Thanks, lol. Like I said, I trade - and sometimes offer private financial consulting. The blogging has become somewhat of a hobby, along with Bitcoin. I avoided it for a while because most of what I have to say was available elsewhere. Everyone's free to form their own conclusions.

Here are future gold price estimates. The gist is to watch the 40 & 50-week moving averages, as well as the 144-day moving average.

In the '70s, the US was the world's primary free-world economy. The world's primary source of oil had shifted to the Middle East. In the late 1970s, the oil exporting nations realized their power and stood up against American dominance (largely because of irritation at being paid for their real asset of oil with worthless paper no longer tied to another real asset - gold). That triggered a general economic slowdown as the nation's source of energy was squeezed. This led to rather sudden asset and production deflation in the face of money supply that was still rising. As Hugo offered: stagflation.

Over the years there have been several cases of similar resistance (particularly Saddam Hussein), though it wasn't a unified front as during the late '70s. Now we are seeing a global shift to remove the USD as reserve currency and reject American dominance. This is far more troubling, as there is no way for the US to prevent such a massive tidal shift in desire for freedom from the wealth-siphoning effect of the USD. Without being the reserve currency, the US will have to pay with assets instead of dollars.

Gold for oil, and not cheap (sub-$1,000) gold - gold at its real value many times higher than current.

It wasn't the greatest movie, but I strongly recommend Rollover (1981) for a good idea of how the interrelated aspects would cause serious consequences. The action can be seen in this video. Even though it's an old film, the depiction is still very applicable to the current situation.

There is also a much more in-depth explanation from FOFOA, as well as a follow-up with additional clarification. I have to say, I recommend everything from FOFOA. If I'd come across his information (also that of Another, FOA, et al.), I wouldn't have had to discover nearly so much on my own. Make use of the resources offered by him to understand where the world is headed.

With the chart, nothing really stands as support between here and the previous long-term lows of 2:1, then 1:1. Those are the targets for big money. When those ratio levels are reached, they'll start lightening up their positions. That will happen as the little guys who still have some investable wealth have finally decided to get into the game, providing potential for an overrun below 1:1 and putting their own heads in the noose. The rich get richer.

Excellent article, thanks for posting it. It highlights the cyclical nature of economies and financial structures very nicely. The analysis appears to be based on societies with written language, so I'd be curious to know what the Graeber's perspective is on those cultures that were spoken-language only. There also seems to be an assumption of exchange only in goods for goods.

It would seem to me that barter would dominate at seasonal tribal gatherings, during which surpluses would be offered in exchange for other surpluses. The exchange wouldn't have to be for physical goods: surpluses have been offered as a communal good, indicating a particular tribe's success and garnering respect or support. The intangible reputation in that case being the return. Records for these transactions simply don't exist and inferring as such would be virtually impossible.

There's a small archipelago nation in the South Pacific that holds such seasonal meetings, although exposure to modern society is eroding the practice. During these events, each tribe would contribute to a communal 'pile' of goods that formed the cumulative surplus of their respective production after providing sufficiently for themselves. The greater the pile, the prouder the society. The greater the share of the pile offered by a particular tribe, the greater the respect for that tribe. Out of the surplus, all tribes would then partake of the excess during festivities.

No one blanket explanation seems to cover everything, so I find it's still a chicken & egg situation, but it's good to have different persepectives.

A major point outlined is something that I agree with entirely - debt slavery is occurring and taking root now more than at any other point in history, especially with the mechanism and timing by which it is being expanded. Graeber's explanation helps to pull back the veneer of absurdity that is todays' status quo. I am left wondering whether this is the final stage of our species as we know it.

The issue of capitalism is one that I think isn't as clear, though. I find capitalism to be more of an observation of natural behavioral interaction. Whereas communism, socialism or other forms of centralized governance describe a structure to be maintained, capitalism is an observation of an order that arises naturally. This is actually very well examined by Eric S. Raymond in The Cathedral and the Bazaar.

If the Bitcoin economy were of sufficient size to be a source of influence instead of being influenced, that comparison might hold. Currently, Bitcoin is still too small of a market to hold its own and continues to be buffeted by capital flows, exhibiting behavior similar to equities at times and currencies (including gold, but more so anti-dollar types - AUD, CHF, EUR) at other times.

There's also the fact that the Bitcoin monetary/unit base is still being rapidly inflated by mining, so the price may have held for a while prior to this major event (Jackhole), but now I think a lot of people are starting to offload somewhat due to their expectations not being met.

Now where are those news stories about BitCon 2011 from the media?

No more direct QE was pretty obvious - too much opposition. Calling for fiscal discipline is just lip service unless actions are taken to back it up. Without political backing in conjunction with monetary tightening, there's no action.

