Gold Is Screaming Danger

[Guest Riser]

You don't get it. Warrants and the like are just paper promises to deliver gold in the future. There ain't enough gold around to deliver on all these promises. In the coming fiat currecny system collapse they'll become worthless.

Protect yourselves.

Oh yes I do "get it" in the last phase of the fiat collapse we will no doubt see unallocated accounts dishonoured, Warrants not honoured, and allocated accounts siezed. However, we are not there yet and I suspect we have a long way to go before we reach that situation. Until then its a case of make hay while the sun shines, if you can stand the risk then leveraged products offer much more potential upside than the underlying asset.

[Guest]

Bobbins. I knew I should have bought some more gold this morning when it was 670.

No - but you can see it. No-one will allow asset prices to fall more than a few percent. Think of the millions and millions of people up to their ears in debt - and think what would happen if defaulting caught on - banks would go bankrupt. They honestly would. They've only got a 3% protection margin (or is it 7% now).

So it's going to be INFLATION by increased money supply, to dilute people's debt. But that can't be sustained either. There will be a bigger and bigger credit binge... and if houses aren't increasing in value due to higher interest rates, where will all the extra money go? Everywhere else, that's where.

Think about it for a few moments and try and get your head around the size of the numbers involved.

What happens if the money going into everything else DOESN'T go into people's pay packets?

And we all get outsourced to the Czech Republic?

We've been in the calm-before-the-storm for so long now, I still think there's a strong case for defaulting (as the price of everything else goes up) and then deflation in property prices. This is a good part of the reason that this 'inflate our way out' scenerio doesn't totally wash with me.

Economics gurus: How do they get the money to the people?

Edited May 9, 2006 by megaflop

[AvidFan]

Bobbins. I knew I should have bought some more gold this morning when it was 670.

What happens if the money going into everything else DOESN'T go into people's pay packets?

And we all get outsourced to the Czech Republic?

We've been in the calm-before-the-storm for so long now, I still think there's a strong case for defaulting (as the price of everything else goes up) and then deflation in property prices. This is a good part of the reason that this 'inflate our way out' scenerio doesn't totally wash with me.

Economics gurus: How do they get the money to the people?

Aren't increases in money supply the same as currency devaluation? basically this means that labour becomes cheaper compared to raw materials, etc, etc. and wages can be increased. Its just an endless spiral of credit. As the money supply is increased, the currency devalues, it stimulates the economy because our exports are cheaper and its sold to us as "growth".

If interest rates keep inflation in check, all we're really hoping for is the increasing cost of borrowing to deflate housing or at least stall prices while everything around it adjusts upwards. Your savings pile will shrink to nothing - i.e. if you've saved half the price of a house and are expecting it to afford a whole house in a few years you'll be wrong- you've really only saved half the price of a house - it's just that your wages will be higher and you'll better placed to buy in a few years time.

What we're all looking for is an asset that preserves wealth while our target asset (housing) falls. But this has to be in real terms, not nominal terms.

Bobbins. I knew I should have bought some more gold this morning when it was 670.

What happens if the money going into everything else DOESN'T go into people's pay packets?

And we all get outsourced to the Czech Republic?

We've been in the calm-before-the-storm for so long now, I still think there's a strong case for defaulting (as the price of everything else goes up) and then deflation in property prices. This is a good part of the reason that this 'inflate our way out' scenerio doesn't totally wash with me.

Economics gurus: How do they get the money to the people?

Megaflop - can you IMAGINE for a second what would happen if deflation kicked in? People's debt INCREASING with respect to their salaries? Surely defaults would he HIGHER in the long run and there'd be plenty of suicides in the mean time...

I'm sure an inflationary escape is what is planned. As everyone keeps saying, the genie is out of the bottle. Money supply has already been hugely inflated and to sustain it, they have to keep going.

I'm not saying it will necessarily be hyper inflation. In theory, interest rates have to be greater than inflation to keep the cost of borroeing positive - so if you're a cash saver you may be treated fairly - who knows. If there were 5 years of 10% interest rates and house prices stayed still, I'd be happy with that - but we ain't gonna get it...

