The capital that was in financials is moving elsewhere. Destruction of the banks by reallocation; wealth didn't disappear.

Banks can't use their excess reserves because they're needed just for survival. How can the banks continue to profit and keep themselves running? Government assistance in the form of funny money, whether that's from printing or forced guidance of the investment community - squeezing capital into banks and bonds by making other options unattractive.

We'll see in an hour or so.

BerkShares, anyone?

This is an ideal situation for Bitcoin, but until it's easy enough to use via handheld devices and/or paper bills with some form of encoding on them (QR codes?), the technology barrier will remain too high. Not to mention the eventual issue of price stability with a deflationary system.

Aside from this beginning of the paragraph, I agree. The deflationary argument isn't missed, it's just based on different assumptions. When assuming that the debt will be discharged at a loss, I arrive at the same conclusion you do.

Bad debt doesn't represent liquid money, no. It is just locked-up and unable to be either redeemed or made use of. The debt hasn't vanished: it's still tied to assets by the respective creditors and debtors; the creditor has been swapped out for another in the case of the Fed. It can't be made to disappear unless the Fed were to take all of the write-downs - forgive all the debt it's acquired. That would do a lot of damage, if not destroy the institution and economy in general. Or, the debt needs to be replaced with a liquid form of money.

Maybe we should offer our definitions of bad debt so we can be sure we're on the same page. My understanding of bad debt is simply a contractual agreement in which at least one party is not able to or is unwilling to meet the obligations to the other party or parties. Can it get more legalese?


The bad debt as money notion. Since the bad stuff is already out there and completely gumming up the works, the options for the economy are: die now (deflation) or die later (inflation, then deflation). The "formality" is that the Fed is only going through the motions of what it's officially supposed to do - dead man walking.


If the debt is written off there are still assets that were associated with the debt, no? What happens to them? Is the creditor or debtor helped or harmed; was the debt "good" or "bad" from the creditor's perspective, or the debtor's? When does the transition from "good" debt to "bad" debt make that same debt disappear? Bankruptcy proceedings? What is the actual destruction process? If you can explain your understanding of the mechanism for this, I'd greatly appreciate it. As far as I see now, there is no pause or reset button for this game and the line between a mere asset and money remains blurred.

What's being described is like putting piles of cash into a safe and forgetting the combination to open it. It's no longer liquid but it's still there, you just can't get to it. Now what? Some form of common money is needed to keep the show going, pay the bills. Who would believe you when you tell them you locked your money in your own safe and can't get to it? (US to China: sorry, we can't pay because, uh...) You'll come off as either foolish, stupid or a liar. (War?) Wouldn't it be easier to duplicate the money that's locked up to act as a replacement until the safe can be opened? (Everything's fiiiiine, really! Nothing to see here, it's all good, we swear on the Founding Fathers! Just give us another month or twenty!)

Now that both sides (creditors and debtors) involved with the debt that's been tied up are in a frozen position (creditors receiving income & debtors using credit lines), they'll need liquid assets to keep going. How much will they need? Well, how much was held in reserve (if any), what's the minimum to maintain solvency and how much was the debt worth? Be honest - $700 billion, $2 trillion, $1.4 quadrillion? Ok, now can both sides survive a resonable time before reality sets in?

Repeat that situation millions of times, at all scales. Everything is already broken, the Fed is just handing out the playbill. It comes with a complimentary $1 billion for those who can afford seats to begin with.

Almost forgot the kicker: what happens when the safe is re-opened? Are the safe owners richer, or is it just an illusion? I think in percentages.


So there wasn't danger in allowing gold to rise past $500/oz? $1,000/oz? $1,600? What happens when $2,000 is broken? Will the Fed see danger in allowing the price to go past $2,500 or $3,000? What I'm getting at is: at what point does the Fed finally decide, enough is enough?

If the Fed intervening is causing these boom/bust cycles, do you think it stands to reason that the problem might grow so great that the Fed can't manage the problem? When will the Fed get out of the way and allow the business cycle to right itself? Is that even possible now, or will the whole system snap in two?


I was thinking more about the next two months, but that works. So a gradual or rapid decline in gold from here with a corresponding lift-off in USD?


The chart shows securitized debt is contracting while traditional forms of debt are rising. The "bad" debt doesn't just disappear - the valuation is reallocated, often losing some of its attributed value along the way, but certainly not all of it.

