Bitcoin Forum

For several months now, I've been suspicious of Bitcoin's price movements in relation to precious metals futures - particularly gold & silver. With the recent Reuters story "Bitcoin, the City traders' anarchic new toy (http://uk.reuters.com/article/2012/04/02/uk-traders-bitcoin-idUKBRE8300JL20120402)", the alarms have grown even louder.

Time permitting, I'll have a more in-depth analysis of the large price moves that seem to occur in Bitcoin within one day prior to major moves in gold and silver. The correlation has been highly predictive for months now.

In conjunction with more long-term analysis and indicators, it seems to be very possible to front-run the market manipulation. Since both Bitcoin and the precious metals are inevitably constrained by a limited supply, this should be no surprise.

This connection may remain for a long time. Maybe a fund could be implemented to capitalise on the pattern?

nice title.  can't wait to see your evidence.

Yes.  Chart me please.

yes, chartporn please.

meanwhile, somthing to read:
http://www.zerohedge.com/news/chris-martenson-explains-how-gold-manipulated-and-why-thats-okay

expect a tome, lol. 

The recent fall in gold and silver didn't happen with bitcoin.

Not in the same manner, no. Remember that this is a seemingly strong correlation, not a hard rule.

On April 1st, Bitcoin had approximately a ~3.5% drop - gold then experienced about a 2.5% decline from high to low on the 3rd, with additional pressure on the 4th marking nearly 4% so far this week.

http://noblenomads.com/wp-content/uploads/2012/04/bitcoin-04042012-mod.png (http://noblenomads.com/)

See any similarities between the Bitcoin waterfalls on April 2nd & 3rd and the gold waterfalls from November through December 2011? The patterns are evident on Bitcoin dailies also.

http://noblenomads.com/wp-content/uploads/2012/04/gold-04042012-mod.png (http://noblenomads.com/)

What's interesting to note is that Bitcoin trades 24/7/365 and the initial Sunday waterfall attack took place just prior to Asian markets opening.

An additional note is that the attack on gold occurred on the Commitment of Traders reporting day, right after the period cut-off.

Finally, the "First Waterfall Attempt" happened at midnight UTC - very similar to the patterns from March 28th (after another apparent effort at creating a bull trap) and on April 1st where the pressure visibly began. I've noticed these "midnight strikes" occur frequently, and there are other patterns of time-based moves as well.

Pay attention to the shaped wave oscillation from March 28th to April 1st where the price jumps up, stabilises, then drops the same magnitude as the rise. That happens with extremely tight supply and is indicative of a concentrated interest attempting to exert control for gain. What gets me going is that this is exactly the same method used in gold futures trading.

When comparing the Bitcoin hourly chart to the gold daily, the patterns are visibly similar - not exact, but similar. There is an issue of market scale, Bitcoin being microscopic next to gold (the entire Bitcoin market is worth only 26,000 troy ounces of gold - less than 1 metric ton). Therefore, it makes sense that patters we see in Bitcoin on a shorter time-frame would take somewhat longer to emerge in gold.

The percentage changes are still similar, though. At least with initial moves. As can be seen with the multiple waterfall attempts in Bitcoin, that happens with far greater effect in gold. This is only possible because of the complete fabrication of supply in gold via derivative contracts - Bitcoin's equivalents are minute by comparison.

We would have to see options and mining contracts traded widely, and directing price action more than actual Bitcoin trading in order to have the same situation as gold. If gold contracts and derivatives disappeared, causing gold trading to be done exclusive with the physical supply available and verifiable, we would have Bitcoin's charts in gold.

Key here is the separation of the trading instrument versus the underlying asset: Bitcoin trades as itself; IOU paper contracts trade for gold. Removing Bitcoins from trade would cause immediate and powerful distortions in related markets; removing physical gold from trade and nobody is the wiser so long as the underlying asset is not sought. Bitcoin is currently free from such obfuscations, but could easily develop that kind of shell structure within the next few years. Bitcoin: accept nothing less.