[Guest]

Aren't increases in money supply the same as currency devaluation? basically this means that labour becomes cheaper compared to raw materials, etc, etc. and wages can be increased. Its just an endless spiral of credit. As the money supply is increased, the currency devalues, it stimulates the economy because our exports are cheaper and its sold to us as "growth".

If interest rates keep inflation in check, all we're really hoping for is the increasing cost of borrowing to deflate housing or at least stall prices while everything around it adjusts upwards. Your savings pile will shrink to nothing - i.e. if you've saved half the price of a house and are expecting it to afford a whole house in a few years you'll be wrong- you've really only saved half the price of a house - it's just that your wages will be higher and you'll better placed to buy in a few years time.

What we're all looking for is an asset that preserves wealth while our target asset (housing) falls. But this has to be in real terms, not nominal terms.

Interesting points.

However, Labour becomes cheaper in real terms only, and the adjustment is not immediate or smooth.

Increasing the money supply doesn't alter my pay check immediately, or alter the amount of money in my company's customer's sterling bank accounts* as soon as it might alter the prices of other stuff. If they put interest rates up to cover this, then people just get busted on the debt. This is why I think there's potential for an inflationary period to backfire.

* although foreign customers would be Lovin' It

can you IMAGINE for a second what would happen if deflation kicked in?

Prices going down? I mean house prices going down specifically. Re-run of the 1989-1996 scenario. Sorry if I am being slack with my terminology.

[Johnny Cash]

Remember, I am not making any profit. All I am doing is preserving my hard earned capital. I will only start making a real profit when I manage to borrow depreciating dollars to buy gold - which is still historically cheap, even at these prices. This is the brand new "reverse gold carry trade ™" which I bet some hedge funds have already started.

Why not take out a spread bet to short the dollar relative to sterling and then just borrow sterling to buy the gold?

[longjohn]

Not surprising given that the same interests controlling our mainstream media are the ones doing this to us.

The establishment media is in trouble. As little as 12 months ago I would pick up a copy of the economist or the FT and I would believe to some degree what was written.

I now struggle not to fall of my chair laughing everytime I read it. (Although to be fair the FT does have good articles occasionally.)

The bias and lies are obvious and see-through. A few examples.

Gold has gone up a bit, but buying it is stupid. It is a "barbarus relic".

Leaders that Nationalise their energy resources are stupid.

Peak Oil is a myth.

The $200 trillion derivatives bubble is a good thing, that will definitely lead to more crises, but we should admire Goldman Sachs for creating it (wtf!)

In the latest economist there is an article on the movie Flight 93, and mentioned the booing crowds. And even a sentence sneering at 9 11 conspiracy theories. Although it doesn't link the two, and misleadingly states that the crowds booing are doing so because they think the movie has been released too soon.

I do not buy that the economist is produced by people who do not understand what is going on. It is a deliberate and calculated mass-deception.

You have to wonder why they have suddenly started mentioning these things though.

Maybe the shit really is about to hit the fan.

Edit:

Just watched the BBC 10 o'clock news. Seems they didn't think the gold price story was worthy of a mention.

In its place a nice five minute segment dedicated to "housing shortage", so many lies and lies of omission!

I really despair because I then have to listen to my folks come to me with arguments like "but there's a housing shortage don't you know".

This is an excellent post. It beautifully describes my thinking. I have been quite surprised at how quickly I have moved from thinking the writers, editors and producers in the mainstream media are incompetent, to thinking they are complicit.

[tonification]

I bought in at $500 exactly last December, so I'm delighted with the $700 move today.

What bugs me are the constant media reports blaming this on the Iran crisis. IMO, it has nothing to do with Iran and everything to do with the markets and inflation.

If war fears were responsible, surely gold would have boomed after 9/11 too? It didn't. Surely gold would have boomed when the Iraq invasion began? Gold actually fell then.

Also, I don't think the Iranian situation has developed much over the past few months (bar a bit of posturing), yet the commodities markets have exploded.