Another issue is how these "defaults" are occurring. Where has it been stated that the debt is being defaulted on? Use of that term is dangerous; likely to cause a cascading panic among counterparties. Is the bad debt really being defaulted on through bankruptcy and write-offs, or simply being reclassified? Either way, the debt still doesn't just disappear. If it's an accounting change, then nothing has really changed.

Even in the case of bankruptcy and write-offs, the asset and/or debt involved reverts to one party. For the loser, it's like having grown and learned how to use a sixth finger, then being forced to cut it off because someone else wants it for skin grafting after his face was blown off when he lit a firework. Default causes some loss of value, but there is still a shift in asset allocation (again, assets don't disappear as if via magic) that proves detrimental overall.

I think I've beaten a dead horse enough for now. There are more immediate developments to pay attention to at the moment:

Persuant to the physical gold premium issue discussed earlier: $17 gold and $2.48 silver premiums in China. Spread far enough, the paper/physical connection fully severs and the banks lose all control. Demand must be alleviated in the short term.

One last point - has anyone been paying attention to the Japanese Yen? The final round may be in the chamber. Bernanke's playbook reads: kick USD up, smack gold down, announce terrible news that reverses those positions.

Bitcoin should also do well if there's more inflation in store...

That's a reasonable way to look at it, just take it a step further. How do businesses and consumers save their accumulated wealth? A primarily transactional currency cannot maintain stable pricing (thus keeping the economy stable overall) while also acting as a store of value. Right now, everyone is jumping from one transactional fiat to another, or assets that don't perform as gold does.

Save in gold. Spend in dollars/fiat. Two sides of the same coin. It may be a chicken & egg issue as far as whether gold as money came first or some form of representative fiat did, but gold certainly came before the dollar. The dollar was initially backed by gold and silver. Just because a direct connection isn't present doesn't mean there isn't a relationship. The floating exchange forms a tie on its own, much like fluid coupling in a transmission.

Bitcoin (and any similar crypto-currency) is the only currency I know of that truly transcends that connection.

Sure, if debt were simply debt. Securitization has changed debt into a form of money - it now functions as such.

There is a difference between debt that is simply extended credit which can be withdrawn, and debt that is effectively monetized by market actions. The Fed's printing is really just a formality, so it doesn't matter whether it continues or not (although pressure will persist for it to proceed).


Cause and effect are reversed here. Again, the functional monetization has already taken place. Gold is not dependent upon the formality of the Fed introducing monetization to maintain liquidity; everything is already in place for gold's upward revaluation. The base monetary inflation is reactive and simply locks that fate in.


The quote in question from February 12th, 1973 is available at Jesse's. It is from Volcker's memoirs.

"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake." Paul Volcker, Nikkei Weekly 2004

Note the bolded section in the full sentence. When taken in context, it suggests a controlled appreciation in gold's price, not an all out assault to keep it down. Many held US dollars because they were conveniently convertible to gold, much like Perth Mint certificates are today. At that time, gold was still set at a fixed rate in relation to the dollar, so the same trick of severing the connection is not available this time around.

What happened after the dollar was no longer directly backed by gold? Demand for gold via dollar convertibility, now being viewed by other nations as unreliable, shifted to direct ownership of gold.

As Jesse states in the Volcker post linked above: "The banks love to whack gold and silver prior to a market operation.  This way if the metals rally, they have less opportunity to break out and run  even higher."

By running the price down prior to revealing QE3/OT/Flood-the-world-with-snakeoil, gold and silver will simply run up to resistance at prior record highs instead of hitting new ones. Subsequently, their rise will continue, but it won't be with as many participants as it almost certainly would've been if gold were nuzzling its peak when the banks let loose. Instead, many will be surprised and in disbelief that the price could continue to rise, then hesistant to re-enter for fear of another top. That's the systematic "intervention in gold sales to prevent a steep rise in the price of gold" in action.

It is good to keep in mind that commodity trading firms did not merge with the major banks until after the gold bull in the 1970s. Having these trading houses under their wing, the bullion banks now stand to gain from gold appreciation rather than be raked across the coals.

The question has been posed before, but wasn't answered: if gov't has the power to permanently maintain a low price in gold, why did it rise at all? In fact, why do these crises even occur?

Other than that, I agree with your and netrin's assessment. Also, gold will be sold - but with dollars unreliable as a store of wealth (again), that (massive amount of) capital will flow into gold.

As for how things will unfold - a spike in gold's (and silver's) price to entice selling (the cure for high prices is high prices) prior to futures delivery deadline at the end of the month, followed by another violent smash down at the beginning of October. The same will repeat after options expiration in October - a large spike rise in gold's price during the latter half of October.