I would be willing to bet putting my head in a crocodile's maw that very same financial lineage is attempting to game the Bitcoin system as is doing so in precious metals and various other markets. Even without the time yet to analyse data sets, the markets feel too alike for it to be mere coincidence. Having called the major bottoms in both gold and Bitcoin, they were again too similar to be chance.

the human brains excels at finding patterns and similarities amongst them

FTFY

It's only Saturday, so we'll have to see whether there's more pressure on Sunday. I expect nothing less, along with a round of HFT traders committing murder from London on Bitcoinica longs with forced margin calls.

http://3.bp.blogspot.com/-cmwIbiThcIo/T3SKpw8qlyI/AAAAAAAAVKU/vrSGzX7I_cw/s400/jpm.JPG (http://jessescrossroadscafe.blogspot.com/2012/03/mf-global-forbes-sums-it-up-well.html)

Another weekend assault, once again beginning at midnight UTC; almost exactly the same pattern and motive as is present with gold price manipulation. The London & Wall Street junkies get to keep playing even on the weekends these days. Why should the leverage game be any different just because it's Bitcoin? That's a rhetorical question.

http://noblenomads.com/wp-content/uploads/2012/04/bitcoin-04072012-mod.png (http://noblenomads.com/)

If the correlation holds as well as it has in past weeks, gold will be hit heavily for a decline into the mid-$1500s - possibly even a short stint to or below the $1525 level. The amount of new shorts piling in would be unbelievable; watch for the COMEX open interest to absolutely explode. I wouldn't put 500,000 out of range. I'll be keeping a close eye on the commercial shorts as well; any sign of significant covering would suggest preparation for an epic upward move. As always, the CoT (http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm) cut-off should stand as the time target for the $1500s push to be complete, allowing nearly a full week to cover shorts (and tracks).

This is exactly the kind of action that would occur during a paper/physical separation - the only problem is that it's virtually impossible to know precisely where they rupture. It's like ripping a sheet of paper in half: you know approximately where it's going to tear, but it's almost impossible to pick the actual starting point.

http://noblenomads.com/wp-content/uploads/2012/04/gold-04072012-mod.png (http://noblenomads.com/)

When the opposition starts catching onto your strategy & tactics, it's time to change your methods - if you can change the rules, so much the better (think FrankenDodd (http://www.foxnews.com/story/0,2933,593587,00.html)). There will always be a tell somewhere, though. I think it's blindingly obvious that the banks' own traders are making use of the same methods in Bitcoin as they are in traditional markets, front-running grander moves.

For however long this pattern maintains, I'll be making use of it. Any means of forewarning is a powerful weapon in a trader's arsenal, and dismissing any possible advantage without first-hand experience reeks of arrogance and a dinosaur destiny. If these forced margin call tactics continue to work, we may be greeting JP Bitcoinica in the near future instead of a free market.

Do you think this is being done for profit, or are people testing strategies in bitcoin before using them in the commodities markets? You should look for truncated "waterfalls" in bitcoin that do not appear in gold. Also consider that the ratio of "bitcoin time" to "gold time" may not be constant at 1/24. How would you explain this ratio?

I think it's a combination of profit & testing, maybe even with an intent to suppress. Bitcoin is immensely appealing across multiple levels of the global economy; anyone with a reasonably deep understanding of finance can connect the dots and realise the potential threat Bitcoin poses to the existing paradigm.

Thanks for bringing up truncated waterfalls (indicative of probing) - I have seen them, but haven't compared much with gold because of the difficulty in connecting smaller moves; it's the major flows that have been predictive, not so much probing action. When something finally breaks a major level of support or resistance, then it's time to pay attention.

The ratio isn't a hard rule: most times gold has followed Bitcoin within a 24 hour period, but the timing for certain period expirations is different; e.g. CoT reporting periods, options expiration & delivery notification dates, etc. With Bitcoin, there are no such periods as of yet. It's been an elastic range, but so far the longest I've noticed (again, unscientifically) has still been within 3 days.

Part of my intention for starting this thread was to have solidified documentation to ascertain the validity of the correlation. For a while, it was like seeing a shape in the dark - I didn't know if it was real or not, but lately the moves have been growing much more obvious. Due to other obligations, I have yet to run a direct comparison using hard data.

Also: the additional decline in Bitcoin to a low of $4.66 over the past few hours approximates $1525-1530 in gold.

There's a very cursory contrasting of Bitcoin weekly and gold yearly (http://noblenomads.com/2011/12/30/accelerated-foundation/).

http://noblenomads.com/wp-content/uploads/2011/12/usd-bitcoin-gold.png (http://noblenomads.com/2011/12/30/accelerated-foundation/)

Interesting, I think this thread needs a sanity check though. Nasdaq composite during the dotcom bubble looks alot like gold during the 1979-80 bubble.

