GOLD

[warpig]

Crunch some numbers, the cost of getting out and back in depending on the number of ounces is around 5%, be careful you don't end up with less than you started with.

 

So short term , say next month or so , sell gold and then reinvest after the correction .

[romans holiday]

So short term , say next month or so , sell gold and then reinvest after the correction .

The volatility of gold has settled down these past few months. imo it is now being bought primarily as a currency not a commodity... and even a markey crash might not see much of a decline in its price. Looks to me the currency of choice.

[njpurser]

I almost wept with joy yesterday when I saw this (I think from Jim).

 

That monthly doubling, plus the trend line indicate a change in policy-moving up a gear.

 

Add in China decreasing its holding of US Treasuries by 3% in June- a reversal-and things are set up nicely.

 

Gold will gain against the dollar and the pound, and then dramatically so as the brown stuff hits the spinny thing.

 

Cgnao's prophetic utterances are about to come true on another level.

 

Question is are we seeing preparations for the new reserve currency being made before our very eyes?

 

 

Nick

[marmite]

I have not seen backwardation discussed on here for a while. Does this siginal another leg up ????

 

http://www.gata.org/node/7723

I have received a deluge of mail from readers of my latest article on the gold basis and the threat of the coming permanent backwardation in gold. I truly appreciate the interest of my readers in learning my thoughts on the subject. I regret that it is not possible for me to answer these letters individually; I make an attempt here to answer one or two, where the questions are general enough so that my answers may benefit all readers.

 

. . .

 

Hello, Antal:

 

I have questions about your "Dress Rehearsal for the Last Contango."

 

1) Will not gold at +$1,000 per ounce restore gold holdings registered at Comex warehouses? If not, why not?

 

2) When the gold basis goes negative, could it not subsequently go back to positive, assuming the price rises to over $1,000? If not, why not?

 

3) Why must gold backwardation, once established, become permanent?

 

I should like to hear your reply to these questions. I am really very interested in understanding fully the implications of the vanishing basis for gold, and I hope you can provide me with your answers to my questions.

 

With warm regards,

 

Victor

 

. . .

 

Dear Victor:

 

For a full discussion on the gold basis and the permanent backwardation in gold you must come to Canberra, Australia, where the Gold Standard Institute will have a seminar in November. This seminar is second devoted exactly to these topics. Last year's seminar was a great success; this year's will be an even greater one.

 

I am confident to say that Canberra is the only place in the world where you may get scientific information on gold contango, gold basis, gold warehousing, bimetallic arbitrage, and the prospects of permanent gold backwardation as well as answer to a host of tantalizing questions that arise from these.

 

We shall have an expert on hand from the Perth Mint. And as an absolute first, we shall have the manager of Masters Fund, a unique gold fund just coming on stream, to answer questions. I am proud to say that I have been associated with this fund from inception throughout the incubation period. The Masters Fund is offering exclusive features not available from any other fund, such as:

 

1) The guiding star of the fund is not the dollar price of gold, but the gold basis which is much less open to manipulation, and much more relevant to an accumulation plan.

 

2) The gold in the fund bears a return in gold, so profits are measured not in terms of the U.S. dollar but in terms of gold itself.

 

3) Any appreciation of the fund's value in U.S. dollar terms is additional, but the maximization of dollar value is not a prime objective.

 

4) The gold in the fund is never put out on lease or on loan, nor can it be pledged as collateral, but stays on the premises at all times under the full control of the fund. It has never happened before that you could collect the return on capital unless you were willing to relinquish temporary control over it and thereby assume the risk of losing it. This could be important at a time when wholesale defaults on paper gold contracts may engulf the world.

 

5) The principle on which the fund operates is valid whether the monetary metals are in a bull market or a bear market.

 

6) The fund is especially recommended to those individuals who are in the habit of measuring the value of their assets and their own net worth in gold units rather than irredeemable paper units such as the US dollar.

 

7) The fund is structured in such a way as to take full advantage of the coming permanent gold backwardation, when all other gold funds will be grounded.