Finally, the debt crisis in Europe will be proclaimed "solved" and the pols will pat each other on the back while the system continues to crumble under their feet. Regardless of the fact that the same pattern arose in 2008, this is very apparent from everything but price action. Use all the tools at your disposal when it comes to gold, or resort to running blind.

The gold price analysis I'm describing has already been explained in detail; cypherdoc, maybe you could post your most clearly explained analysis to make assessing the accuracy of differing methods easier to follow.

By definition, perhaps. In function, I disagree. Explanation?


Assuming the relevant banks fail, yes. And yes, it would be good for precious metals so long as there isn't a cataclysmic collapse of society.

Jim Rogers does not use the term 'manipulation' explicitly. Rampant monetary inflation is not manipulation? Perhaps we should have an agreed-upon definition, because virtually everything being done now is manipulative, as far as I'm concerned. The markets are being whipped around by the major institutions and that's been their entire means of preventing collapse - keeping market participants too confused to make a cohesive decision one way or another.

You called for a USD rise, which is fine. I took no issue with that, only your insistence that your concept is radically new when it isn't. The mechanism has been described by others.

Please keep the focus on the concepts and avoid ad hominem arguments.


It was a compliment.



There are a lot of links and quotes in my posts. I add them when they're relevant and make my point further.


Absolutely - this was one of the things we agreed on. Essentially, N^th derivatives. The problem with assuming the USD is everything is that it's also a derivative: of gold.


I point to all but very long-term technical charts and indicators as being suspect, stemming from the fact that manipulation paints false signals. In addition, assets and the means to make use of them are disproportionately distributed throughout the world, with the productive capacity and infrastructure decaying among developed nations.


This relies as much on policy decision as hyperinflation.



A dominant world currency is very possible. There will be alternatives so long as currencies exist.


Margin calls will hit and losses will occur. So what happens on the other side of the trade? Derivatives form reservoirs into which capital flows. The flow into them doesn't immediately disappear - it's a process. Where does that money go?

When paper market volatility is extreme and the price is collapsing, will investors continue to risk leverage in markets on an instrument decoupled from its underlying, in-demand asset? No. After seeing so many lose their shirts in paper, they'll have to buy the asset itself or risk further losses. It's a learning process and those who learn quickest will be the most successful.

Write-downs can only occur to a certain extent, that being the level of the derivative-holder's solvency. Beyond that, its assets become forfeit. Valuation thus flows out of that entity and into the recipient by way of asset transfer.

Derivatives have been great for turning profits without getting hands dirty. If a trader wouldn't normally be trading the underlying asset, a precarious situation exists for any market. With gold, demand for the asset is rising naturally - i.e. not forced. This is opposite the dollar, which is being forced higher.

Should the derivative valuation be crushed and demand still exist for physical, the financial instruments won't matter at all. They key is demand for the underlying asset, not the derivative. Nobody wants a herd of cattle or hundred barrels of oil sitting in his yard, but a hundred ounces of gold? Who would want a bundle of dollars if it's dropping in value relative to real assets? Only those who see the numbers go up, but don't think about what the numbers are going up in relation to.


As explained above, demand for the real asset is all that matters, regardless of any initial shock that may occur due to derivative disintegration.

Gold is a real asset. Bitcoin is a... surreal asset?


Please re-read. Fundamentals provide overall direction; technicals offer points of interest. Driving fundamentally west from Washington, DC? Stop at the Arlington Memorial and the Grand Canyon on the way to Los Angeles.


Of course it's a warning: that's the idea. Market moves can take a long time to unfurl. This helps to scare out those trading without patience. It helps to have unlimited cash-flow in the form of an illusion to blind the populace.

The price activity we're seeing has been exhibited very often just before options expiration. With physical delivery of gold and silver becoming overwhelming in the futures markets, any additional strain will be prevented at all costs. If that includes throwing what the banks know is worthless paper at the problem, then that's what will happen. Is it in the banks' best interests to have thousands of new millionaires minted because they held some well positioned longs in precious metals?

Look at the price action recently - from the beginning of each month, PM prices are hammered right up to options expiration. After options expiration, prices rise. Behind the scenes, the numbers strongly suggest short covering: the banks are getting out of Dodge. Add to that the FOMC decision coming up; this is no surprise, only the exact events are curious because they echo past events.


Try a logarithmic chart, or you'll see exponential rises everwhere.