Also, saying that the deficit needs to be fixed in a way that doesn't hinder the economy is like telling someone with a dislocated shoulder to pop it back in without causing any pain. Not possible.

What struck me more was the suggestion that they'll do what's needed to assist economic recovery. To me, that says it's going to be more of the same, just not immediately; maybe when the markets have crashed a little further from where they are now, or the crisis in Europe moves to a breaking point.

Of course, that's all verbiage. A liar can keep lying until he's blue in the face and there still won't be a consensus on whether he's telling the truth or not. That's a politician's job, or in this case an economic head - placate the people/markets. It's exactly what happened: treasuries and gold are steady, equities aren't entirely spiraling out of control and the dollar is relatively steady as well - mostly because it wasn't thrown under the bus.

If you look in the right places, you'll see that the story is quite different. A duck might look calm while on the surface of the water (Bernanke speaking), but underneath his legs are kicking like mad to move him around (extreme volumes, open interest and statistical concentrations). The same is going on behind the scenes. Again, I'll defer to Eric De Groot in examining spread trade statistical concentration.

The more spread trades put on, the less investors' fight-or-flight mechanism is certain of which way to go. That means that there will be fewer on-board when the train leaves the station, at least when it comes to position size. Most have either lightened up their long positions, closed out entirely, gone short or taken hedging/spread positions. Where was all the selling coming from during the 23rd and 24th? Was it just longs taking profits or was there a helping hand flooding the market with short positions? What happens when those shorts are covered or take profits?

All this week during the $200 gold decline, I can almost guarantee that commercial trading positions (bullion banks and other big players) have been accumulating on the buy side; frustratingly, we won't know for certain until next week's CoT report. The price will be pushed up and as the current shorts cut their losses, the covering will provide the additional selling for those commercial interests to buy into. As the price rises, existing longs alongside the commercials (like me!) will add to their positions while additional 'dry powder' funds will come in. Momentum buying will carry the price further until the retail suckers pile in (mostly from fear of missing the ride up) and cause another spike high well above $2000/oz.

With that happening so shortly after such a large run-up already, down comes the bullion bank hammer (assisted by margin increases and negative media) and flushes all the doubly-weakened spiders out. Calls of the bubble top will make the rounds yet again after a near-$1,000 drop occurs (~30% or so corrective declines are normal on the way up). This time, enough cumulative froth will have been built up that many will decide the insane volatility and $200 price swings aren't worth it, so there won't be as much resistance on the way down as there was this week (picture a clean left hook followed by a solid uppercut). An outside reversal to the downside will be painted for the remainder of 2011 and the price will rise on a gentle slope until the low-liquidity end-of-year games.

These annual games are shaping up no different from other years, just with a progressively earlier and stronger resistance to their efficacy. It's the market forces that make things happen, not the speeches given at Jackhole or from the White House. Those are reactionary, taking credit by responding to what they can no longer control or hide.

As long as you've still got some physical metal, trade paper all you want. I'm trading paper to get physical.


All of those factors matter. Right now, short-term trading is immensely dangerous. For example, I managed to squeak out 50 pips profit by shorting USD/CHF at 0.8120, but doing so regularly would be a fool's gambit. That type of short-term counter-cyclic trading only presents opportunity once in a while.

For momentum, I'm riding the 11-year gold bull which doesn't seem to be ready to take a major pause quite yet. You're right, it will take time and is the long-term play. Short-term there isn't often enough room for momentum to build, which is why hedge funds are shredding themselves apart as technical indicators keep getting falsely triggered.

Use the appropriate technical strategy for a market as long as you have a solid understand of each respective market's fundamentals; swim perpendicular to a rip-tide, not against it.

Good chart. Overshooting to the downward slope is a possibility, especially considering the similarities between today and the late 1970s. Market participants will obviously be looking first for horizontal support at about 2:1, then 1:1.

@ cypherdoc:

Looks like Roubini has been doing a few too many lines of coke off naked strippers.

Agreed!

Too late.

Another gold margin hike imminent? If it does come to pass, I fail to see anything at all legitimate about the move. The gold price has paused and to raise margins while the price is near a low point is absurd, unless you buy into the premise of there not being sufficient unencumbered physical metal at the warehouses.

That's my understanding as well. It is hard to tell whether they'll decouple within the next year, and they are your Bitcoins, so fair enough.

He'll try, along with those in the private sector trying to keep things from falling apart.

The most obvious way would be to change the rules: price controls. Efforts at capping various rates are along those lines (a la operation twist), though legislative means are sure to follow when they prove insufficient. Capping will keep interest rates down, but won't do much for operational funding. There are numerous other minor methods that can be used together in order to guide/incentivize/force demand to one degree or another. Whether they're used individually or in conjunction remains to be seen.