Edited May 9, 2006 by tonification

[Manic Miner]

Also, I don't think the Iranian situation has developed much over the past few months (bar a bit of posturing), yet the commodities markets have exploded.

Increased money supply + quest for yield + inability to find yield = gold price increase

It doesn't get much simpler.

"Unless you can solve the mystery of the seven seals - Vernon Howell"

[vinny]

Megaflop - can you IMAGINE for a second what would happen if deflation kicked in? People's debt INCREASING with respect to their salaries? Surely defaults would he HIGHER in the long run and there'd be plenty of suicides in the mean time...

I'm sure an inflationary escape is what is planned. As everyone keeps saying, the genie is out of the bottle. Money supply has already been hugely inflated and to sustain it, they have to keep going.

I'm not saying it will necessarily be hyper inflation. In theory, interest rates have to be greater than inflation to keep the cost of borroeing positive - so if you're a cash saver you may be treated fairly - who knows. If there were 5 years of 10% interest rates and house prices stayed still, I'd be happy with that - but we ain't gonna get it...

Exactly - you need gold AND cash to be sure of protecting yourself.

Buy gold by all means BUT 100% portfolios may be a mistake.

The markets / PEOPLE will decide the route we go. It may appear that governments make desicions - oft the opposite is true.

BTW - The 100% bullishness here may mark a point at which gold pulls back. Either way I feel comfortable with my position, I intend to add to my cash / government fixed price bond / gold holdings. ONE part of my portfolio WILL get wiped - the other will soar to compensate.

[cgnao]

USD falls below 8 Chinese Yuan. Another sign.

[Nijo]

Sorry for my n00bness in asking this question, but I'm interested in discussion on "all the shorts unwinding" and "the mother of all short squeezes". I've seen snippets in these threads, but I'd like to read more.

Can somebody point me in the direction of some summary article?

Thanks!

[cgnao]

Sorry for my n00bness in asking this question, but I'm interested in discussion on "all the shorts unwinding" and "the mother of all short squeezes". I've seen snippets in these threads, but I'd like to read more.

Can somebody point me in the direction of some summary article?

Thanks!

This links explains it all http://www.gata.org/CheuvreuxGoldReport.pdf

And on another front, look at this! It is the most evident of all manifestation of wild inflation:

http://www.usatoday.com/money/2006-05-09-penny-usat_x.htm

Coins cost more to make than face value

Updated 5/10/2006 2:12 AM ET

By Barbara Hagenbaugh, USA TODAY

WASHINGTON — The next time someone offers you a penny for your thoughts, you might want to take them up on it.

For the first time in U.S. history, the cost of manufacturing both a penny and a nickel is more than the 1-cent and 5-cent values of the coins themselves. Skyrocketing metals prices are behind the increase, the U.S. Mint said in a letter to members of Congress last week.

The Mint estimates it will cost 1.23 cents per penny and 5.73 cents per nickel this fiscal year, which ends Sept. 30. The cost of producing a penny has risen 27% in the last year, while nickel manufacturing costs have risen 19%.

The estimates take into account rising metals prices as well as processing, labor and transportation costs. Based on current metals prices, the value of the metal in a nickel alone is a little more than 5 cents. The metal in a penny, however, is still worth less than a penny.

...

[cgnao]

London AM fix came in at $707. Physical market unbelievably strong.

Protect yourselves.

Edited May 11, 2006 by cgnao

[FTBvish]

$723 and counting.

The word 'ballistic' comes to mind.

[Bear Goggles]

$723 and counting.

The word 'ballistic' comes to mind.

Yes, shortly before the word 'hyperinflation'

[AvidFan]

Someone please confirm this is going to spike and we get a Summer entry point...

[cgnao]

The US dollar is staring into the abyss.

http://stockcharts.com/h-sc/ui?s=$USD...id=p66210592639

Down 1% for the day against most currencies. Down nearly 3% against gold.

As a double whammy, US markets are selling off, DOW is now down 134 points.

