GOLD

[drbubb]

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.

. . .

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?

 

Okay.

So exactly how does it "recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims"?

 

And how do they SHORT gold?

 

Why do the Gata people rarely talk about the function of the banks in managing Gold price risk for their mining company clients? And why do we never hear about how these banks would get around the various risk limits imposed by regulators.

 

I think this is vague thinking, and I wont believe that there is a broad conspiracy until I get some solid answers to these questions.

 

Consider:

+ The cartel, if it exists. must be using the Gold futures market as a key arena in which to manipulate the gold price. Futures are really the only place where one can readily short the gold price, and hold the shorts for a long period of time. And since the Comex releases weekly reports on trading activity, you ought to be able to see their maneuvers by tracking that data. You wont see everything, since there is a large OTC market, but you will get a good idea of what they are doing. It wouldnt make sense to ahve a huge position in OTC, and do the reverse in the futures market, because one would then be "trading against oneself", and leaving some easy profits to arbitragers.

 

+ If they allow the price to rise at 15% per annum, then "the cartel" must be buying gold, as well as selling it. So they are also "manipulating" the price UPWARDS when it falls - we never hear about that from GATA

 

+ They cannot keep selling, else they would have run out of gold years ago, so it makes sense that they buy as well as sell

 

+ Have you looked at the COT report figures?? I have spent HOURS compiling that data, and reaching some conclusions about it, and they are consistent with the idea that "the commercial" (ie the big banks, the "cartel") are buyers of gold - at times - as well as being sellers.

 

+ Once you accept that they both sell and buy, why not learn to read the behaviour of the commercials and buy when they are buying, and be prepared to take profits when they become aggressive sellers. Let them work FOR YOU rather than trying to beat them

[drbubb]

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.

 

This is EXACTLY what I have been expecting: strength in the Dollar, with weakness in Gold and stocks.

 

The next Manic Swing towards deflation is now underway

 

[Pixel8r]

Okay.

So exactly how does it "recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims"?

 

And how do they SHORT gold?

 

Why do the Gata people rarely talk about the function of the banks in managing Gold price risk for their mining company clients? And why do we never hear about how these banks would get around the various risk limits imposed by regulators.

 

I think this is vague thinking, and I wont believe that there is a broad conspiracy until I get some solid answers to these questions.

 

Consider:

+ The cartel, if it exists. must be using the Gold futures market as a key arena in which to manipulate the gold price. Futures are really the only place where one can readily short the gold price, and hold the shorts for a long period of time. And since the Comex releases weekly reports on trading activity, you ought to be able to see their maneuvers by tracking that data. You wont see everything, since there is a large OTC market, but you will get a good idea of what they are doing. It wouldnt make sense to ahve a huge position in OTC, and do the reverse in the futures market, because one would then be "trading against oneself", and leaving some easy profits to arbitragers.

 

+ If the allow the price to rise at 15% per annum, then "the cartel" must be buying gold, as well as selling it. So they are also "manipulating" the price UPWARDS when it falls - we never hear about that from GATA

 

+ They cannot keep selling, else they would have run out of gold years ago, so it makes sense that they buy as well as sell

 

+ Have you looked at the COT report figures?? I have spent HOURS compiling that data, and reaching some conclusions about it, and they are consistent with the idea that "the commercial" (ie the big banks, the "cartel") are buyers of gold - at times - as well as being sellers.

 

+ Once you accept that they both sell and buy, why not learn to read the behaviour of the commercials and buy when they are buying, and be prepared to take profits when they become aggressive sellers. Let them work FOR YOU rather than trying to beat them

 

 

DrBubb I will forward your questions on to James and let him reply to your questions directly. Here is a bit more from the email he sent me earlier.

 

Obviously Michael does not read Bill Murphy of lemetropolecafe and other writers in the GATA camp. The gold cartel does buy gold to cover shorts. That's one part of how they have managed to control the gold price and keep it from moving to would what be its free-market price if the market were unfettered by gov't intervention.

 

Just look at how Comex open interest expands at critical price levels. Comex O.I. is probably only 10% of the total paper market, but it does give a good indication as to what is happening. The gold cartel is actively trading.

 

[G0ldfinger]

...