There's an outstanding article at Jesse's Cafe Americain today which goes into a good amount of detail regarding that very matter.

I think the Repo market tactic will provide the most direct means of getting the banks to start dumping their reserves into the markets instead of holding them. That would kick up dollar velocity and liquidity while also providing operating capital in the form of loans for government without resorting to the typical high-profile QE method. Several of the other methods in the article above would almost amount to strong-arming certain sectors of the economy into demanding dollars.

That's why I agree with you that dollar demand will rise, but it's value will be a much less definite issue. Bernanke is doing his best to bail out a rapidly sinking ship that keeps springing new leaks, so he's got some sympathy from me. On the other hand, he and his ilk dragged us all into this mess in the first place.

At the very least, how can you not die laughing from this?

I see. If you agree that gold's price is currently in uncharted territory, then there are methods to project where potentially significant price levels will arise. One of those is a Fib projection. Others involve trend lines or temporal estimates. Jim Sinclair uses a French curve to project parabolic rises over varying time periods, although I think he's had custom software designed to do that now. It's a simple fact that humans are good at pattern recognition and will come up with all kinds of ways to explain them and recognize more intricate ones.

Just because we can plot projections obviously doesn't mean they're going to be the defining factors. That lies with the basic supply and demand. Sure, the run-up to $1913 touched a Fib projection level, but it wasn't the projection itself that caused everyone to sell.

Why didn't the selling occur at the 161.8% or the 261.8% level? We don't have the position information that the banks, exchanges and various market makers do, so only they can figure out where a break will occur in a timely fashion. Since many of them have trading divisions, who's to say they aren't using that information to game the system, using projection levels as points to attempt a reversal?

Fibonacci retracements are significant and used all over, almost as much as plain ol' trend lines. The projections make just as much sense to use, and it worked very well this time around. There's probably some element of self-fulfillment at work, but how much is anybody's guess. It's kind of chicken & egg with certain discernible influences taking the lead periodically. I hope that answers your question at least a little bit.

Is there going to be a distinction between paper silver and physical silver, with SLV and futures or anything leveraged being paper?

Stockcharts is an excellent source.

Otherwise, GoldMoney also has an excellent silver chart.

A lot of other sources rely on Kitco's data feed.

Oh, nice image kjj - I doubt many would know what language that is.

Didn't Mish say this was impossible as well?

Good ol' Jim Sinclair with currency-induced, cost-push inflation. This might be a good time to review his formula.

Nice find, Hugo.

When the message was sent on August 8th, gold was around $1700. I had suggested not buying in size, but also not shorting. My intent was to convince you to keep your physical metal holdings, though I could've been more explicit on that. As it so happens, gold rose $200 from where you were getting ready to short. Do you feel lucky now? Are you willing to bet your wealth on luck, or a more measured approach?


The conversation has obviously gone more toward short-term trading than long-term investing, although both the fundamentals and technicals have been covered extensively from numerous angles.

I still stand by the advice of holding your physical come hell or high water. Trading has once again become as much an art as a science.

My overall rationale for offering the advice is this:

The most powerful banks, corporations and governments of this world have taken us all to ruin. As the system crumbles and they try to prop it up, there is a window of opportunity during which individuals can build up some protection and survive or even thrive. With all of the misinformation and placating being done to help the giants maintain the status quo, the vast majority of people will succumb.

I've been studying the precious metals and related history for years. I've also been putting that knowledge into practice, with a lot of experience to build from thanks to some truly great people in the sector. It's become fairly easy now to see through the methods used by the organizations listed above. Ironically, in trying to keep the masses calm and protected, greater suffering will ensue. Therefore, even though it might be a futile effort, I try to offer explanation for what's going on beyond the inconsistent gibberish that come from the media.

The key here is that the more people who survive intact financially, the less devastating the overall effects of a collapse will be. If too many are completely wiped out, there will be major violence and a breakdown of society to an unimaginable level.

If nothing else, just take away one thing - hold onto your physical metal. If you don't have any, get some. At least an ounce or two of gold while it's still readily available.

There are repeated head fakes being perpetrated, and this is yet another of them. As I said earlier, Bernanke's announcement to come at Jackson Hole will simply be a trigger for what's been building over the last few months, particularly in silver.

When statistical concentration is stretched to its limit, it must reverse. As Harvey Organ noted yesterday, during the two day fall in gold and silver, more than all of the world's entire yearly production was shorted. Very similar selling happened in 2008, but the drop then was far more than 10%. Where is all of the metal to back those positions coming from? It doesn't exist; this is a paper game and you can only throw so much money at a problem before it becomes ineffective.