THIS^ is the strongest counter to the argument of "anyone can fork the chain" I have heard thus far.


They're just jealous they didn't discover the key to alchemy before we did.

Sanity checks are always welcome as long as the assumptions they're based on are valid. Lots of patterns have fractal similarity, but their causes are more important than the resulting price patterns. Gold is both structurally and functionally dissimilar to equities, so price movements during different periods may look similar but be caused by different variables (otherwise gold would've behaved the same as NASDAQ during the dotcom bubble). Gold and Bitcoin are structurally different but functionally equivalent, so the same inputs should produce similar outcomes.

http://i40.tinypic.com/34dlhmf.png

Blue= Monthly nasdaq composite close Nov-95 to Feb-2012
Red= Monthly Unadjusted Gold Ounce/USD Jan-1976 to April-1992


Should we use gold to predict Nasdaq?

from this graph alone it looks rather like Nasdaq leads gold.

Nasdaq graph starts 19 years after the start of the gold graph.

oh, thanks for the x-axis  :P

Thanks for reading :P.

Seriously arepo, you seem pretty critical lately.  Is everything alright dude?

Not exclusively. As mentioned, both the structure and the function of the two assets are different. It's like trying to equate stocks with bonds - trying to value one using techniques that are effective for the other generally ends up with results that don't make sense. Bitcoin and gold are functionally equivalent, even though their structures are different.

Given circumstance/input A:

Stocks behave in pattern A
Bonds behave in pattern B
Gold behaves in pattern C

Given circumstance/input B:

Stocks behave in pattern B
Bonds behave in pattern C
Gold behaves in pattern A

And so on for input C, D, etc...

Each asset class responds in a different way to various events and situations, which is why they rise and fall at disparate times. Since Bitcoin is functionally equivalent to gold, it is reasonable to expect it to behave similarly with the same inputs. In the above examples, pattern A occurred in both stocks and gold, but were dependent upon different inputs.

What may be possible is observing whether input B frequently follows input A. Then a pattern A in seen the NASDAQ might be forthcoming in gold if there are signs of input B. A 50,000 ft overview would be of historical currency debasement/inflation - the pattern has occurred so often through the ages that the current similarities are very likely to eventually lead to what has happened in the past.

Coming back to Bitcoin, there is a question of magnitude. Because Bitcoin is a micro-economy, any adoption will cause its growth to be much greater than gold; that means the time-frame will be compressed - it's possible to see 100 years of gold's growth in 100 weeks. In addition, similar patterns are occurring at the same time - makes sense because of the functional equivalency between gold and Bitcoin. That accelerated, exponential growth would also occur synchronously in a hypothetical stock exchange 1% the size of NASDAQ, as long as the two work in a similar fashion.

One thing to keep in mind is that Bitcoin is mostly growing as a transactional medium right now, rather than a store of value like gold is today. The former is relatively unknown while the latter is familiar to everyone and has been for thousands of years. Bitcoin supply is also growing at ~25% annually; gold supply increases at ~1.5% per year. These are the factors that introduce some divergence, but they're still similar enough to be highly correlated.

Always consider which asset class best describes the item in question: commodity, equity share, contract, currency, etc. Everything else tends to fall into place after that.

tl;dr comparing apples to oranges is still comparing fruit - comparing apples to steel is completely different.

If paper gold is knocked down by Wednesday, I'll be fully convinced of the correlation.

If not, back to the drawing board :)

Very interesting tracks (https://bitcointalk.org/index.php?topic=75885.0) in Bitcoinica's data.

There should be some reason that [1 BTC week = 1 Gold year], [1 BTC hour = 1 Gold Day], etc. This should be a function of "market cap" or whatever the equivalent is for gold/bitcoin. If the highest correlations are consistently found using pyschologically appealing numbers for the relative time frames (1 day = 1 month, etc), this would indicate manipulation would it not?

Well, market cap may be too simple to explain the ratio. It should also be related to the sensitivity of speculators to price movements, which would be a psychological factor. Perhaps 1 btc week = 1 gold year could arise naturally.

+1

Gold is a very mature 'product' to trade in whereas bitcoin is very young and still finding its place in the world. The real value will not be realized until further on down the line. Its difficult to gain a foresight by extrapolation of historical prices.

That's what I'm leaning toward: natural patterns of opposing forces.