From August 26th:



There's a problem: the banks are now stuck holding each others' debt. The crap that was flushed down the financial sewers finally clogged up the works and is backing up into the bankers' own homes. If it's impossible to break the clog, the next best thing is to dilute the junk so that it isn't so toxic anymore, consequences be damned.


Painted charts are picture-perfect. Be nimble and mind your stops - best to you with your trading.

Once again, options expiration followed by the FOMC next week. You may as well consult a Ouija board for the daily predictions. The targets of $1,740 and $1,680 remain, with $1,700 a likely point to be retested intraday during the Fed announcement.

Yes, GLD is supposed to be backed by gold bullion that is completely unencumbered. There is question as to the "unencumbered" status, but we don't need to touch on that topic for now. It's only necessary to know that there is some flexibility available to GLD management in keeping the fund backed by gold.

In order to redeem any of the physical gold from GLD, a block of 100,000 shares must be redeemed in one shot. Also, this can only be done by an "Authorized Participant". This is impossible for the majority of investors, even with approval to go through the "Authorized Participant" for the redemption process.

At several points during its existence, the GLD fund has experienced major outflows of metal that do not seem warranted by any stretch. The largest instances of these are what trigger the GLD Puke Indicator.

GLD is used as a trading vehicle as well as for exposure to gold. Because of this, and the popularity of the fund with neophytes, it's easy for large interests to squeeze out those unprepared. Those big "authorized" players then pick up all the shiny GLD shares which can be redeemed as needed.

This is how the divergence occurs: as demand for gold continues while supply decreases, the fund will have an increasingly difficult time sourcing the asset. During these downdrafts in gold's price, major chunks of the metal in trust have been redeemed and will be again. If that's followed by a major rise in the price of gold with no supply available, the paper price will rise without a commensurate increase of gold held in the trust.

With little to no supply during a true bubble-like situation, the price of gold will not come down. Any of the approved institutions can still withdraw from the fund, taking additional gold with them. When this happens, the paper price represented by GLD will plummet while the physical metal will be virtually impossible to obtain. The GLD fund will then be forced to close and investors who couldn't get out (individual investors, retirement funds, etc.) will take a 100% loss because there won't be any gold remaining to back the ETF.

That point has obviously not been reached yet and there are other funds which have much more stringent standards and easier redemption mechanisms, but I wouldn't want to even be exposed to the possibility of being caught in such a situation.


Sure, China's got the reserves to do so. It makes them look like the good guy and puts a yoke on the collective neck of the Eurozone nations. Also, since China has been buying up real assets for the past few years with it's depreciating US dollars, this is another means for the country to make its USD stockpile continue to work instead of just sitting there losing value.

There has to be a buyer for distressed assets. China (and other well-positioned nations) will be buying up foreign debt in distressed sales using the same crap paper they were paid. Paying back the debt will mean that the debtor nations will effectively become slaves (indentured servants, to be more euphemistic) to China - unless the debt can be paid off with worthless currency or war breaks out. This is the global transfer of wealth - it's taking place in more than gold.

I don't lick all the gold, just some of the freshly minted bars. Tastes like licorice. Besides, not for sale!

I'm more of a Goldschlager man, myself.




Deceptive tactics before the feigned retreat. There would be non-stop rising without pause in gold if this were the real loss of control.


If you lick it, you get a buzz.

In all seriousness, it demonstrates an admittedly semantic difference between inherent value and a mere property of the substance. For the absolute basic existence of humanity, food is necessary. Without it, we die; we can live our entire lives without gold.

On a different level, gold could be considered to have inherent value for an economy (such as one without the infrastructure to support crypto-currencies). Not necessarily that either perspective is right or wrong, just an issue of which one is appropriate at the current time.


Of course, Jim Rogers has never made mention of the manipulative games going on.

Some such as yourself are better at calling the short-term gyrations than others. Some are better at long range shifts. That doesn't mean you stand alone. Also, call me crazy but I prefer having a life.


It's been proposed that there will be a hammer-like action in gold. This time it's just on a much larger scale. The long trade for this stage is about half over; it's the short trade that will be the show-stopper. For several months, at least.


You mean this pyramid?



Are you speaking of the same emerging markets where manufacturing has moved while those in developed nations rust or are taken over by government? The same ones where agriculture is still a large component of national production as opposed to "developed" countries where 98% of its citizens couldn't grow enough food to feed themselves for a year if they wanted to? These are same growing environments that have built brand-new infrastructure and have positive prospects while the "Masters of the Universe" panic and try to save their own hides.

