GOLD

[Pixel8r]

Actually, the state of the COT figures and the probability of another deflationary downswing this autumn

is making me LESS BULLISH on Gold than I expected to be at this stage

So if what your expecting doesn't happen, the deflationary downswing this autumn, and in fact gold completes it inverse head and shoulder, you will be one of the buyers that james is talking about in the interview.

 

Did you think anything about what I wrote above about the cartels manipulation by leasing of gold?

[G0ldfinger]

... I am not saying that Jim doesnt know how the gold markets work, but I do think that he and Gata make too much of the idea of gold manipulation. There is LESS of that going on than Gata would have you believe.

I think the people who do the 'manipulation' are often simply not aware of it.

 

And let me ask you this, if the governments keep selling gold to depress the price, then surely at some point they would run out of gold to sell. If not, then they must be buying back the gold they sell short to manipulate the price. So when does that happen, and why do we not hear Gata talking about government manipulators buying gold?

I think they will buy gold a few years (or less) from here. As Sinclair says, they're only human too. They will make everything much more outrageous.

[Pixel8r]

I think they will buy gold a few years (or less) from here. As Sinclair says, they're only human too. They will make everything much more outrageous.

Hasn't it started to happen already, wasn't this year the first that there was more buying than selling by CB's around the world.

 

Let me continue to put 500 tonnes (16 mil. oz.) into perspective:

 

European Central Banks agreed to limit their gold selling to 400 tonnes per year in 1999. Due to the announcement back in the fall of 1999, it caused a $70 spike upwards in the gold price, and you can see this spike on any gold chart. Why the spike? Because people realized that the gold selling (and gold lending) by Central Banks was going to be slowing down. And it has.

 

And now it has reversed...indeed turning into Central Bank gold buying.

 

Argentina, South Korea and South Africa are also gold buyers now.

 

And now, China and perhaps all of Asia!

 

http://www.gold-eagle.com/editorials_05/hommel121005.html

[drbubb]

Trouble is the companies which are leasing it from the CB's have built up massive short positions, so when it comes to the crunch the gold is no longer available. That is the thing with owning gold, it should be no one else's liability as when TSHTF you actually don't own any gold, just a paper promise to it. When TSHTF we all know what paper can end up being worth.

 

James does talk about the fact that gold should have been a lot higher than it is currently in this weeks FSN, partly the reason it isn't has been the actions of the cartel and also the many gold ETFs. As people start to not trust the ETFs and want physical, the price will rise. This has recently started to happen in a big way with the Greenlight Hedge fund pulling their holding from GLD and moving to physical - http://etfdailynews.com/blog/?p=4592

 

I think your opinion of James Turk is not right, I believe he is very connected in the gold industry, he currently is holding $607 Million physical gold for customers and is connected with the LBMA. Could it actually be that the paper dealers at chase are less connected with the real market than they believe?

 

I dont buy that.

Have you studied the COT report data? You should do that before going too far into these theories.

I find it most enlightening.

 

BTW, how do you think the CB's short gold, if not thru the banks and the futures market?

 

Here's my latest Swing chart, which I have now pushed back to the end of 2007:

 

 

To me, it looks like Gold could be about to collapse.

It is only be propped up by the enthusiasm of the Large Specs (per this chart).

If they turn sellers, perhaps because of a easing of QE stimulus, ie low rates are jacked up,

then we could see a swift drop in gold, and it might even overwhelm the usual seasonal influences.

[romans holiday]

To me, it looks like Gold could be about to collapse.

It is only be propped up by the enthusiasm of the Large Specs (per this chart).

If they turn sellers, perhaps because of a easing of QE stimulus, ie low rates are jacked up,

then we could see a swift drop in gold, and it might even overwhelm the usual seasonal influences.

BIG call DB.... considering many here have over 50% of their worth in gold.

[Pixel8r]

I dont buy that.

 

BTW, how do you think the CB's short gold, if not thru the banks and the futures market?

 

I think CB's short gold by leasing it out to commercials on the gold lease rate, which is through the banks who in turn do it via the futures markets.

 

So the gold that the CB's are supposed to be holding in their vaults is actually a paper promise from the banks who they have been bailing out. When there is a call for physical the price will increase as most of what is actually out there is paper, rather than actual physical.