Just look at how Comex open interest expands at critical price levels. Comex O.I. is probably only 10% of the total paper market, but it does give a good indication as to what is happening. The gold cartel is actively trading.

The London Gold Pool made money at the beginning. Only later they were blown out of the water. If we're going to see more deliveries taking place, the Cartel will blow up spectacularly (as before).

 

It's all been there before.

[Pixel8r]

The London Gold Pool made money at the beginning. Only later they were blown out of the water. If we're going to see more deliveries taking place, the Cartel will blow up spectacularly (as before).

 

It's all been there before.

That was exactly the point I was trying to make earlier.

 

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.

 

[chazza]

Well in my prediction of a drop below GBP 500, I'm in good company... Frizzers also sees a possible/probably drop of USD 100

 

http://www.moneyweek.com/investments/preci...gold-93306.aspx

 

"The dollar gold price could easily be taken down $100 from here, so be careful."

 

I see the GBPUSD break today as being important, breaking the uptrend from the March lows. Unless this is THE turn in the equity markets I reckon we should see cable retest the trendline.

 

Which means I think GOLD/GBP is close to its ST low. I'm going to invest 50% of my fund this evening and play the reminaing 50% be ear.

[warpig]

I agree, I bought a sizeable position in July at these levels.

 

I see the GBPUSD break today as being important, breaking the uptrend from the March lows. Unless this is THE turn in the equity markets I reckon we should see cable retest the trendline.

 

Which means I think GOLD/GBP is close to its ST low. I'm going to invest 50% of my fund this evening and play the reminaing 50% be ear.

[drbubb]

DrBubb I will forward your questions on to James and let him reply to your questions directly.

Here is a bit more from the email he sent me earlier.

 

Sure.

It will be interesting to hear Jim Turk's comments on those points

 

Another Question:

When the gold price rises and approaches $1,000, the number of Commercial Shorts expands to 70%

of total shorts, or even above that (using the Combined Futures and Options data), and when the price

drops, the shorts are closed, so that when Gold is bottoming, Commercial shorts may be just 64-65%

of the Total. Effectively, it is that wave of Commercial selling hitting the market which tends to overwhelm

the buying from the Large Speculators (Hedge Funds et al.)

 

Now here's my question, does JT expect the that we will see strong enough buying from the Large Specs

to overwhelm that selling, when the price pushes through $1,000? If so, then maybe the Commercials

will be forced to cover shorts in a rising market, and that would add an explosive dynamic to the upthrust.

 

I dont think that this scenario that I have painted is impossible, but if we look at the recent history of the

COT data, I cannot find a single instance of this occurring, so I dont want to make a heavy bet on it.

It has been safer to just "trade the swing", and sell when the Commercial shorts push up to 70%.

 

Chart (note that when the "swing" indicator exceeds the Gold price, then Commercial shorts are over 64%)

 

The Commercials are buying, covering their shorts when the swing indicator falls below the GLD price

[wren]

If gold were really underpriced relative to its "true" market value for a prolonged period of time it would lead eventually to shortages.

 

Even more so for silver which is mostly used up in industry. I do think that silver will go up a lot or else there will be shortages - probably some time within 10 years, 20 on the outside.

 

I do think that some manipulation of the markets occurs as evidenced by NY smackdowns (less common this year than last year) which can be nicely profitable for those in the know.

[wren]

...........

Which means I think GOLD/GBP is close to its ST low. I'm going to invest 50% of my fund this evening and play the reminaing 50% be ear.

I've had bids sitting for months down to about 12% below todays price. I've cancelled the lower ones and set up new ones down to a few percent below today's price. I am buying in euros and I think July could have been the euro bottom.

[FWIW]

hmmm...nice sales!

 

Silver and gold very near their 100 day SMA!

[drbubb]

GLD : 91.61 Change: -1.39 // chart

Open: 91.49 High: 91.8574 Low: 91.28

Volume: 6,832,834

Percent Change: -1.49%

 

That's below average volume. Average would be more like 10 million.

 

Gold shares / GDX were down 4.87% (!!) on above average volume : GDX-chart

[drbubb]

For your interest, Bubb: http://jsmineset.com/2009/08/17/jims-mailbox-207/

 

That's an interesting chart on COT open interest.