It sounds like you're suggesting the USD is here now and forever. Haven't you said that nothing lasts forever? There's a turning point coming up in gold, but it isn't the end.

When I brought up the greatest insult of being ignored, the same applies to the US dollar. Once it becomes irrelevant, the lie crumbles into dust. There is only one thing that can realistically make the dollar irrelevant: a large portion of the world shifting to a different currency (Euro, Yuan, gold, Bitcoin, etc.).

If, or rather when that happens, the world goes to war as the US cannot sustain itself in its current form. America will try to hold onto everything it can by force rather than endure the difficult transition of shifting to greater productivity instead of consumption. Should America not become violent, that would shock me - nothing of its past or current behavior suggests that will occur.


It was interesting, not surprising. The move was obviously imminent. As for the sequence that it took place in, the specific technique was curious.

The pattern you described is especially important to grasp. The same has occurred in gold, only inverted. Has any of this fixed the problems? No. Has anything been done to actually fix the problems? No. The same pattern will therefore continue, the overall long-term trend intact.


I realized there was something particularly special about gold a long time ago, but I don't claim that I discovered why this was by myself and in a vacuum. Credit where credit is due, when claims are justified. We all laugh at Al Gore for his claims regarding the internet. Even if we come to realizations on our own, it's good to keep in mind that they don't come to us from nowhere.

If I have seen further it is only by standing on the shoulders of giants. ~Isaac Newton

Twelve moves ahead might win a battle, but being ahead in the wrong direction will lose the war. Gold still is not the bubble.


A "fundamental transition" is the explanation? That describes the situation, but not the mechanism.


These "foreigners" are anything but netural about gold, especially in Asia. Plenty of them are as savvy as the greatest western minds, if not more so because of longer-term vision.


We're seemingly knee-deep in deflation. Has gold gone down? Did it sell off with equities? Speaking of equities, how did the mining companies do? Oh right, some new records while everything else was plummeting.


Thanks. I've mentioned the logistic nightmare of doing all of your own studies all the time. It's unrealistic. Understanding and using what's of value is far better than re-inventing the wheel every step of the way, and it keeps you competitive. Don't fight the tide just because it's there. This also ties in with my bit about enjoying life instead of incessantly hovering over price charts.


Bitcoin? I wish. Maybe in a few more years.

The topic of central banks selling their gold has been pondered ad infinitum. This is a minor issue compared to the overall trend. If a central bank does decide to sell (from Libya, perhaps?), the flow will be absorbed so fast you won't have a chance to blink or catch your breath before it's gone.

There's no need for exclusively linear, non-linear or head-up-your-ass thinking. Just diversify and prepare; go heavy with what you think is most beneficial. Most situations share a lot of the same preparation techniques.


One of the best points in this thread.


When I make a return from trading derivatives, I go and buy physical gold. What happens when demand for gold is higher, especially amid a more educated public? Physical gold demand explodes.

As derivatives collapse and US dollars are rushed into, instruments that formed the paper gold markets will completely devolve. Where will those USDs go next? Physical gold, among other real assets. Just because paper instruments are destroyed doesn't mean the demand disappears. The paper lie can only hold so long as the majority doesn't realize what's behind it.

This means that you will see a complete divergence: GLD goes to pennies while bullion premiums go through the roof. The officially stated price doesn't even have to rise for that to happen. In fact, that will serve to keep those oblivious to these activities still in the dark.


A managed market does not offer genuinely valid technical signals. By the same token, manipulation can only go so far. On very long term charts, the technicals will provide a better gauge of the long-term trend. This is why it can be hard to keep up with the daily gesticulations, but easy to see the big movements.


Another excellent point.


This is the heart of the matter. I wish I'd read further before writing my earlier responses. There's a recent video on gold premiums that looks at this.


Now we can play "Fall of the Weimar Republic"! Any pictures? My apologies for the smartphone image quality.



Manifested debt (extended credit) has the same effect whether it is printed or a simple ledger entry that has no physical counterpart. Does debt disappear from bank records simply because it's a number in a database?

This issue was discussed. If the banks cut all credit lines down to their outstanding balances, that would reign in some of the system's excess. How much is dependent on the outstanding balances. You already established that your lines of credit are clear, but how many have maxed out credit cards and HELOCs? How much of that can be closed out? If it is written down at a loss, how many financial institutions would be around the next day? For that matter, how many companies that have large financial divisions would survive (recall General Motors' GMAC)?