 

Of course false alarms can and do occur, and it is possible that gold goes into backwardation and then promptly comes out of it. It has happened before. But we are looking at a 35-year trend, embracing the entire history of gold futures trading. The trend has been that, as a percentage of the prevailing rate of interest, the basis has been falling from practically 100 percent to practically 0 percent.

 

You and I know the reason for this. It has to do with the vanishing of all newly mined gold into private hoards at an accelerating pace, the insatiable appetite in the world to snap up all available gold by well-heeled governments and individuals who no longer believe in the tooth fairy residing in the Federal Reserve.

 

You have to remember that the basis is widely used as a guide in the huge arbitrage operations between gold holdings and dollar balances and in the gold carry trade. To participate in this arbitrage you must have gold on deposit in Comex warehouses. But with the vanishing of the gold basis the profitability of this arbitrage as well as that of the gold carry trade has been drying up, which explains the dwindling of warehouse stocks.

 

Another consequence of the vanishing of the gold basis is that it makes the risks involved in the gold/paper arbitrage rather lopsided, as far greater risks are assigned to short positions on gold and long positions on the dollar than on long positions on gold and short positions on the dollar. The arbitrageurs are very much alive to this lack of symmetry and are increasingly unwilling to put their gold in harm's way. They are fully aware that we are approaching an historic milestone, one that has never been passed before: the milestone marking the last contango.

 

As a consequence of this lopsidedness the gold futures markets can no longer coax gold out of hiding. In vain do futures markets promise risk-free profits for taking over the carry from the individual.

 

Here is the deal they offer you: Give us your cash gold in exchange for gold futures that we'll let you have at a deep discount so that you can pocket risk-free profits. The offer is increasingly declined. There was a time when a drop in the basis would pull in gold from the moon, figuratively speaking. No more. Arbitrageurs no longer believe that gold futures are fully exchangeable for cash gold.

 

Gold backwardation is virtually inevitable, and when it comes, it will be irreversible. Why? Because it signifies a crisis of the first magnitude: the general disappearance of gold from trade for reasons of lack of confidence. No one will give up gold, because one is no longer confident that he can get it back on the same terms.

 

Vanishing confidence is like a runaway train The only thing that might turn this runaway train around is a steep rise in US interest rates. However, this is not in the cards. It would ruin what is left of the US economy. It would also cause the bond market to collapse, sending the dollar down the drain.

 

I do not see the collapse of the bond market happening any time soon. The US Treasury and the Federal Reserve can muddle through this crisis, and possibly beyond, by making bond speculation risk-free in order to maintain demand for Treasury paper.

 

Having said that, I don't think the guys at the US Treasury and Federal Reserve understand the gold basis and the seriousness of the threat of permanent gold backwardation. They are just trying to hold the line at $1,000 for whatever psychological value it may have, for as long as they can. It's the same old tug of war, they think.

 

It is not. Once the $1,000 level is breached, there may be some "profit taking," to be sure. But because of the zero basis, those who take profits will look rather foolish. Last contango -- last profit taking.

 

Be prepared for a great wave of defaults on paper gold obligations. Certainly, the lessees of central bank gold will default. Comex will close its gold pit for good, and outstanding contracts will be settled on a cash basis.

 

I will be surprised if any gold ETF shareholders will see a grain of gold coming their way out of the rubble left by the default. Comex gold certificate holders will be lucky if they can get a fraction of their gold back from the warehouses -- after a lengthy wrangle. Too many claims have been issued on the same lump of gold.

 

Under these circumstances it is difficult to see how anyone could wish to deposit gold in a Comex warehouse to restart gold futures trading. The market for slaves disappeared after emancipation never to come back again. The gold futures markets will disappear, utterly (and deservedly) discredited. Like the slave markets, they will never come back.

[electroweak]

Nice spot, Marmite. I hadn't been looking at the Derived Lease Rate for a while.. to remind me, here is what I found on it:

Derived Lease Rate (DLR)- this is the lease rate that you see quoted at Kitco.com.

The DLR is defined as LIBOR - GOFO.

 

Just now we have:

DLR(1M) = Libor1M (0.2725) - GOFO(1M) (0.425) = -0.1525

 

3M also -ve, but nearer zero.

 

 

On a related note, I just checked the COMEX registered stocks and they have gone down. There have been significant withdrawals!

