. The only way to make money in gold so far has been to refuse to puke up when everyone else is - but that would be so much harder to do when you need a war chest to survive on.

 

 

 

 

[Steve Netwriter]

The dollars might not be hyper-inflated, but the prediction sure is.

 

No it is not.

FOFOA's freegold theory is very convincing, and has yet to be disproved.

 

Other than cut/print/default how else can the US get out of its current predicament?

 

[drbubb]

No it is not.

FOFOA's freegold theory is very convincing, and has yet to be disproved.

Other than cut/print/default how else can the US get out of its current predicament?

What's his timeframe?

If he doesn't have one, it can never be disproved

[romans holiday]

No it is not.

FOFOA's freegold theory is very convincing, and has yet to be disproved.

 

Other than cut/print/default how else can the US get out of its current predicament?

The problem with that approach is it is too "US-centric".

 

I see Bill Gross of Pimco is talking of "structural" solutions.

 

The US is the leading country in a global economy... any way out of the predicament will have to involve a re-setting of the international currency system. The free-floating "Washington Consensus" system worked in a period of expansion, but will crush the economy in a contraction; ZIRP reserve funding currencies will see an extended period of short-covering on capital flow/ flight back to the centre.... spiking their currencies and crucifying their economies. Japan is the the future for developed economies.

[G0ldfinger]

Japan is the the future for developed economies.

So, everyone is going to be a huge a exporter with a huge surplus?

 

Hmmm, I guess we could all export to Mars, or wherever the ETs live, that are discussed on other threads. Surplus planet Earth - I love it! Maybe we can all buy Martian debt then, and be rich!

[romans holiday]

So, everyone is going to be a huge a exporter with a huge surplus?

 

Hmmm, I guess we could all export to Mars, or wherever the ETs live, that are discussed on other threads. Surplus planet Earth - I love it! Maybe we can all buy Martian debt then, and be rich!

Debt deflation is the common factor.

[G0ldfinger]

Debt deflation is the common factor.

What debt exactly will deflate? And how will this make situations similar?

[G0ldfinger]

In Japan there was some shrinking in total debt over the past decade, according to the chart below. It wasn't all that much, and can possibly mostly be attributed to the popping of the property bubble. Japanese CPI rate stayed mostly positive, as we know. All this as one of the most sucessful exporters. IMO, it won't look any like this for the US or the UK. Where is the booming export industry? Tax revenue, etc.?

 

[romans holiday]

What debt exactly will deflate? And how will this make situations similar?

In Japan it was the corporate sector which had to deleverage. In the Anglo-sphere economies it is the private sector that has to deleverage. Once the psychology shifts from inflation expectation to deflation expectation you might as well....... tell the tide not to come in.

[G0ldfinger]

In Japan it was the corporate sector which had to deleverage. In the Anglo-sphere economies it is the private sector that has to deleverage. Once the psychology shifts from inflation expectation to deflation expectation you might as well....... tell the tide not to come in.

I think the corporate sector has to delever just as much as the private sector. Think of all the pirate equity.

[BelfastBoy]

I hold only Investec Global Gold and Blackrock Gold and General inside the ISAs.

Which company did you use to open these ISA's?

 

Thanks

 

(I did a quick google search and nothing obvious appeared.)

 

Not thinking of opening an ISA until the end of October - just incase...

 

 

[GatheringStorm]

Which company did you use to open these ISA's?

 

They're with 4 different providers for (probably illusory) additional safety.

 

However, I find Fidelity the best. The easiest and most robust trading platform over several years and the quickest execution of the buys. Link below.

 

 

https://www.fidelity.co.uk/investor/default-direct.page

 

 

[enrieb]

Financial Times Says European Banks Lent Their Customer's Gold to the BIS

 

http://jessescrossroadscafe.blogspot.com/2...-customers.html

 

Although it does not appear until almost the end of this article in the Financial Times, BIS Gold Swaps Mystery Unravelled, the source of the gold provided in the dollar swaps with BIS is coming from customers of about 10 European banks who are holding their gold at the banks in 'unallocated accounts.'

 

"The gold used in the swaps came mainly from investors’ deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called “allocated accounts”, which restrict the custodian banks’ ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper “unallocated accounts”, which give banks access to their bullion for their day-to-day operations.

The European Banks, including HSBC, Société Générale and BNP Paribas, were desperately in need of dollars because of a repeat of the eurodollar short squeeze which we had previously identified. Their customers were withdrawing dollars previously on deposit at the banks, which were unable to meet the demand because of the deterioration of the dollar assets they held, and because of the fractional reserve nature of their operations.

 

o the BIS stepped in, supplementing the swap lines the ECB has with the Fed, and swapped its dollar holdings directly for the some of the banks' customer's gold. Let us be clear about this. The gold is on deposit at the banks, in the same way that customer dollars had been on deposit. I do not wish to fuss too much about it, but at the time that the BIS swaps were revealed, a noted blogger pooh-poohed it with the toss off that 'everyone knows that the European commercial banks own quite a lot of gold.' Well, in this case, the ownership is greatly exaggerated. It is on deposit, owned by other people, but utilized as an asset by the bank. There is a difference.

 

In lending out the gold to BIS, they were relieved of their dollar short squeeze and were able to supply their customer demands. BIS obtained a fee of some sort in the swap, and so it is happy. But it should be noted that BIS had not done gold swaps for over forty years. So why now?

 

The question remains unanswered though. What is the duration of the swap, and does BIS intend to hold the gold or use it in other interbank operations?

 

A secondary question would be: why did the banks go directly to the BIS and swap their customer's gold, rather then to the ECB which is perfectly capable of managing swaplines for currency with the BIS and the Fed. Is the Fed running out of dollars? I have an open tab in my mind that the BIS was seeking gold to balance out demands from other banks for gold, not for dollars, and the eurodollar swaps were a convenient way to do it. This story that 'the BIS had lots of dollar lying around and were itching to use them' strikes me as being of the whole cloth.

 

Yes, the nice high level chart the FT includes shows the spike in gold holdings at the BIS, but does this mean that it is sitting there in their reserves unencumbered, or are they leasing any or all of it out, 'putting it to work' as they say? Central banks are notorious for making little distinction between unencumbered gold assets and real assets in the vault.

[nicejim]

Financial Times Says European Banks Lent Their Customer's Gold to the BIS

Dear world,

 

 

TAKE F%&*ING DELIVERY !!!1!!1!!!!

 

 

Yours sincerely etc

[Catflap]

Gold Bears Are Wrong, Smart Money Isn't Selling

 

http://www.minyanville.com/businessmarkets...7/2010/id/29327

 

As soon as I started reading what you had posted I realised it was Toby Conner's work - I have his website in my signature and I find his work on the stock market and gold backs up my own thoughts. He's completely right on the dollar as well, as I have been arguing when so many think the dollar is now in a new bull market and going even higher. It isn't and the fundamentals just don't support that argument either - the dollar IS going to break it's 2009 lows and re-test the 2008 lows in Q1 next year, either holding those or dipping into the 60's.

 

[dietcolaaddict]

Here's a clear look at the seasonal dip ahead.....

 

 

Over the last ten years, August 28th has been the sweet spot for this time of year.

 

 

[dietcolaaddict]

Still quite clear over a 40 year timeframe......

 

Options expiry on the 26th looks like a good time to be considering a purchase