 

Here's my latest Swing chart, which I have now pushed back to the end of 2007:

 

 

To me, it looks like Gold could be about to collapse.

It is only be propped up by the enthusiasm of the Large Specs (per this chart).

If they turn sellers, perhaps because of a easing of QE stimulus, ie low rates are jacked up,

then we could see a swift drop in gold, and it might even overwhelm the usual seasonal influences.

 

The bullion banks have been having the last laugh, they keep going short and wait for the longs to eventually succumb. This will change when physical not paper is asked for, which will happen at some point then they will be overcome and the price will go to the moon. There can be infinite amounts of paper but there is a limited supply of physical. Maybe it will happen this time, maybe not. But as I was trying to show you earlier now that the first large spec has asked for physical rather than paper, we might be about to see it change. All that needs to happen is that all the hedge funds ask for delivery of physical rather than paper, for them to overturn the commercials shorts.

 

People just need to realise that a paper promise for gold is not the same thing as bullion. That is the joy of bullion it is no ones liability.

 

I think we are on the verge of a major breakout in gold with a target of $1300 and not the collapse Pretcher has been calling incorrectly for years. As Jim Sinclair has been saying recently he has always been calling for a down swing just before every major breakout since $256. How many times does this need to happen before people stop listening to him?

 

If gold goes through $1000, when will you be a buyer, $1050 or higher?

[electroweak]

The bullion banks have been having the last laugh, they keep going short and wait for the longs to eventually succumb. This will change when physical not paper is asked for, which will happen at some point then they will be overcome and the price will go to the moon. There can be infinite amounts of paper but there is a limited supply of physical. Maybe it will happen this time, maybe not. But as I was trying to show you earlier now that the first large spec has asked for physical rather than paper, we might be about to see it change. All that needs to happen is that all the hedge funds ask for delivery of physical rather than paper, for them to overturn the commercials shorts.

Was that Greenlight Capital?

http://www.bloombergnews.com/apps/news?pid...id=arz6MqVbTVBs

 

 

[Pixel8r]

Was that Greenlight Capital?

http://www.bloombergnews.com/apps/news?pid...id=arz6MqVbTVBs

Yes, when the large specs start to demand physical rather than paper the game could start to change.

 

James does talk about the fact that gold should have been a lot higher than it is currently in this weeks FSN, partly the reason it isn't has been the actions of the cartel and also the many gold ETFs. As people start to not trust the ETFs and want physical, the price will rise. This has recently started to happen in a big way with the Greenlight Hedge fund pulling their holding from GLD and moving to physical - http://etfdailynews.com/blog/?p=4592

 

[drbubb]

Under their fiscal responsiblities to the US taxpayer should they have not been selling off or scalling into the market with these assets during the current rally?

 

I believe they have started (or will soon start) some cautious selling down, but I cannot provide any details

 

Here's a chart on the Gold price

 

Long Term Weekly chart ... update-Weekly

Gold-2000

 

To me, a pullback to the 52wk.MA near Gold-$850-870 would be very healthy here,

and so might be a drop to near $800, which just touches the bottom of the channel.

 

We saw something like that in mid-2007 before Gold took off.

[warpig]

I agree. I wouldn't necessarily deem it a conspiracy, but certainly gold is used as a tool to manipulate other markets.

 

Fort Knox has not been audited recently, maybe there isn't as much gold there as there should actually be. I know that Ron Paul has been calling for it to be audited, but it hasn't happened. Also the US store central bank gold for many other countries, such as Germany, which could be used in the cartels actions to control price.

 

I believe that actually what they do is lease the gold rather than sell it, that way they don't need to replace it as they still own it in their accounts, just not actually have it anymore. Leasing gold to companies which they then sell and are short physical, is a great way for the CB's to control price as they also so make money off the gold which was in their vaults. Trouble is the companies which are leasing it from the CB's have built up massive short positions, so when it comes to the crunch the gold is no longer available. That is the thing with owning gold, it should be no one else's liability as when TSHTF you actually don't own any gold, just a paper promise to it. When TSHTF we all know what paper can end up being worth.