The music is about to stop. Grab a chair before it's too late.

[cgnao]

http://www.marketwatch.com/News/Story/Stor...D&siteid=google

On watch for the next LTCM

By Peter Brimelow, MarketWatch

Last Update: 12:01 AM ET May 11, 2006

NEW YORK (MarketWatch) -- All eyes are on the Fed, and one respected institutional service thinks there are reasons to dislike what they're seeing.

It's nearly eight years since the Long-Term Capital Management hedge fund cratered. At that time, the Federal Reserve engineered an extraordinary bailout on the (highly debatable) theory that the financial markets would otherwise be fatally disrupted.

What would happen if there was another LTCM today?

The Connecticut-based institutional service Bridgewater Daily Observations, which itself manages over $150 billion, has been asking this disturbing question and getting a fairly disturbing answer.

...

Bridgewater's savage summary: "...Now you've got a new, academic, waffling Fed chairman, a falling dollar, a falling bond market, rising gold and commodities prices, and an underperforming stock market all with a giant current account deficit ..."

Its caustic conclusion: "Bernanke is rapidly losing control."

[liquid]

From http://www.financialsense.com/editorials/f.../2006/0504.html

BULL IN BEAR'S SKIN?

by Antal E. Fekete,

Professor Emeritus, Memorial University of Newfoundland

May 4, 2006

Dear Mr. Northwest:

Thank you for asking the provocative question whether the current bull market in gold is stage-produced by the powers-that-be in order to divert attention from the deliberate devaluation of all currencies. Your letter has given me an opportunity to sort out my own thoughts on the subject. Here is the result.

Supply and demand

My analysis of the gold and silver market is very different from the conventional. I am a monetary scientist. Supply and demand equilibrium analysis means nothing to me. For a monetary metal both supply and demand are undefinable. There is no way to quantify speculative supply, still less demand. Yet without it the gold market is like Hamlet without the prince, to borrow a phrase from Samuelson.

Speculators can jump back and forth between the long and the short side of the market at a moment’s notice, and in case of monetary disturbances they do. If you insist on using these concepts, the most you can say is that both the supply of and the demand for the monetary metal or its paper substitutes are infinite. Therefore the price can approach any conceivable figure, including infinity for the metal, zero for the paper substitutes. Of course, the banks and the government want to maintain the myth that futures markets provide a reliable link between the two. The fact remains, however, that this link is tenuous and illusory.

It follows that any scientific analysis of the gold market must sidestep concepts such as supply, demand, equilibrium price and replace them with concepts such as asked price, bid price, spread, basis, contango, backwardation.

Corner and short squeeze

The literature on corners is scanty. Yet it is the possibility of corners and short squeezes that must be analyzed if we want to understand the present situation. The facts are as follows. While short squeezes are common, true corners are exceedingly rare. So much so that some authors flatly deny that successful corners are possible save under siege or blockade. By a corner I mean the attempt of longs in a commodity exchange to prevent the shorts from making good on their contractual obligations by forestalling supply. However, the shorts are going to move heaven and earth to get supplies to the market in time for delivery. The higher the longs have bid the price, the greater the incentive for the shorts to deliver. If we examine the historical corners in the Chicago wheat pit we shall see that every one of them was a short squeeze that fell short of being a successful corner. The shorts used every available means of conveyance from dinghies to triremes, from barrows to lorries to move supplies from distant places to the appointed elevators in time.

Contrary to popular beliefs, the shorts are not stupid. Nor are they suicidal. They are responsible businessmen well able to calculate, including calculation of the cost of transportation by the fastest conveyances available such as supersonic aircraft if need be to carry supplies half-way around the globe. Whenever they sell short, they are not acting on impulse. They act on cold facts. They know full well that the futures markets fail to be symmetric. They know that there is a built-in bias favoring the longs at the expense of the bears: the risk shouldered by the former is limited (as the price cannot fall below zero) while that shouldered by the latter is unlimited (as the price can theoretically go to infinity). Whereas an individual short seller might miscalculate, it is virtually impossible that the shorts collectively would.