Market cap is undoubtedly a factor in the ratio, just not the only one. I could be completely wrong about this whole situation and it might end up being completely overshadowed by social/psychological factors. Or gold could be in a much stronger position than thought. I suppose we'll see soon.

I'm unsure that analizing this kind of patterns with Bitcoin is useful since it's economic is so tiny and insignificant compared to the others.

A single trader with not so many money (a couple million $ is pocket change for fund managers and such) has the ability to make oscillate the Bitcoin value from almost 0 to almost infinity in a relatively short period of time.

Anyway, since I find miscreanity fundamental (i.e.: non tecnical) analysis awesome, I follow the thread with interest :)

Thanks for following :)

The gold price has greater elasticity than Bitcoin's does right now, owing to the magnitude difference in both the underlying asset markets as well as their derivatives. They're also not exactly "in phase" but I think they are sufficiently enough for the correlation to remain. I'm now fully convinced that it exists. Take a look for yourself as gold was pushed down almost 1.3%:

http://noblenomads.com/wp-content/uploads/2012/04/kitco-gold-3day-041012-mod.png (http://noblenomads.com/)

It's very difficult to determine in real-time whether that spike was due to overwhelming buying pressure or the big short(s) covering. Gold isn't in the clear yet - it'll be fought tooth and nail until an exogenous event (QE3, Iran, etc) denies the sub-$1700 range. This could be short covering like what happened in Bitcoin during April 1st and 2nd (the dip & spike below), where covering took place and the freed short ammo was re-applied.

http://noblenomads.com/wp-content/uploads/2012/04/bitcoin-04102012-mod.png (http://noblenomads.com/)

Patterns do exist with similarity on all time-scales. It's just tough spotting them. These are too close to be denied - the same methods are used over and over.

Ha, now for that move "bitcoin time" passes slower than "gold time"... I see the pattern, but the x and even y axis (percent change doesn't work so well) need to be adjusted. I wouldn't be sure you have something unless you can figure out these factors.

Hold up - what happens in Bitcoin over one or two days should take longer in gold. There might be another day or three of pressure and decline in gold. Today has a good chance of being just the first test of the $1630 level. I'd give it until the end of the week to be sure.

You're right on needing to assess additional factors. I think the percentage delta could narrow with regard to the magnitude/time element above. Then the psychology and social awareness notions come into play - Bitcoin doesn't seem to be viewed as savings yet (which would help improve the stock to flow ratio), and there's a disproportionate number of aggressive traders and (I think) sophisticated manipulation.

If you think of any other major factors, I'm all ears.

I'm actually a complete novice at trading. I'm just now trying to figure out how bitcoinica works.

I think what you are really doing is looking for sequences of events, the duration of each may be less important.

To an extent. A sequence is one factor; nothing happens in isolation.

If a pot of boiling water is stirred, the bubbling will subside briefly. The more vigorously it is stirred, the longer the bubbling will be stalled. That's a very simple example, so you can imagine various possibilities - what happens if salt was dissolving in the water, what if the pot is oddly-shaped or made from tungsten instead of steel, etc.

I've been thinking of it like calcium oscillations in a muscle cell. When the cell is stimulated to contract with some drug it will pump in and out calcium at a certain frequency. The frequency and amplitude are a function of the magnitude of the initial stimulus (drug dose) and decays over time. This is due to various feedbacks etc. Repeated doses result in overlapping waveforms that may cancel each other out or add together.

For markets the drug would be a period of higher than normal buying or selling volume. The problem is we have no way to predict which drug (Rally or crash), when the "drug" will be given, or at what dose. But perhaps we can predict what the effects of different drugs would be on the market by analyzing its current state.

The market is on drugs!!

That's a great analogy - the wave pattern triggers calcium-induced calcium release (http://en.wikipedia.org/wiki/Calcium-induced_calcium_release), which runs until exhaustion of supply and then reverses.

There are a lot of similarities to physical phenomena, biology in particular.


Mostly like Whitney Houston, a little like Charlie Sheen.

What about calcium nodules in the inner ear..

I had that once.. I walked like a drunken sailor for 2 weeks!!


BPPV

http://en.wikipedia.org/wiki/BPPV

Better that than BPH (http://en.wikipedia.org/wiki/Benign_prostatic_hyperplasia) :)

There's definitely a STEMI, indicative of MI (http://en.wikipedia.org/wiki/Myocardial_infarction). I'm sure plenty of people experienced that shortly after buying at $30.