 

Gold (oz) - (remember this was nearly 2.75 million oz in July!!):

change | Registered

-17,662 | 2,125,868

 

 

Silver (oz) - (this was flatlined near 62.5M oz since April)

change | Registered

-1,000,336 0 | 61,554,739

[TrueNorth]

Funny, I was thinking it would be cool to chart the contracts taking delivery and see if they are rising.

 

And ref the above on contango, I also just stumbled upon this at GoldMoney. [bolding mine]

 

What safeguards are in place to protect my gold and silver if GoldMoney goes out of business?

 

If for any reason GoldMoney stops operating, Holdings with approximately 12,500 goldgrams or more and/or 1,000 silver ounces or more may receive gold and silver bars that meet LBMA standards, less delivery and handling fees charged by the vault operator, and national currency for the balance, or alternatively, a customer may choose to receive a national currency for the equivalent value of their metal. All amounts less than 12,500gg and 1,000 silver ounces will be converted into a national currency and sent to you by bank wire or bank cheque. Andium Trust Company Limited will complete this winding-up process.

 

I am sure many here have holdings that would exceed these delivery criteria.

[warpig]

I can't imagine GM going out of business this side of the crisis...

 

Funny, I was thinking it would be cool to chart the contracts taking delivery and see if they are rising.

 

And ref the above on contango, I also just stumbled upon this at GoldMoney. [bolding mine]

 

 

 

I am sure many here have holdings that would exceed these delivery criteria.

[G0ldfinger]

I can't imagine GM going out of business this side of the crisis...

Dito.

[alexreeve]

Dito.

All assets seized amid allegations of money laundering (subsequently emerging that there was no evidence whatsoever)?

[HPCsoYESTERDAY]

apologies if already posted....

 

 

What the Chinese Are Buying and How to Own it First

 

 

“China loves gold in all its forms,” the FT reports, “as a reserve currency, jewelry, an investment.” I’ve mentioned in the past about how the Chinese central bank doubled its holdings of gold this year, but it’s more widespread than that.

[Pixel8r]

All is looking very promising for the completion of the inverse head and shoulders in September to me, which should mean a surge to $1300.

 

 

The flag formation has support at around $940 and resistance at $960, with things coming to a point in September sometime. Looks like very strong base building to me. Anyone holding on for Precther's drop might be waiting along time.

 

 

 

 

 

[lowrentyieldmakessense(honest!)]

All is looking very promising for the completion of the inverse head and shoulders in September to me, which should mean a surge to $1300.

 

 

The flag formation has support at around $940 and resistance at $960, with things coming to a point in September sometime. Looks like very strong base building to me. Anyone holding on for Precther's drop might be waiting along time.

 

 

prechters lost the plot re Dow $400 - possible if priced in 1930's dollars

 

http://moneynews.newsmax.com/headlines/deb.../10/245898.html

 

Geithner Asks Congress for Higher U.S. Debt Limit

 

Monday, August 10, 2009 9:02 AM

 

Article Font Size

 

WASHINGTON -- U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

 

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.

 

A Treasury spokeswoman declined to comment on the letter.

 

Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.

 

The latest request comes as the Treasury is ramping up borrowing to unprecedented levels to fund stimulus and financial bailout programs and cope with a deep recession that has devastated tax revenues.

 

It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended Sept. 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts.

 

The request to increase the debt limit will likely raise the ire of Republicans who have accused President Barack Obama of runaway spending. They may try to hold up the legislation in effort to win concessions on Obama's health care reform plan.

 

Geithner urged Reid to not let politics hamper U.S. credit-worthiness and said he looked forward to working with the Nevada Democrat to secure enactment of legislation on the debt limit as early as possible.

 

"Congress has never failed to raise the debt limit when necessary. Because members of both parties have long recognized the need to keep politics away from this issue, these actions have traditionally received bipartisan support," he wrote. "This is clearly a moment in our history that calls for continuation of that tradition."

eh

 

[Pixel8r]

Gold ‘Deja Vu’ Shows Advance Above $1,000: Technical Analysis

 

Aug. 25 (Bloomberg) -- Gold will rise to more than $1,000 an ounce next month based on moving-average “deja vu” patterns since the start of 2005, according to Barclays Capital.