Are the shorts really naked?

It is a fatal mistake to underestimate your opponents, in this case the short sellers in precious metals, arguably the smartest lot on earth. They know how to do what Aristotle and latter-day economists have said was impossible: to make gold beget gold. I don’t for a moment give credence to the fable that the commercials are selling short naked. Most of their short position is hedged most of the time, if not directly by metal in their possession, then certainly indirectly by metal in the possession of the principals, i.e., for whom they act as a man of straw. The commercials are agents. They act on behalf of their customers, be they wealthy individuals who want to sell call options or futures on their gold hoard anonymously, or banks and governments that do not want you to find out what they are up to. The fact is that selling covered calls and puts is a more efficient way for a bull to husband his resources than buying gold and sitting on it.

Consider the hypothetical scenario that the government of Israel wants unobtrusively accumulate gold. Or, to furnish an example of a more populous country, let’s assume that the government of China wants unobtrusively to accumulate silver in any conceivable amounts. The task is cut out for both countries. They have respectable hoards to begin with. Gold is the most portable form of wealth and the most frequently mentioned word in the Bible after God. China has been on a silver standard since time immemorial and did not participate in the silver-demonetization farce of the 19th century. The best course of action for a government wanting to accumulate gold or silver is to mislead the market by fomenting the bearish case. The net short position in gold represents its stake that it is willing to risk in an effort to get more gold and silver through market manipulation. In other words, the net short position is only apparent, a red herring to throw gold bugs off the scent. It is the tip of the iceberg that you can see and touch. What you don’t see and can’t touch is the bulk of the iceberg submerged: the huge physical gold and silver hoards that the owner wants to increase further by hook or crook. It can be done by hiring agents in the commodity pits. The commercials sell the metals short in excess of visible supplies, acting on behalf of their faceless principals. They sell more gold than the future output of the mines going out five years. They sell more silver than the total inventory held in exchange warehouses. The longs take the bait eagerly. They buy and hold in the hope that the shorts are overextended and will not be able to deliver. The point is that this is exactly what the shorts want them to believe.

It is easy to predict what will happen in such a situation. The longs are sitting ducks and the shorts keep preying on them. They raid them periodically so that, after the shake-out, they can pick up gold and silver dropped by weak hands. Not only do they buy back what they have sold short as bait; they pick up a lot more. It is a wolf in sheep’s skin or, if you like, a bull in bear’s skin. The name of the game is to mislead the public and induce it to give up monetary metals for a pottage of lentils. I am not putting this forth as a thesis. It can never be proved or disproved. It is merely a hypothesis more plausible than the one suggesting that the shorts are as stupid as they are suicidal.

Ted Butler believes that mountains of surplus silver, remnants of silver demonetization six score years and fifteen ago, that were still around in 1945, have long since been dissipated and “consumed”. Of course, the shorts welcome such beliefs and help foster them by all means. Aided by this myth they accumulate still more silver by fleecing the naive and overconfident longs who are cocksure that they are facing naked shorts in the pit. Meanwhile the watchdog agencies know that physical silver exists and can be delivered if necessary. One should not be so sardonic as to think that he was the only one to discover that silver was dirt cheap at $3. The “wolf pack” has also discovered it and started accumulating, albeit very, very quietly. Theirs is quite different from Butler’s “buy and sit” strategy. They are not waiting for the miracle of silver in four digits to happen. They do something in order to start drawing benefits from their investment immediately. From their vantage point the longer the price rise is stretched out, the better. Why? Because they know something that Butler apparently doesn’t: how to make silver yield an income provided that you can hide it under a bushel.

There is no need to cry “foul play”. It will do nicely if you credit the shorts with more wits than you assign to the longs.