To compare BitCoin and gold and their trading patterns really misses the mark, in my opinion, due to the massive difference in fundamentals.

In gold you have an asset where the price is being suppressed, not supported, and not by users, but by owners, and not for the obvious reason. The largest owners do not act as other purposeful market participants because of the the extreme differences they have. Thus, the price of a portfolio asset, for the largest owners, is worth infinitely less than the ability to retain their monopoly on issuing what billions of people use as currency. BitCoin, unlike gold, currently poses no material threat to disrupting this monopoly.

In other words, to discuss the gold market and not discuss GATA's (http://www.youtube.com/watch?v=06fa20Y_cXg) work is pure folly.

ITT:

http://s16.postimage.org/trxaoxqad/etc_correlation50_01_960.jpg[

Right, noone here is publishing the correlations or Pr(B|A)'s.

So much charting..

http://i290.photobucket.com/albums/ll257/bugenhagen_photos/i_came.jpg

In the OP, I suggested that Bitcoin is experiencing suppression - though not explicitly. Patterns in the leverage games are virtually identical between Bitcoin at Bitcoinica and gold in the major futures markets - the same methods of attempting to squeeze weak, leveraged positions. What made things particularly unsettling was the frequency and similarity, as well as the correlation - until massive physical demand in gold surfaced recently. Keep in mind the similarities have not just been in price movements, but also behind the scenes in volume, stop-hunting probes and forced liquidations; too much to be purely coincidental.

There does seem to be a difference, as you note, between the motive of the Bitcoinica moves and gold's - the former seems to be more profit-oriented than those in the latter. In other words, Bitcoin seems to offer an opportunity to grow wealth while extrication from a bad situation dominates the feel of gold trading. In addition, Bitcoin has far less of a derivative environment clouding its unit value - the equivalent of gold prices being driven by physical metal instead of leveraged positions.

You're right about Bitcoin not being a material threat yet, but it is possible that it could be perceived as one despite deterioration of the existing monetary regime being a greater priority for those institutions built upon it. Whether that perception is the present situation, and whether there's a wait-and-see approach being taken or active attempts at control by more than independent professional traders, I'm not sure.

What I do know is that there has been political attention and banks' traders dabbling with it, so I think it's safe to assume that there's some level of awareness, even if it may not be a priority consideration. The scramble to facilitate mobile payments points to an effort that may have been influenced in part by Bitcoin's potential to dominate that area.

You're missing Sarah Palin's impregnation rate plotted against funny Whitney Houston jokes.

A 3% spike in Bitcoin - now gold futures should make a similar move before the week is out.

There is enough pressure in both to result in potentially explosive upward moves.

There's actually been fairly similar action in gold the past hour or two:
http://www.kitco.com/charts/livegold.html

Yes, there's something going on there - it might be the beginning of a push up to retest $1680-1700. That's the target I'm expecting after Bitcoin's jump.

I've been thinking about this. Take hourly gold and hourly bitcoin price for the last couple weeks or whatever period during which you think you are detecting similar patterns, convert the prices into pitch, and leave time as time. Then listen to the two of them while adjusting the tempo of each continuously until they match up. This may be a more intuitive way of detecting similarities occurring over variable time scales. Better if you take the first and second derivatives of price/time and code that to correspond to different sounds.

Then in the end you could have a plot of bpm vs time for each price which would show how the "tempos" of the two may be related.

Then finally, release your new dubstep track.

It'd finally be possible to say, "This is what a Bitcoin sounds like." :)

As for what's happening right now: isn't it amusing how Bitcoin took off right at the end of trading for the week - on top of this being an options expiration day?

Gold will rise next week. It looks like Bitcoin's derivative environment doesn't allow for as much selling pressure as there can be in gold.

Bitcoin has a capping effort in place, making no real progress and dipping only slightly through the 17th. On the 18th - precisely at midnight UTC, it takes off to retest and obliterate the $5 level, after which there's the typical short effort attempting to squeeze new longs out - this time unsuccessfully. Looking at Bitcoinica's data (http://charts.bitcoinica.com/open_interest?date=2012-04-18) confirms the same methods of attack.

http://noblenomads.com/wp-content/uploads/2012/04/bitcoin-04202012-mod.png (http://noblenomads.com/)

Sure enough, one day later gold shoots up exactly at the opening bell for New York trading and experiences the same short pressure immediately after its peak. The difference here is that gold was pressured much lower in relation to Bitcoin.

http://noblenomads.com/wp-content/uploads/2012/04/gold-04202012-mod.png (http://noblenomads.com/)

Again, I attribute gold being pushed relatively lower to the wider range of derivative instruments available with which to move the perceived value of the underlying asset. If Bitcoin options and futures markets were more mature, there would almost certainly have been a greater decline from its April 18th peak as well.