 

James does talk about the fact that gold should have been a lot higher than it is currently in this weeks FSN, partly the reason it isn't has been the actions of the cartel and also the many gold ETFs. As people start to not trust the ETFs and want physical, the price will rise. This has recently started to happen in a big way with the Greenlight Hedge fund pulling their holding from GLD and moving to physical - http://etfdailynews.com/blog/?p=4592

 

I think your opinion of James Turk is not right, I believe he is very connected in the gold industry, he currently is holding $607 Million physical gold for customers and is connected with the LBMA. Could it actually be that the paper dealers at chase are less connected with the real market than they believe?

[warpig]

If you want to make something I'd buy from you, here's an idea... I would like a purpose made PVC tube (ideally translucent) to accept the largest gold coin in a coin capsule. You would only need to make one diameter, as to pad out the inside of the coin capsule for smaller coins with a foam ring would be fine.

 

These would ideally be 12" long with a thread at both ends of the tube to either extend the tube by screwing in another section or an end cap. I would of course expect the tubes to be water/air tight.

 

Just a thought, no one seems to make them.

 

The large 100 coin box will retail for about $40. The idea behind it wasn't to show the coins off but as a storage container. I figured if I am going to design a storage box I may as well design it so it looks good at the same time. At the moment my coins are in plastic capsules in a plastic bag in my atic (burglers don't normally go in to the atic) which is an untidy storage solution.

 

i agree that a large investor for silver would more likely want bars, these boxes are geared more to the small investor who wants a holding and will want to keep thecoins in a safe place in the home.

 

I think the small investor demand will grow as we see inflation rising. I think the big obstacle at the moment for a small investor is awareness and where to buy at a low premium.

[Pixel8r]

I agree. I wouldn't necessarily deem it a conspiracy, but certainly gold is used as a tool to manipulate other markets.

I haven't and wouldn't use the term conspiracy, it is the gold cartel using the weapons at their disposal to continue controlling the price of gold, the canary in the fiat coal mine.

 

[wren]

Somebody make a big gold purchase to make it go down.

[azazel]

gold, the canary in the fiat coal mine.

 

Hmmm, strange they are both yellow....there must be a reason.

 

[azazel]

I recieved this interesting email from "Daily Wealth",

 

The Fight Between Inflation and Deflation is Over

By Porter Stansberry

 

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

 

– Ludwig von Mises

 

For most of 2009, I've had a friendly disagreement with several colleagues who believe a big deflation will be the end result of the 2008 financial crisis.

 

I knew they were wrong. I knew inflation would become a problem sooner, rather than later. And in the past several months, I've been proven right.

 

The mortgage and banking collapse of 2007-2009 saw total collateral values collapse between $5 trillion and $10 trillion. The response from our politicians and central bankers was massive: the largest creation of new money in credit since the Civil War.

 

 

 

The Federal Reserve created roughly $2 trillion in additional credit and loaned it against all kinds of dubious collateral, things like Bear Stearns' mortgage book. (There's a handy and simple guide to estimating the Fed's credit quality. The more acronyms in the lending programs, the worse it gets.)

 

The Federal government responded with a record annual deficit of at least $1.8 trillion. In the second half of 2008, the outstanding federal debt grew by roughly a 40% annualized pace (24% for the entire year). Thus, in only a few months' time, the roots – the money and credit – underlying our economy expanded at a record pace.

 

In the second half of last year and the first quarter of 2009, the main question in the world's financial markets was: Can the world's government print enough money, fast enough, to forestall a deflationary collapse?

 

I knew it was no contest. There is no way for an economy to outrun a printing press. The Fed has the power to create an unlimited amount of money or credit and the power to inject that money into the economy in any way it sees fit.

 

Let's look at the numbers. Let's assume the total collateral damage of the banking crisis turns out to be $5 trillion. Yes, that's a huge hit – roughly half the output of our economy each year. It's the equivalent of sending every American household a bill for $50,000 – due immediately. However, in less than a year, the Feds have already created nearly $4 trillion in new money and credit. The hole in the system has already been plugged. It only took a few months.

 

The fight between inflation and deflation is over. Deflation was knocked out in the first round.