Without a workable solution in place that can be fired up the moment the prior system collapse (don't fool yourself - there isn't one; Bitcoin certainly isn't ready yet), you're unwittingly hoping for the same thing the gold bugs are: Armageddon. Sadly, that's the end result at this stage no matter what happens.

Yes, there very often is a clam before a storm. Then it spits in your eye.

OT provides exactly the kind of framework necessary to allow transparent transactions among different types of instruments. The overall structure it promotes is basically a flexible market for everything.

If you wanted, you could trade umlaut posters for Swaziland textiles almost as easily as you can exchange EUR for USD today. The same mechanism would make BTC payment feasible for anything else.

Complete abstraction of financial associations is the result, or securitization of everything.


What kind of range? Only Gold has annual closing prices since 1792, but you'd have to produce the chart yourself. That shouldn't be too difficult with current spreadsheet software, even for online versions. I did it myself with Kitco London PM fix data going back to the late 90s. That gold chart is a Google Docs Spreadsheet with numerous limitations, including lack of log scale. I really should add 2011 data as well.

The Privateer has some good charts as well. Stockcharts also offers an extensive amount of data and charting analysis on a subscription basis. An alternative would be to open a Think or Swim paper trading account and use their charting software, but that might be limited to a few years as well. There are others that I've come across, but I'm not sure of any other dynamic gold charts offhand that offer more than a few years to a decade of data.


What intrinsic value? As the saying goes, "you can't eat gold". Its value is derived from its relation to everything else, primarily because of physical properties and the fact that it exists in such a steady and limited quantity.

A better question might be: how much is society worth? While the same can apply to paper currency, the difference is that gold does not require management to act as a representative of work effort or wealth. No physical asset functions as well as gold for the purpose of a currency, and no abstract representation has been able to avoid the pitfalls of centralized control and management until Bitcoin came along. With every other currency in a state of violent flux, gold is resuming its currency status.

An even more appropriate question now is: how much gold is necessary to stabilize the global monetary system? If it's 20% of all money currently in the world, USD denomination based on base money and debt obligations outstanding, the flow will result in a major revaluation of gold in relation to all other assets. The figure of $10 trillion seems a very low estimate.

The only one?




Along the same lines, I could predict an earthquake in California and claim that I knew it was coming when it finally happens. Predicting the timing is exceedingly difficult, so I prefer preparation instead. That way, the trap can be sprung when the conditions are right; the reward reaped when there's little to no fight left in the move.

Our disagreement lies with gold anyway, not the USD. I've added a few quotes, but it's often easier to find precise instances of one's own posts - I'd recommending finding the exact points from your own quotes as well as the ones I dig up. That promotes a less biased view and it means I won't have to spend hours going through the thread.




From August 9th, gold went up about $100/oz. Nothing was said directly; everything was deferred to this month. The USD rise was delayed by a few days.


Had to include this one - a priceless piece from S3052. Is the idea to wait longer for the fall to happen? Another California 'quake prediction.


Winner! This one was a solid call.


The distinction here is that gold is not included in the equation. The USD appreciates against the Euro, and both are depreciating against gold.

It isn't the fact that this dollar rally happened that's interesting, but the extent to which it has risen in such a short time.


Being first to scream "FIRE!" doesn't mean there is one.


Can a technician explain why there are so many conflicting technical signals and so much confusion? Is support the result of a line on a chart or real-world supply & demand? Can that distinction be made from price alone?


Then why would Europeans be buying gold as the dollar rose against the Euro? Is the entire world buying gold just because of a falling USD? Correlation is not causation. Beware of such linear thinking.

There was no US dollar in ancient Rome. Gold protects against instability, especially debasement and fraud.


This thread has more readers than the two of us, but I'll be sure to try harder in another lifetime where impressing you matters to me.

Acknowledging those whom we've learned from keeps us from making outrageous claims. Also, I do not have the time to produce every chart and study on my own, so I find those who excel at what they do. It takes time to sift through the chaff to find the wheat. Ah, the magic of specialization and outsourcing!

I could be wrong as well, mostly in the short-term... but I doubt it.


That's reasonable to assume; it doesn't have to end in a parabolic rise. It's the probability of that happening which is very high.

The banks have been targeting gold for centuries because it clearly shows when they've buggered things up. What else is new?


See my last statement about gold being targeted. Understand that central banks are net buyers of gold. The manipulations are to keep the power of gold out of the hands of too many whom the banks can't easily control, assuming a powers-that-be conspiracy hat. On the other hand, the banks are also struggling to survive and thus will attack what they see as a threat to their existence: gold.