Short covering and profit taking

Granted that the shorts are bluffing to tease, taunt, and bait the bulls, it is clear that at one point short selling must become counter-productive. Large bait tickles small fish. When it does, the shorts pull in their nets. They cover. But the fact stands out that it is they, the shorts who call the shots even though their paper losses appear to be staggering, not the longs. Unknown to the public, these losses are far surpassed by gains on physical gold that the shorts have been amassing clandestinely at the expense of the longs for half a century. When the shorts pull the plug and cover their position, the longs are jubilant amidst cries of “cornered rats”. Yet all the longs can show for their effort is paper gold, while the shorts control an increasing slice of physical pie. The price of paper gold is destined to go to zero; that of physical to infinity. Who is fooling whom?

The shorts realize that in any bull market there is bound to be periodic profit-taking. They don’t have to induce one. It will happen on its own accord. It is spontaneous and unpredictable. While it scares the daylight out of the longs; it is picnic for the shorts. It provides a reliable steady income for them, one that the longs sorely miss. Moreover, the shorts tend to sell into strength and buy into weakness. This is their strength. The longs typically buy into strength and sell into weakness. This is their weakness.

Backwardation and basis

Instead of the COT reports Butler should concentrate on such direct indicators as backwardation and basis. Backwardation is the market phenomenon whereby nearby futures are selling at a premium over the more distant. The normal condition for monetary metals is the opposite, contango, indicating that supply is plentiful. Backwardation in monetary metals is a foolproof indicator that supplies are getting tight. Basis is the name for the spread between the nearby futures price and the spot price. Its shrinking reveals that short selling is becoming counter-productive so that the shorts may be getting ready to cover. Conversely, the widening of the basis tells you that shortages may soon end the shorts are likely to start selling once more. Butler will write a hundred pages about the COT reports while writing half a sentence about backwardation. As far as I can tell, he has never written even a quarter of a sentence about the basis, in spite of a challenge I issued to him privately two years ago. Perhaps he has never got around to take a refresher course, so busy he was poring over reams of COT reports. Be that as it may, the basis is a most sensitive market indicator. When negative, it is a red-hot alarm indicating that offers to sell gold are drying up fast, and may be withdrawn at any time. Please don’t take me wrong. I am not against studying COT reports. All information is useful if you know how to interpret it intelligently. But it is not a very intelligent construction to put on the COT reports to assume that the bulk of the short position of the big commercials is naked.

Having said this, I must credit Butler for advocating the ownership of metal fully paid for as against futures positions or ownership of unallocated metal in public warehouses. He also admits the possibility that the “wolf-pack” may engineer another sell-off even after having suffered horrendous paper losses during the latest run-up of the price.

Can depression be averted?

Where does all this leave us? The short-covering and profit-taking charade will continue, possibly for several years to come. There will be no disorderly cut-and-run by the shorts and no meteoric rise in the price. Spectacular rises, yes. But they will be followed by equally spectacular and sometimes protracted corrections testing the stamina, staying power, and intestinal fortitude of the longs. Volatility will increase faster than the moving averages. Exchange rules may be changed unilaterally favoring the shorts, prejudicial to the longs.

Obituaries of the dollar are a bit premature. We cannot rule out the possibility that policy-makers favor a controlled devaluation of the dollar in terms of gold. By now they must realize that bilateral devaluations against selected currencies will never work. They would provoke trade wars and competitive currency devaluations. By contrast, a 1979-80 style devaluation of all currencies against gold should be acceptable to all governments, even though the outcome would be the same. The dollar would be devalued against other currencies at various rates, higher for the yen, less for the euro, and least for the renminbi. The trading partners of the U.S. would tolerate that without retaliating with discriminating tariffs and quotas.

You see, my position is close to your own. Yes, as you say, there is an iceberg of gold and silver which is unseen that never enters the market. Yes, the watchdog agencies know this (as well as the identity of the principals of the short sellers who fool the market in posing and parading naked while in full armor, in a reversal of Andersen’s amusing tale) but they are sworn to secrecy. And yes, it is not impossible that this bull market in gold is stage-produced in order to devalue all currencies deliberately without the policy-makers making a scape-goat of themselves. The purpose of the exercise? Why, it is to get rid of the debt-incubus short of deflation, defaults, and depression. Come to think of it, a measured devaluation of all currencies against gold is the only hope to avoid an enormously destructive and protracted depression of the world economy that would be triggered by the sudden toppling of the Debt Tower of Babel. A planned melt-down, well-entombed inside of a golden sarcophagus, is the preferred way to go.