 

The big risk is what happens next. Having turned on the presses to save the day, who will have the political clout and the desire to shut them off? Barack Obama's budget calls for annual deficits in excess of $1 trillion for the next eight years. Thus, by the end of this year, not only will all of the damage from the mortgage collapse ($5 trillion) be replaced by new money and credit, there will be significant inflationary pressures in the economy.

 

The good news in our economy this year, so soon after such a major collapse, means we will certainly have a massive inflation during 2010 and 2011. There's no such thing as a free ride. Bailing out the banks will carry a heavy price for anyone who doesn't have the resources or the knowledge to escape the dollar.

 

 

 

How can you "escape"? First off, make sure you own plenty of gold bullion. I also recommend owning assets that will run higher in an inflationary environment, like vital transportation and energy assets. Also, own some good farmland. Food and land prices will go higher.

 

Yes, the news is grim... but if you own gold and strategic assets, you'll survive and prosper in the coming inflation.

 

Good investing,

 

Porter Stansberry

[warpig]

I know, but some do.

 

I haven't and wouldn't use the term conspiracy, it is the gold cartel using the weapons at their disposal to continue controlling the price of gold, the canary in the fiat coal mine.

[Pixel8r]

I recieved this interesting email from "Daily Wealth",

 

The Fight Between Inflation and Deflation is Over

By Porter Stansberry

Thanks for posting, great article. I am sure RH and DrBubb must have something to say about it.

 

[headmelter]

If you want to make something I'd buy from you, here's an idea... I would like a purpose made PVC tube (ideally translucent) to accept the largest gold coin in a coin capsule. You would only need to make one diameter, as to pad out the inside of the coin capsule for smaller coins with a foam ring would be fine.

 

These would ideally be 12" long with a thread at both ends of the tube to either extend the tube by screwing in another section or an end cap. I would of course expect the tubes to be water/air tight.

 

Just a thought, no one seems to make them.

 

If it didn't have to be translucent you would get what you need at a plumbers merchant.

[warpig]

I have considered knocking something together, but the caps wouldn't be water tight/threaded and that's assuming I could find the right diameter pipe.

 

If it didn't have to be translucent you would get what you need at a plumbers merchant.

[romans holiday]

Thanks for posting, great article. I am sure RH and DrBubb must have something to say about it.

Yes, he is away with the monetarist fairies. He should have a read of what is going on in the real world.

 

http://www.telegraph.co.uk/finance/comment...s-capacity.html

 

Professor James Livingston at Rutgers University says we have been blinded by Milton Friedman, who convinced our economic elites and above all Fed chair Ben Bernanke that the Depression was a “credit event” that could have been avoided by a monetary blast (helicopters/QE). Under that schema, we should be safely clear of trouble before long this time.

 

Exactly, I have been hammering away at this very point. Friedman [and the quantity theory of money] is being falsified today.

[id5]

If you want to make something I'd buy from you, here's an idea... I would like a purpose made PVC tube (ideally translucent) to accept the largest gold coin in a coin capsule. You would only need to make one diameter, as to pad out the inside of the coin capsule for smaller coins with a foam ring would be fine.

 

These would ideally be 12" long with a thread at both ends of the tube to either extend the tube by screwing in another section or an end cap. I would of course expect the tubes to be water/air tight.

 

Just a thought, no one seems to make them.

Better still, make the tube out of Mylar including the foam rather than PVC and then Silver can be safely stored in them as well.

[Pixel8r]

For DrBubb and anyone interested in the Gold Cartel;

 

A Short History of the Gold Cartel

 

By James Turk (May 4 2009 2:32PM)

 

This week Bill Murphy and Chris Powell, co-founders of the Gold Anti-Trust Action Committee (www.gata.org), will be in London, England. Their trip is part of GATA’s ongoing effort to raise awareness of the gold cartel and its surreptitious intervention in the gold market.

 

Bill and Chris will meet with the British media to explain GATA’s findings. They will also attend an important fund raising event being held in support of GATA’s work. Their trip is another important step by GATA aimed at creating a free market in gold, one which is unfettered by government intervention.

 

Governments want a low gold price to make national currencies look good. Gold is recognizable the world over as the ‘canary in the coalmine’ when it comes to money. A rising gold price blurts the unpleasant truth that a national currency is being poorly managed and that its purchasing power is being inflated.