 

I followed the link, and found this comment in Jim Sinclair's MAILBAG

 

= = = = = = = = = = =

Dear Jim,

Assuming a market crash in September 2009 and an even greater crash in May/June 2010, should a senior like me sell or hold through these events? As a shareholder and gold stock investor, I’m planning to hold all gold stocks and bullion/coins. I’m uncertain as what to do with my holdings in copper, oil and gas. Please share your thoughts with me.

 

Your comments are much appreciated by seniors. We advise them to buy only bullion/gold coins.

You are our guiding light. Thank you.

Sincerely, CIGA Morris

 

Dear Morris,

1. At first copper, oil and gas will move lower with minor dollar strength.

2. Next the dollar will move lower.

3. Third gold will go higher.

4. All things gold will go higher.

5. The dollar breaks below .7600 and then .7200

6. Copper, gas, and oil will then move much higher.

7. Hyperinflation comes into view.

8. Equities move higher from serious low.

9. Gold moves to $5000 or higher.

All the best,

Jim

= = = = = = = = = = =

 

He may be right in the future. But so far, it has not worked that way.

Mostly, when we have seen assets like Stocks and Commodities move down, that move has been

accompanied by a rising dollar, not a falling Dollar as JimS may be indicating.

 

It CAN HAPPEN in the way he has indicated, and I think if you see commodities move lower,

and the DOLLAR DROPS WITH THEM, that may be a sign that a new game is afoot, and that

could be setting the stage for a big dollar collapse.

 

A likely first sign of a new dynamic emerging would be when Gold shows good relative strength

versus other commodities like Oil and Copper.

 

Presently, I am getting the idea we could see a rather sharp drop in Gold and other commodities

setting up a good buying window perhaps as early as late August - ie the week after next.

 

Gold-to-WTI is stabilising near 13., but Gold-to-Copper looks like it is headed to 3.00, versus recent high of 7.03

 

[romans holiday]

That's an interesting chart on COT open interest.

 

I followed the link, and found this comment in Jim Sinclair's MAILBAG

 

= = = = = = = = = = =

Dear Jim,

Assuming a market crash in September 2009 and an even greater crash in May/June 2010, should a senior like me sell or hold through these events? As a shareholder and gold stock investor, I’m planning to hold all gold stocks and bullion/coins. I’m uncertain as what to do with my holdings in copper, oil and gas. Please share your thoughts with me.

 

Your comments are much appreciated by seniors. We advise them to buy only bullion/gold coins.

You are our guiding light. Thank you.

Sincerely, CIGA Morris

 

Dear Morris,

1. At first copper, oil and gas will move lower with minor dollar strength.

2. Next the dollar will move lower.

3. Third gold will go higher.

4. All things gold will go higher.

5. The dollar breaks below .7600 and then .7200

6. Copper, gas, and oil will then move much higher.

7. Hyperinflation comes into view.

8. Equities move higher from serious low.

9. Gold moves to $5000 or higher.

All the best,

Jim

= = = = = = = = = = =

 

He may be right in the future. But so far, it has not worked that way.

Mostly, when we have seen assets like Stocks and Commodities move down, that move has been

accompanied by a rising dollar, not a falling Dollar as JimS may be indicating.

 

It CAN HAPPEN in the way he has indicated, and I think if you see commodities move lower,

and the DOLLAR DROPS WITH THEM, that may be a sign that a new game is afoot, and that

could be setting the stage for a big dollar collapse.

 

A likely first sign of a new dynamic emerging would be when Gold shows good relative strength

versus other commodities like Oil and Copper.

 

Presently, I am getting the idea we could see a rather sharp drop in Gold and other commodities

setting up a good buying window perhaps as early as late August - ie the week after next.

 

Gold-to-WTI is stabilising near 13., but Gold-to-Copper looks like it is headed to 3.00, versus recent high of 7.03

With regard to gold, I think he assumes, like most commentators, that the relation between the dollar and gold will remain inversed. The inflationists asume gold will rise when the dollar falls, conventional deflationists assume that gold will fall as the dollar rises, but there is a third scenario; both gold and the dollar could strengthen together. Given that both gold and the dollar are considered safe havens, I think this last scenario is most likely. The dollar would strengthen as capital flows back into it, capital will also flow into gold which would see a linear rise in the price rather than a parabolic one. The following inverted triangle [posted a few times now] portrays the dynamic which will subvert the assumption that gold and the dollar must somehow always be on opposite sides of the trade. The triangle shows what happens in a drive to liquidity where gold does best with the dollar a close second.