Now that Bitcoin has spiked after a rally to ~$5.45 the (most likely leveraged) selling pressure is back on. No surprise there. The same should occur in gold either up to CoT cut-off (Tuesday) or very shortly thereafter.

It's going to be 3 steps forward, 2 steps back until the next catastrophic event.

Vicious takedown at exactly midnight UTC. It's the same pattern of attack, yet again.

So far this week, gold hasn't seen the spike. I attribute this to there being effectively unlimited sell-side force in the form of unrestrained fiat currency supply and the ability to apply that pressure through mature derivatives markets. The perceived supply of gold can therefore be expanded as rapidly as desired by utilising the derivatives, clouding the actual value of the underlying asset.

With Bitcoin, short side supply must be obtained either from freshly-generated blocks, or via trading because there is no derivative capable of obfuscating Bitcoin supply - for example, by enticing new momentum buyers on spikes from $4.70 to $5.45 and then exerting pressure to force them out, additional BTC can be employed to control the exchange price. Leveraged long liquidation simply hands more power to the manipulative side. Trading technicals is extremely dangerous when playing on margin in this environment.

The MO is the same as with gold. Buy the dips, sell 1/3rd on rallies - rhino horn shapes, as Jim Sinclair puts it.

A relatively major spike down in Bitcoin yesterday from ~USD$5.10 to $5.02 was followed by an immediate uptick to the stable range of around $5.10-$5.14 which has held for some time now.

A relatively major spike down in gold began yesterday and continued today to yet another retest of December's low, also followed by intense buying pressure that pushed it back up to the stable range pivoting around USD$1550-$1570 that's held for the past week.

To reiterate: I do not think this is a coincidence. Rather, I see this correlation as an indication that Bitcoin offers a better indication than the paper gold market offers for physical gold, primarily because paper gold markets are proving themselves more related to fiat currencies than the underlying metal. This is not even accounting for Bitcoin dark pool pricing, which is not reflected in the usual exchange rates and may be higher by 10% or more.

Funny how major markets finally close for the weekend, and BItcoin takes off like a miniature rocket.

What Bitcoin is doing now and throughout the weekend will be what gold and silver do during the rest of June.

no, seriously.  i've always said that when NYSE traders close up shop at 4pm they wheel their computers over to the Bitcoin Room.

Me likes the sound of that!  ;D

And DDoS mining pools, apparently. Buggers >:(

Bitcoin continues to foreshadow movements in gold. Since there's more pressure on gold, there's a divergence. Since they're both subject to similar fundamentals, that separation can only last so long.

It's finally time. Gold will follow Bitcoin upward, probably doubling before hitting a correction.

Woot!!

Can you put a timeframe on this? Are you saying gold will go up 30%? I somehow doubt it.

Looks down hard to me.

My price estimates from late last year of $2,100-3,000 still hold, but they're a little low now. A doubling from current basing levels would put gold in the $3,100-3,400 range.

As for time: by the end of 2012. Unlike last year when I expected $2,100 to be broken and then a knockdown like we saw from just over $1,900, there's really no more room to the downside.

The only realistic way of continuing the illusory mechanism is by causing a full separation between paper and physical prices. That can still happen at this point, and the indication that it has taken place would be a pop in the USDX of several hundred basis points without a commensurate correction on a monthly time frame; preferably within a weekly close.

Paper gold prices would then plummet due to effectively unlimited sell-side pressure, obtained through asset freezes like that seen with MF Global, and fractionally-supplied money. Bids would be completely overwhelmed regardless of funding because more can always be supplied directly to the sellers.

On the other side, physical would rapidly go into shortage and become impossible to obtain at paper prices. It would shortly become an off-exchange item, being used for large transfers with little to no public disclosure; similar to what exists now in the oil trade (e.g. India paying Iran in gold for oil), but becoming far greater in scope.