 

This year’s trading was similar to previous patterns that indicated gold has a tendency to “break higher” in September and the 200-week moving average showed the uptrend on the precious metal remained intact, Jordan Kotick and other analysts at Barclays wrote in a report on Aug. 21.

 

Bullion jumped 7.8 percent in September 2005 and 10 percent in September 2007, laying the ground for the metal to rise to new highs in the following months. Gold traded at $946.20 an ounce at 12:40 p.m. local time in Singapore, up 7.3 percent this year. The metal was “mired” in a contracting range between $967 and $928, the analysts said.

 

“This is likely a repeat of Aug. 2005 and Aug. 2007 when the market broke significantly higher in September,” the analysts said. “We are looking for a breakout above $1,033 next month.” Gold rose to a record $1,032.70 on March 17 last year.

 

The metal will rise to $979.74 an ounce in the fourth quarter and climb to 994.84 in the first quarter, according to a weighted average calculated by Bloomberg using forecasts of 18 analysts.

 

JPMorgan Chase & Co., Standard Chartered Bank and three other financial companies predicted bullion would top $1,000 in the fourth quarter, the survey showed.

[G0ldfinger]

If the exponential pattern of peaks continues, then the next peak will be over $1,400 IMO.

 

http://gold.approximity.com/gold-silver_watch.html

[Steve Netwriter]

Did someone say $1400 ?

 

 

I agree GF.

 

[G0ldfinger]

... I agree GF.

To expert opinions - same result. Good stuff!

[Pixel8r]

Did someone say $1400 ?

I now realise that my target of $1300 was being to over cautious

 

[alexreeve]

I now realise that my target of $1300 was being to over cautious

If an investment looks so certain, it seems like shooting fish in a barrel; chances are, you're the fish.

[sash777]

If an investment looks so certain, it seems like shooting fish in a barrel; chances are, you're the fish.

 

Agreed. Averages and patterns are all fine and good but don't think anyone can take these figures seriously - follow the fundamentals, we are in unchartered terrain.

[romans holiday]

Agreed. Averages and patterns are all fine and good but don't think anyone can take these figures seriously - follow the fundamentals, we are in unchartered terrain.

Ye, of little faith.

[G0ldfinger]

Agreed. Averages and patterns are all fine and good but don't think anyone can take these figures seriously - follow the fundamentals, we are in unchartered terrain.

That's why I said over $1,400.

[Pixel8r]

Agreed. Averages and patterns are all fine and good but don't think anyone can take these figures seriously - follow the fundamentals, we are in unchartered terrain.

Which fundamentals are you talking about? Disparaging statements are very easy to make without posting anything to back them up.

 

Investors in gold who have held through the last 18 months must have had very strong fundamental reasons to have done so. I see massive amounts of QE and massive deficits as far as the eye can see. Rest assured I am not just basing my decision to buy gold on a few squiggly lines on a graph

 

To put things in very plain language, fundamentally we are in a gold bull run, which will last until there is some sort of solution to the problems created by the banks OTC derivative bad risk taking. I believe part of the solution will be fiat currency devaluation for which gold is a very good hedge against.

[sash777]

I'm totally with you on that Pixel8r, I've bought and held and would not be surprised at a jump up beyond $1000. Indeed, just like you, I'm expecting it and only surprised by how long it's taking - the fundamentals all point to devaluation of major currenciest. However, my point is that whether this is $1300, $1400 or $1500 will be down to events as they happen and not down to the patterns that the aforementioned squiggly lines have been making in the past. Technical analysis obviously does have it's merits in some situations but I don't think this is one of them.

[TrueNorth]

I'm totally with you on that Pixel8r, I've bought and held and would not be surprised at a jump up beyond $1000. Indeed, just like you, I'm expecting it and only surprised by how long it's taking - the fundamentals all point to devaluation of major currenciest.

 

Me t'ree.

[dietcolaaddict]

Just no blatant rocket pics 'if or when' folks.

IMHO they are a bad omen.

 

Post something more subtle to express excitement this Sept - Feb season