 

Double post.

 

[drbubb]

It's been added to since I originally posted - or I'd have posted the lot.

 

Wouldn't you say seeing how gold stayed relatively strong compared to nearly everything else in last years crash that it's already earned a reputation (currency not commodity) there? Maybe this reputation will build in the next crash - particularly with a growing lack of fondness for the $ - and things might play out in a similar pattern and balance to how Sinclair describes?

 

Yep, I'm currently thinking to put my sideline $ back in over next few weeks.

 

Indeed it has.

The current situation of "excessive reliance on Hedge Funds" to move the price up can be easily corrected.

If they sell down to a lower level of longs, they may be ready to fuel the next price rise. I am hoping that the

present drop, will be building a base for the next strong Gold rally up.

 

But I reckon that we will need to see:

+ The Gold-to-WTI and Gold-to-Copper ratio to show relative strength (only Gold-to-WTI is so far)

+ Gold-in-C$ to show a good base

+ The Swing indicator lower, ideally back near 64%

+ Gold stocks to stop their current slide, and maybe show some stability in relation to stock indices

 

With those conditions in place, then Gold may be ready to attract MORE MONEY from Large Specs (mostly the hedge fund commodity) on its next surge up.

 

I have been doing some work on how much money they had committed to Gold Longs in the past. The result is surprisingly range bound, as you can see in the following chart:

 

 

If gold is going to push through $1,000, then the Large Speculators will have to be willing to invest more than

$25 Billion in their Gold Longs. Assuming just 10% gearing, supporting $25 Billion only needs $2.5 Billion margin.

Surely the Big Funds can find more margin money, if/when they become really frightened about a falling dollar.

[Pixel8r]

If gold is going to push through $1,000, then the Large Speculators will have to be willing to invest more than

$25 Billion in their Gold Longs. Assuming just 10% gearing, supporting $25 Billion only needs $2.5 Billion margin.

Surely the Big Funds can find more margin money, if/when they become really frightened about a falling dollar.

That or there we will need to start entering the mania stage where there will much more buying by the small specs (the general public around the world). Calling them speculators doesn't seem right, maybe it should be the small wealth preservers.

 

I suspect it will be both.

[drbubb]

That or there we will need to start entering the mania stage where there will much more buying by the small specs (the general public around the world). Calling them speculators doesn't seem right, maybe it should be the small wealth preservers.

 

I suspect it will be both.

 

Have a look at how they are reported:

http://www.cftc.gov/files/dea/cotarchives/...mxsof080409.htm

 

"Non-Commercials" are normally called "Large Speculators", since they are not using Gold as part

of their commercial position. "Non-reportables" are called "Small speculators"

 

... but I know what you mean. We are hedging against a drop in wealth

 

What is interesting about the chart was that the buying petered away at the small level each time.

What we need is another period like 200t when the Commitment to Gold jumps to a new level.

Back in late 2007/early 2008, it jumped from under $10 Billion, to near $25 Billion in a few short months.

 

Another interesting point, is how the Commercial short positions rose to accommodate that move up in

gold.

 

If you consider what happened last year, when the Gold price dropped sharply, the commercials were

SHORT COVERING as the price fell. In other words, they were BUYING BACK their shorts. Without

that buying from the short-covering commercials, the price would have fallen much further.

 

So you could say, those shorts are useful, since they can be thought of as a "reservoir" of future

buying in the event of another Gold price collapse.

[bitbigt]

...Presently, I am getting the idea we could see a rather sharp drop in Gold and other commodities

setting up a good buying window perhaps as early as late August - ie the week after next...

I agree - but feel only 50% confident in this call.

 

Therefore, I today bought another kg (now own 3), whilst having cash in reserve to buy another 4-5 if the big drop does occur. [if it doesn't happen, and I miss the rocket, I'll just pay of a mortgage with the cash].