Whether the separation will actually occur remains difficult to call. HKEx has recently acquired the LMA (http://www.telegraph.co.uk/finance/markets/9333414/Hong-Kong-wins-race-to-buy-London-Metal-Exchange.html), throwing uncertainty into the mix. If China deems squeezing western participants for their gold an important enough direction, then it may occur - ironically from the opposite participant expected. That would mean China will have obtained massive amounts of gold at the expense of other sovereigns, again mostly western. By breaking the paper/physical connection, it would be like burning the bridge after having crossed it so as to ensure China would be the sole gold power for an extended period.

It's also possible that the separation may occur regionally, wherein a particular nation may restrict communication, trade, and travel through its borders while breaking legitimate market valuations. That would have the same effect as price caps, only through market interference rather than exclusively by legislation. The same results would occur as well - shortages of the underlying real assets.

I only know the paper/physical connection could be broken - either way, direct physical metal ownership eliminates counterparty risk. Even in the event that it does break, Bitcoin exchange rates should continue to offer insight into what the true physical gold valuation is; their fundamentals are almost identical, strengthening as Bitcoin's base inflation rate continues halving.

I like how Schumer ordered Bernake to QE3 today ;).

The closed it pretty nicely too... senator: "you said you'd QE3 if the jobs numbers weren't adequate... what is adequate"; ben: "worse and steady are no good, we need improvement".  Translation: we'll most likely be doing QE3.

Too bad it won't work.

So you're saying that by the end of 2012 either:

• the physical market will have separated from the paper market (no physical gold to be had at paper price) or
• paper price will be beyond $3000

correct?

If so: I commend the size of your balls to put a timeframe on this. Most who believe it will happen don't.

That's correct, although the paper/physical value could separate at any time between now and full reintegration of gold into the global financial system.

It might have been bold to put my money on the line in late 2011 when I expected $2,100 to be hit before the knockdown instead of $1,900, but making a claim isn't necessarily brave. While $200 wasn't a huge difference, it was proven wrong for the time. As for the options trades, I didn't quite break even; that was the last time I made any trades of size in the traditional financial markets.

What remains is the fundamental reasoning. It is fully intact and just as valid now as it was last year, only now the consequences of suppression will be even greater; nothing has changed just because it's taking longer to unfold than predicted.

http://www.kitco.com/LFgif/au1979.gif (http://www.kitco.com/charts/historicalgold.html)

A similar basing pattern is occurring as took place in 1979, just prior to the inflection leading to the true parabolic rise. The banking maneuvers are nearly identical as well, notably the withdrawal from being suppliers. As the banks (JPM) extricate themselves from short PM positions, they set up for net long holdings that will be immensely profitable over the next few years.

The difference between then and now is global participation where there were only a handful of sovereign nations heavily involved 30 years ago. Notice the two month consolidation from October to December, while today it has been a year. That means the magnitude has become much more expansive, and the pressure to maintain stability at lows even more so.

An even more impressive comparison:

http://www.kitco.com/LFgif/au75-79.gif

http://www.kitco.com/LFgif/au00-pres.gif

What took place in the 1970s over a mere 3 years including the final culmination has now taken over a decade to get only 2/3rds of the way through the total process.

We should see a sharp move upward in gold and silver during the remainder of 2012 with a high somewhere within the $3,000 to $6,000 range, followed by another several months of correction and consolidation. I expect 2014-2015 to be the final blow-off spike, well in excess of $10,000 per ounce, the final 5 to 6-digit range depending on how extreme inflation becomes.

Thankfully Bitcoin has a Pirate providing guidance.

This made me lol. ;)

Hey misc, interested in action on the BTC/gold ratio at the end of the year? We could make a straight bet on it (50BTC?) or we could do a future swap deal at the current rate (175BTC of yours for 1oz of mine?). Easiest to just settle in BTC, but I do have the ounce in case you disagree with kitco price by that time or whatever.

50 btc/oz would be my guess for a endgame price for gold.
Whatever that would be in fiat would be irrelevant at this point. But that gonna take a long time.

you might be underestimating BTC itself (value increase not caused by fiat inflation but bitcoin economy/investment growth)... or are you talking 2012-based BTC when you say 50 btc/oz?

@miscreanity: thanks for above charts and elaboration.

It is my opinion that most people in this forum underestimate gold. Not just because of the intrinsic and historical value but also because of unique physical properties. It can be used for tangible nanomoney both in virtual and physical form and it is the only element which has the property along with a single stable isotope.