Look at the psychology outside of the US. It is not as you describe.


Yes.


Very likely. The fraud will continue to the bitter end. Of course, that's still all paper games.

I really don't think it's a good idea to be trading at all right now except to maintain hedges, especially with the FOMC meeting coming up so soon. If you haven't prepared by now, batten down the hatches and ignore the markets for a bit.

Because it's ofter easier to link an article and it can be better said by another: Richard Russell at King World News on the anti-gold sentiment.

That's where Open Transactions comes in.

Thanks for the link!


Excellent chart, that's actually one I haven't seen before.

The average cost is significantly higher than $330/oz today. Rising input costs such as energy, fuel, labor and materials have increased the overall production cost. I'd have to verify what the numbers are, but it's still well below $1,000/oz. That's a massive profit margin for a physical product, especially when the margins used to be only a few percent or even negative at times, and only the largest and best-capitalized companies were able to survive.

Attraction to such high margins is exactly what's happening: old mines are being reopened while exploration companies are ramping up their efforts and the majors are looking to acquire juniors in order to capitalize on as much production as possible. That's precisely what occurs in Bitcoin mining, although the terms are different and movement of miners/pools is more flexible.

History rhymes.

Use scientific notation.

I see. For that, you'd probably have to hit individual nation's records. Hopefully it'll be easier to find financial data than death records. I tried looking into census information regarding presumed causes of death during the Great Depression in the United States, and there was virtually no "clean" data available from any of the sources I was able to stir up. It was almost as though nobody died because of living conditions and starvation during the worst decade until WWII began, even though major cities around the rest of the world suffered horrible rates of indigent starving in the streets. Anecdotal evidence suggests it certainly happened in NYC and other metropolitan hubs.

Yes, cultural beliefs rooted in emotion seem to prevent any sense from invading most minds until it's bludgeoned into them. Bring on the machines!


We did agree on the dollar rising, but there's too much brewing under the surface that's supportive of a launch in precious metals to position negatively with them. Instead, buying weakness is prudent. From a little longer perspective, the $1,680 gap still warrants watching.

The dollar rally is another issue and very suspicious. Without the Swiss and Norwegian moves, it's improbable that it would've closed above 77.

Positive money flows into gold and silver ETFs. Where is the flow coming from? Interests that are better informed than the retail investors being led around by their noses.

Gold mining stocks break out relative to S&P. Unbelievable strength in the face of unprecedented deflation: not something to stand against.

Gold positioning is at a critical mass. If any large interest (*cough* JP Morgan *cough*) begins short-covering now, it will make the QE1 and QE2-induced rises look like pimples on a gorilla's ass. Apologies in advance for the emesis-worthy imagery.

Gold to exceed $2,000 within 45 days. Key is the fact that gold is under-owned as an asset class. For that matter, Bitcoin is under-owned, but for different reasons. The only asset more powerful than one that functions as money is agriculture. Arable land is also a severely under-owned asset class by percentage of population.

Jean-Marie Eveillard estimates global ownership is at 0.4% when recent historical highs have been around 5% - so a 5-fold increase in ownership should equate to a minimum of 5-10 times the price, or about $9,000-18,000/oz. However, as demand rises and supply is insufficient to meet that demand, price will escalate more rapidly. That is where the real parabolic rise will come in; there's still some time left before that happens.

None of the above analyses are based on what the Fed will do. I'll have more tomorrow.


Nice find - do you have a link?


Gold Bullion International also seems to be headed in that direction. GoldMoney already facilitates transactions between existing GM account holders. There are hurdles to introducing a gold-backed transactional account, but it will happen. Bitcoin is sort of a proof-of-concept for that. The combination of Bitcoin and gold is exactly what Open Transactions is suited for. Existing infrastructure already exists to make Visa & Mastercard pretty much irrelevant - mobile phones. Independent terminals at a business could simply scan a QR code off a person's phone to facilitate a transaction; a wholly software solution, as the physical hardware is in place.

For a general source for global derivative debt, the BIS releases a semi-annual statement. The calculation methodology has been revised within the past couple of years (just like the official US unemployment calculations), otherwise there would be over $1,400,000,000,000,000 ($1.4 quadrillion) total outstanding instead of less than half that at $600 trillion.


Tradition!