 

This reality is made clear by former Federal Reserve chairman Paul Volcker. Commenting in his memoirs about the soaring gold price in the years immediately following the end of the gold standard in 1971, he notes: “Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.” It was a mistake because a rising gold price undermines the thin reed upon which all fiat currency rests – confidence. But it was a mistake only from the perspective of a central banker, which is of course at odds with anyone who believes in free markets.

 

The US government has learned from experience and taken Volcker’s advice. Given the US dollar’s role as the world’s reserve currency, the US government has the most to lose if the market chooses gold over fiat currency and erodes the government’s stranglehold on the monopolistic privilege that it has awarded to itself of creating ‘money’.

 

So the US government intervenes in the gold market to make the dollar look worthy of being the world’s reserve currency when of course it is not equal to the demands of that esteemed role. The US government does this by trying to keep the gold price low, but this aim is an impossible task. In the end, gold always wins, i.e., its price inevitably climbs higher as fiat currency is debased, which is a reality understood and recognized by government policymakers. So recognizing the futility of capping the gold price, they instead compromise by letting the gold price rise somewhat, say, 15% per annum. In fact, against the dollar, gold is actually up 16.3% p.a. on average for the last eight years. In battlefield terms, the US government is conducting a managed retreat for fiat currency in an attempt to control gold’s advance.

 

Though it has let the gold price rise, gold has risen by less than it would in a free market because the purchasing power of the dollar continues to be inflated and also because gold remains so undervalued notwithstanding its annual appreciation this decade. These gains started from gold’s historic low valuation in 1999. Gold may not be as good a value as it was in 1999, but it nevertheless remains extremely undervalued.

 

For example, until the end of the 19th century, approximately 40% of the world’s money supply consisted of gold, and the remaining 60% was national currency. As governments began to usurp the money issuing privilege and intentionally diminish gold’s role, fiat currency’s role expanded by the mid-20th century to approximately 90%. The inflationary policies of the 1960s, particularly in the US, further eroded gold’s role to 2% by the time the last remnants of the gold standard were abandoned in 1971. Gold’s importance rebounded in the 1970s, which caused Volcker to lament the so-called mistakes of policymakers. Its percentage rose to nearly 10% by 1980. But gold’s percent of the world money supply thereafter declined, reaching about 1% in 1999. Today it still remains below 2%.

 

From this analysis it is reasonable to conclude that gold should comprise at least 10% of the world’s money supply. Because it is nowhere near that level, gold is undervalued.

 

So given the ongoing dollar debasement being pursued by US policymakers, keeping gold from exploding upward to a true free-market price is the first thing they gain from their interventions in the gold market. The other thing they gain is time. The time they gain enables them to keep their fiat scheme afloat so they can benefit from it, delaying until some future administration the scheme's inevitable collapse.

 

So how does the US government manage the gold price? They recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims. These banks are the gold cartel. I don't believe that there are any other members of the cartel, with the possible exception of Citibank as a junior member. The cartel acts with the implicit backing of the US government to absorb all losses that may be taken by the cartel members as they manage the gold price and further, to provide whatever physical metal is required to execute the cartel's trading strategy. How did the gold cartel come about?

 

There was an abrupt change in government policy circa 1990. It was introduced by then Federal Reserve chairman Alan Greenspan in order to bail out the banks back then, which like now were insolvent. Taxpayers were already on the hook for hundreds of billions to bail out the collapsed ‘savings & loan’ industry, so adding to this tax burden was untenable. He therefore came up with an alternative.

 

Greenspan saw the free market as a golden goose with essentially unlimited deep pockets, and more to the point, that these pockets could be picked by the US government using its tremendous weight, namely, its financial resources for timed interventions in the free market combined with its propaganda power by using the media. In short, it was easier to bail out the insolvent banks back then by gouging ill-gained profits from the free markets instead of raising taxes.

 

Banks generated these profits by the Federal Reserve’s steepening of the yield curve, which kept long-term interest rates relatively high while lowering short-term rates. To earn this wide spread, banks leveraged themselves to borrow short-term and use the proceeds to buy long-term paper. This mismatch of assets and liabilities became known as the carry-trade.