I own gold and think it's great. But it is already valued really really highly. There is hardly room for value growth at this point. Any major price increase will be because of a depreciating dollar. Bitcoin is so small and new that a few guys learning about it could double demand. Earth would need to spawn a new densely populated moon for that kind of demand increase in gold.

this is true.  i noticed miscreanity didn't take your bet. ;)

Just head over to kitco.com and ask in their forum what they think of BTC. You will find that, the amount of people willing to do the same thing you did (selling gold to buy BTC) is surprisingly slim.

Here is an interesting relation
http://traffic.alexa.com/graph?w=400&h=220&o=f&c=1&y=r&b=ffffff&n=666666&r=2y&u=kitco.com&&u=bitcointalk.org&u=bitcoin.org&
http://www.google.com/trends/viz?q=bitcoin,+bullion&date=all&geo=all&graph=weekly_img&sort=1&sa=N
(bullion, bitcoin)
this might weaken my point because it shows polarity declining during the BTC hype but it also shows how immensely popular gold still is. (Mind you kitco is way less important for the popularity of gold than the bitcoin forum is for BTC). If and when the Bitcoin Forum shoots above kitcos popularity we can continue this discussion :)


You may be right that in the longterm BTC is more undervalued than gold, in respect to fiat money. But in face to face comparison there isn't that much room for BTC to gain value over gold. The situation is similar to 2008 where people popped up saying the gold bull market is over.

if i waited for confirmation from the crowd then just how would i make money?

Depends on what you consider money.

Do you trust Bitdaytrade? (I don't)
But if you are I would suggest using some of your BTC to short gold, since you seem to be certain it will crash, while BTC will soar. (I neither)

That will make you money. Or are you in it to convert it all to fiat some time?  ;D

you haven't been following my thread:  https://bitcointalk.org/index.php?topic=68655.msg1026490#msg1026490

i still have all those positions.

oh well, how long are you planning on keeping it?

can't tell you for sure.  it's a day by day thing.  however, i'm waiting for a specific configuration to occur.

I'd like to know this configuration you speak of...pm me. Thanks.

Pay up like the rest of us.  Thanks.

Then learn to read because he has spelled it out quite clearly.

Hey chill man. If I have questions I will ask him and NOT you!

I'm not getting my information from you because obviously you don't know the right questions to ask to ever give any good answers.

Learn to ask questions before assuming!

Edit: Oh one more thing..I don't think Cypher needs you to speak for him because I was actually talking to him and NOT you. This is where conflicts start when others butt in when they're not being addressed.

That's nice.  If you want to talk to him instead of anyone on the forum, try a PM instead of a public thread.  You sure are touchy tonight.

1. No one was talking to you.
2. You assume I wasn't already paying for his input.
3. You tell me to "learn to read" as if I don't know how to (thanks for the insult)
4. You're a douche?

Yes now I'm getting touchy...lol

 ;D ;D ;D

1. It's a public forum.
2. I assumed that because he has made his targets clear in his newsletter.
3. I was explaining why I made the assumption.  I didn't do it very nicely because I've been drinking and your response rubbed me the wrong way (thanks for the FIRST insult).
4. So are you.

 ::)

hehe thanks!  ;D

Edit: what, can't come up with your own material? Gotta copy my format? LAWL!

Okay, you win.  Now please shut up so the thread can get back on topic.

+1 i win, you lose...ok you shut up too...deal  ;D ;D ;D

smoothie go2bed

Sorry mate its 6pm now. I'm not in your part of the world hehe

No, but thanks for the offer. I'm not interested in gambling with Bitcoin against gold or vice versa, especially not short term - there's way too much potential volatility coming. I prefer sure things that are easy to predict, like Bitcoin and gold against fiat over the next several years.

If I were to use either asset now, it'd be to nibble at insanely cheap productive resources - when everyone's a gambler, don't gamble.


Sure thing.

I think we'll see an inverted XAU:BTC ratio. Maybe even 5:1 or better. Going with the extreme of 5.5 billion troy ounces of gold to the maximum Bitcoin supply of 21mm, the ration would be about 261:1. Silver has an estimated supply in the tens of billions of ounces, and that's historically held fairly accurate in valuation relative to gold, so I'm probably being conservative with Bitcoin.


Agreed about 2008. Gold remains buried in background noise for most people, like Bitcoin has been after the initial over-enthusiastic interest fell. What if both trends rise?