 

Now back to work...

[romans holiday]

I agree - but feel only 50% confident in this call.

 

Therefore, I today bought another kg (now own 3), whilst having cash in reserve to buy another 4-5 if the big drop does occur. [if it doesn't happen, and I miss the rocket, I'll just pay of a mortgage with the cash].

 

Now back to work...

Congrats... but was a little more information than was needed.

[Pixel8r]

Have a look at how they are reported:

http://www.cftc.gov/files/dea/cotarchives/...mxsof080409.htm

 

"Non-Commercials" are normally called "Large Speculators", since they are not using Gold as part

of their commercial position. "Non-reportables" are called "Small speculators"

 

... but I know what you mean. We are hedging against a drop in wealth

 

What is interesting about the chart was that the buying petered away at the small level each time.

What we need is another period like 200t when the Commitment to Gold jumps to a new level.

Back in late 2007/early 2008, it jumped from under $10 Billion, to near $25 Billion in a few short months.

 

Another interesting point, is how the Commercial short positions rose to accommodate that move up in

gold.

 

If you consider what happened last year, when the Gold price dropped sharply, the commercials were

SHORT COVERING as the price fell. In other words, they were BUYING BACK their shorts. Without

that buying from the short-covering commercials, the price would have fallen much further.

 

So you could say, those shorts are useful, since they can be thought of as a "reservoir" of future

buying in the event of another Gold price collapse.

This of interest from the Ed Steer's gold and silver report;

 

Friday's changes in open interest were reported yesterday... and they are as follows: In gold, o.i. fell 3,187 contracts to 385,962...on decent volume of 85,243 contracts. Silver o.i. went in the other direction... up 165 contracts to 109,129...on largish volume of 33,169 contracts. I'm guessing, but I think that the reason why the silver o.i. rose instead of fell, is because the bullion banks, instead of covering their short positions... put on more longs instead... or a combination of both.

 

Without doubt, we should see a fairly large drop in open interest when Monday's gold and silver numbers are published. But, as I pointed out above, the bullion banks are pretty good at hiding their tracks if they wish to do so.

[id5]

I agree - but feel only 50% confident in this call.

 

Therefore, I today bought another kg (now own 3), whilst having cash in reserve to buy another 4-5 if the big drop does occur. [if it doesn't happen, and I miss the rocket, I'll just pay of a mortgage with the cash].

 

Now back to work...

Congrats... but was a little more information than was needed.

Unless of course you are keeping it at home, in which case would you please tell me your address, PM me for secrecy

[alexreeve]

http://news.goldseek.com/GATA/1250575740.php

 

What Hamilton and most people overlook in analyzing central bank gold sales is that they are a farce that beats the best Monty Python sketches. The central banks have printing presses and now computers that can generate loads of fiat money. It is beyond side-splittingly funny that we should take central banks seriously that they need to sell gold in exchange for the stuff they manufacture for free.

 

Central banks do not sell gold to get a few billion of their own fiat money in return, money they probably would throw on top of the stack of half a trillion freshly printed notes that rolled off their presses just that morning. No, central banks sell gold to make it appear that the paper stuff is more desirable than its true supply and demand fundamentals would allow. And when the game looks like it's coming to an end, the central banks can always buy back the gold.

 

It is not a problem to buy back the gold at even $50,000 per ounce when any amount of paper currency can be printed.

[romans holiday]

Congrats... but was a little more information than was needed.

 

Unless of course you are keeping it at home, in which case would you please tell me your address, PM me for secrecy

Perhaps not quite enough information.

[bitbigt]

Congrats... but was a little more information than was needed.

Unless of course you are keeping it at home, in which case would you please tell me your address, PM me for secrecy

Perhaps not quite enough information.

Sorry guys - its all physical, in a bank vault in Switzerland ...all in MrsBigT's name.

Same place and ownership for all our BTLs, and our spare cash.

And same place as my wife has been for the last month, while I stay here working.

 

Hmmm... (sound of penny dropping) ...I wonder if its a fall in PoG, or my wife leaving me, that I should be worried about ???

 

[Pixel8r]

Hmmm... (sound of penny dropping) ...I wonder if its a fall in PoG, or my wife leaving me, that I should be worried about ???