 

The Japanese yen was a particular favorite to borrow. The Japanese stock market had crashed in 1990, and the Bank of Japan was pursuing a zero interest rate policy to try reviving the Japanese economy. A US bank could borrow Japanese yen for 0.2% and buy US T-notes yielding more than 8%, pocketing the spread, which did wonders for bank profits and rebuilding their capital base.

 

Gold also became a favorite vehicle to borrow because of its low interest rate. This gold came from central bank coffers, but they refused to disclose how much gold they were lending, making the gold market opaque and ripe for intervention by central bankers making decisions behind closed doors. The amount lent by central banks has been reliably estimated in various analyses published by GATA to be 12,000 to 15,000 tonnes, nearly one-half of central banks total holdings and 4-to-6 times annual new mine production of 2500 tonnes. The banks clearly jumped feet first into the gold carry-trade.

 

The carry-trade was a gift to the banks from the Federal Reserve, and all was well provided the yen and gold did not rise against the dollar because this mismatch of dollar assets and yen or gold liabilities was not hedged. Alas, both gold and the yen began to strengthen, which if allowed to rise high enough would force marked-to-market losses on those carry-trade positions in the banks. It was a major problem because the losses of the banks could be considerable, given the magnitude of the carry-trade.

 

So the gold cartel was created to manage the gold price, and all went well at first, given the help it received from the Bank of England in 1999 to sell one-half of its gold holdings. Gold was driven to historic lows, as noted above, but this low gold price created its own problem. Gold became so unbelievably cheap that value hunters around the world recognized the exceptional opportunity it offered, and demand for physical gold began to climb. As demand rose, another more intractable and unforeseen problem arose for the gold cartel.

 

The gold borrowed from the central banks had been melted down and turned into coins, small bars and monetary jewelry that were acquired by countless individuals around the world. This gold was now in ‘strong hands’, and these gold owners would only part with it at a much higher price. Therefore, where would the gold come from to repay the central banks?

 

While yen is a fiat currency and can be created out of thin air by the Bank of Japan, gold in contrast is a tangible asset. How could the banks repay all the gold they borrowed without causing the gold price to soar, further worsening the marked-to-market losses on their remaining positions?

 

In short, the banks were in a predicament. The Federal Reserve’s policies were debasing the dollar, and the ‘canary in the coalmine’ was warning of the loss of purchasing power. So Greenspan's policy of using interventions in the market to bail-out banks morphed yet again.

 

The gold borrowed from central banks would not be repaid because obtaining the physical gold to repay these loans would cause the gold price to soar. So beginning this decade, the gold cartel would conduct the government’s managed retreat, allowing the gold price to move generally higher in the hope that, basically, people wouldn’t notice. Given its ‘canary in a coalmine’ function, a rising gold price creates demand for gold, and a rapidly rising gold price would worsen the marked-to-market losses of the gold cartel.

 

So the objective is to allow the gold price to rise around 15% p.a., while at the same time enable the cartel members to intervene in the gold market with implicit government backing in order to earn profits to offset the growing losses on its gold liabilities. Its trading strategy to accomplish this task is clear. The gold cartel reverse engineers the black-box trend-following trading models.

 

Just look at the losses taken by some of the major commodity trading managers on their gold trading over the last decade. It is hundreds of millions of dollars of client money lost, and gained for the gold cartel to help offset their losses from the gold carry-trade. All to make the dollar look good by keeping the gold price lower than it should be and would be if it were allowed to trade in a market unfettered by government intervention.

There are only two outcomes as I see it. Either the gold cartel will fail in the end, or the US government will have destroyed what remains of the free market in America. I hope it is the former, but the continuing flow of events from Washington, D.C. and the actions of policymakers suggest it could be the latter.

[romans holiday]

Interesting to note that gold has been volatile in US dollars. But in pounds looks flat. Sterling is dipping at the same time as gold which is reflecting dollar strength.

 

If you are looking for a dip to buy, it would be best to hold either US dollars or Yen imo.

[warpig]

Sounds like a product to me.

 

Better still, make the tube out of Mylar including the foam rather than PVC and then Silver can be safely stored in them as well.

[warpig]

duplicate post.