What if I am wrong and policy-makers are getting more band-aid out of the medicine cabinet to patch up the disintegrating international monetary system? In that case may God help us survive the coming Armageddon.

Yours, etc.

A. E. F.

May 4, 2006.

I don't condone what Fekete is saying, but then what is he saying? What is the Gold Basin?

http://news.goldseek.com/GoldSeek/1147363200.php

[cgnao]

Forget what Fekete is saying. Concentrate on what is happening.

Explosive tremors in the physical gold market. The London AM gold fix came in at $725.75.

Markets are crashing while the US Dollar index, now below 84, is accelerating down towards major 3 decade support at 80. When that is broken, it will be too late to protect yourself.

Don't get shafted. Get gold.

[Pent Vaer]

Shaping up to be an interesting day. Euro / Brit stock exchanges diving, dollar diving, PMs rising very early in day. Palladium through $400. Oil holding very high. Only thing that worries me is the base metals (copper/zinc) not supporting PM strength at the mo, I've noticed they are pretty good indicators for the PMs.

Pent

[wegorkie]

cgnao - please tell me what do you think of gold mining stocks?

75% of my gold investment is in stocks, only 25% I have in pure gold

[cgnao]

As Mark Twain said, a mine is a hole in the ground and a liar standing next to it.

I prefer gold in my pocket (or my allocated account) to gold in the ground.

Furthermore I believe that during the coming collapse gold will outperform any other asset.

The PM london fix came in at $725, indicating continuing strength in the physical market. Regarding this afternoon's raid, most of the price move down to $710 happened on the COMEX after London closed.

Remember, London is a cash market - you trade, you either deliver or take delivery of actual gold bars. COMEX is instead a futures market, you sell promises to deliver gold at a later stage. These contracts can then either be bought back later, settled in US dollars, or delivered. Only a tiny percentage of them is ever delivered. A bit like fractional reserve banking....

Desperate shorts trying to cover their bleeding positions need to buy. If they went out and bought, the price would skyrocket and they would be blown by margin calls. So they have to sell to bring the price down, in the hope that they may scare the longs into selling. If they are successful, downside momentum builds and they can cover some of their position at a lower price. Can they sell in London? Of course not, because they have no gold. So they sell short for future delivery on the Comex.

It looks like this game is no longer working well and all the shorts get in exchange for their selling is very short lived corrections. Long term investors and hedge funds all over the world want in and are using any slight price drop to buy. Therefore I recommend to

- look mainly at the London fixes

- bless any of these COMEX down moves as an opportunity to add to your real, paid for, allocated physical position.

An aside worth mentioning: Goldmoney only locks in the price for smallish orders below 1 kilo, and executes larger ones at the London fix. Why? Think about it. The answer is that Goldmoney has to buy/sell actual bars on the physical market.

Protect yourselves.

Edited May 12, 2006 by cgnao

[Pent Vaer]

An aside worth mentioning: Goldmoney only locks in the price for smallish orders below 1 kilo, and executes larger ones at the London fix. Why? Think about it. The answer is that Goldmoney has to buy/sell actual bars on the physical market.

Another one worth mentioning on the same topic: goldmoney have just halved the maximum lock amount in 24 hours for silver due to 'market volatility'. Gold limit went down too, not sure by how much. Could be a bit of a shock in certain situations if you didn't know before...

Pent

[Its time to buy]

a year or so on, from Dr Bubb showing us this graph:

so where are we now?

I ve noticed that zealllc havent updated this graph yet....

Just to keep focus gold is $725/oz and oil is $70 a barrel....

I have extended the graph (see attachment), gold is still cheap compared to oil it appears

for every gold sharp rise in price, a sharp fall has followed, caution is advised on this latest rally

Edited May 14, 2006 by notanewmember