Actually it's because banks understand best what gold is and the purpose it has in an economy (sounds a mite conspiratorial). They could've leveraged every asset they wanted while not touching gold, and this gigantic shell game would be able to continue for some time yet. By creating derivatives based on gold, they've effectively turned water into wine - but at an enormous cost. So long as the cost isn't known, the party keeps going. Too bad for the world, the rumors have been flying, suggesting that not all is as it seems - and they're finally taking root.

Without the explosion of debt, M2-based projections would be somewhat valid for at least the US; building analysis on the US alone is misleading. Leveraged debt is the main determinant of gold's value today, not the existing monetary base as was before a floating rate was finally established in 1971.

Because there's been so much securitization of debt and subsequent internationalization of it, the range of backing necessary from a base money supply has been greatly amplified. Had the packaged variants been kept within individual nations' borders, one country's economy (e.g.: Greece or the US) could collapse without severely impacting others - in fact, other nations would then swoop in to pick up firesale-priced assets. That way, there would simply be a percentage change in global ownership. Since that isn't the case, those entities most closely-tied to the existing financial infrastructure will be dragged down with it unless the connection is severed by dumping depreciating assets sooner rather than later.

Martin Armstrong discusses the Euro's dilemma of being a unified currency with disaggregate debt (PDF link). In short, a team effort will have a much more difficult time making progress while carrying dead weight than if every member were under heavy burden, but moving under their own power as a group: with 10 individuals pulling a massive weight, if 1 falls down and doesn't get up, that magnifies the difficulty for the remaining 9 than if the 1 that fell down were to get back up again instead of contributing dead mass - not only has working power been lost, but the weight has been increased. The same problem is partially attributable to the situation US states face.

If the Euro were to struggle along with a unified debt, progression is possible. If it continues as is, with the PIIGS succumbing, there will be fewer nations left to pay down the debt. Imagine France and Germany having to take on the burden of the PIIGS debt. Instead of France and Germany having well under 100% debt-to-GDP ratios, they will shoot well over that level. No nation makes good on its obligations much beyond that point. Default or debasement of the prevailing currency become the only options, and the former is almost impossible - it's like a person forcing himself to face his worst fear.

Applying calculus limits to gold and fiat currencies, yes - the limit for gold's value in fiat terms (due to outstanding debt) approaches infinity. It is foolish to think that would actually be achieved, even with enormous debt monetization efforts. Eventually, the rate of change becomes too rapid for human accommodation: a hyperinflation becomes impossible to sustain and the subsequent deflationary crunch, that the hyperinflation delayed, finally occurs. A very high number in fiat terms, yes (much more than $5k); not infinity.

Toast or not, probably a good position for another week. Every currency will be fairly well range-bound. These sharp spike moves occur in a manner which precludes the majority of profit potential. Earlier this year, the Yen had its massive spike and is now back near the lows. I can guarantee the same will happen with the Swiss Franc - population sentiment toward long held notions of a safe haven shift glacially compared to market savvy investors. Not to mention that Swiss financial stability is still viewed as much stronger than most of the world by those in finance, despite recent events.


Use the print feature - it'll put the entire topic on one very clean page that's nice for saving to an html file as well. I'm glad this thread wasn't lost. Hooray, Cosby! Hey, if you can't take a joke...


The uptrend described in the first paragraph is easily apparent on charts from 1 month to 10 years and longer. The logarithmic chart in this post shows the sharp downward spikes fairly well.


That's one way to look at it and the numbers behind the scenes strongly support that. Another could be that the general populations are divesting while large interests are gradually accumulating so as not to lose their price advantage before the dishoarding is complete. Still other explanations could be offered, but it would seem that there is a definite transition process underway which is geared toward a higher value for gold.


That's guaranteed to be a big part of. The chairman tries to act as indirectly as he can to avoid disrupting markets, so offering greater investment incentives than gold or forcing a situation where liquidation is necessary just happens to be textbook Fed maneuvering.


Booya! 'nuff said.


That's a good point. Incorporating that knowledge into an overall strategy is prudent. I still prefer to rely on the numbers more than the tea leaves, but at least Bernanke's playbook is open for all to see.


Has any nation in the history of the world ever succeeded? A more appropriate question might be whether the Fed can help the country survive without being economically decimated.

It sure was nice spending extra time away from the computer...

Is there something with me that I've intentionally left js enabled and have been reloading forum pages to see all of the wacky hijinks?

That might be beer on my pants, or I could've peed myself from the hilarity of the first refresh after my initial WTF.

Back to reloading pages. Oh Cos, you so silly. Where's mah Jello Puddin'!?

lulz!