Weakness will be feigned with a higher high, followed by another assault leading to a lower low. It will look like an outside reversal to the downside. This is a pattern that has repeated many times at all chart scales from 5-seconds to monthlies. After watching it play out so many times, I've lost count of how many times I've lost count.

Compare GLD with an apparent outside reversal to gold which held support on a closing basis:





GLD is a paper game. Physical metal is running the show.


Your point would apply if such physical shipments had to occur on a regular basis. They do not.

As I mentioned earlier, the problems arose during a fixed exchange which leverage grew around. Floating exchanges preclude the mass imbalances that were spawned from that.


Did patterns exist before trading?


Sure you do, it's just the timing that's virtually impossible to call right now.

Bonds are an institutional medium. Widespread demand will be for a general transactional medium, such as the Euro or USD or local currency (gold/silver are last resort), leaving the bond burdens to be supported by... ?


Gold is clawing its way back up as well. Do you want to start singing the 'one day does not make a trend' tune on that now? It would apply to the dollar just as readily. Be careful when you jump without looking. Temper the type-A; patience is the greatest virtue.


Indeed, they are. They certainly are not acquiring fiat currencies or buying bonds.

I don't recall having seen anything regarding this issue: if mining on pools using different blockchains (Bitcoin/Namecoin), would that have any impact when run under a single instance of cgminer? I assume it wouldn't, but want to make sure.

e.g.:

Thanks.

Yes, a small position which was mostly closed out yesterday and completely today for a tidy profit. This is trading based on experience; it isn't necessary to be long all the time in paper gold. I will be buying GLD puts above $2,100 and selling vertical put spreads below $1,700. Any physical metal is still not for sale, nor will it be anytime in the foreseeable future.

Gold at $1,913 was a 423.6% Fibonacci projection from the May 1st to 5th decline. The spot price drop from August 22nd to today's low of about $1,740 is almost precisely the 261.8% Fibonacci projection from the same fall in May. That's my short-term technical trading.

My stance has been, since the beginning of this thread, that gold would decline heavily. The point was that the decline would be temporary on the way up and that what the bears were clamoring for as the death-knell was just a warm-up.

Long-term, I still view gold as eventually being reintegrated into the global monetary system as a floating component. That will occur at a much higher fiat price for gold than we have now.

For a centralized clarification of these views, here is a link to a collection of analyses preceding Jackson Hole.

All this while waiting for Bitcoin to grow.

For a moment, I thought he was also, but a little further on he turns around and throws the dollar-positive cheer away. He continues with a clip of Greenspan stating that the US can always print money and then affirms that hyperinflation is virtually guaranteed.

Just three days ago, the headlines were blaring the record highs. Recently in this thread, economists were being mocked. Relying on spoon-fed media is a losing proposition.


All I can think of is Two-Face.

I agree with the analysis except the top being in for gold and silver. There has to be more violence to shake the current holders out or they'll simply continue to hold. That's what so many don't get with the precious metals - they aren't like stocks, bonds or commodities. Gold is the core of the financial system and the banks treat it as such.


The margin increases act like speed bumps to slow a rapid rise in price and protect the exchange. An increase forces additional cash to be supplied in order to maintain a position. Leveraged money in a losing position must supply funds out of pocket if the position has gone negative or depleted NAV to a point where available funds are insufficient to cover.

If the raise was done yesterday, as with Shanghai and the previous CME hike, I could see the validity. This is neither protecting the exchange, nor slowing a rise. It certainly did cause additional volatility to the downside, though. All it did beside that is squeeze leveraged money out of positions.


Why post a link with the title of "#046 – It’s Official: US Dollar Hyperinflation Has Basically Been Confirmed" that completely refutes your position?

If you're going to offer a piece of information, please make sure it's timely. The Jim Rogers interview was from a month ago, when the dollar index was below 74. It spiked up above 75 after that was recorded. It's now very heavy again.

The GLD Puke Indicator was triggered again today. The last time there were two consecutive daily triggers was in September 2008. Gold was then around $750 and shot up to over $900/oz before being slammed again only a month later.

A similar magnitude increase would put gold at about $2100 from $1750. That was when the US still had clout. I'm not so sure $2100 will be the ceiling this time, assuming the GPI being triggered holds valid.

Current circumstances are stretched to a breaking point. Jackhole is not what determines the future; it is simply a trigger that opens the floodgates, releasing what's already been built up.

Life would be so much easier if it ran on Bitcoin.


Excellent point. They have access to more information, usually by decree. Of course, they're also buying us time, so they're effectively on our side even if there's opposition because of other aspects.