Gold: I smell a trap

[cypherdoc]

i've been telling ppl for quite some time now that i've been selling my bullion for btc for several months. its true, i've liquidated lots of the stuff since April that i first bought in 2005-2007.  i've been an ardent suporter of btc for the longest time.  i've also been warning ppl about divergences in the PM market i've been exploiting via shorts such as the divergence in silver, miners, and the gold price.  i understand what gold is all about and i love the stuff but when btc came along my allegiance switched.

the basis of my thinking has been and always will be that its all about the USD.  the Fed controls the issuance of the USD and its its only franchise.  i don't think they want to relinquish that control of the worlds reserve currency.  the USD is also how most billionaires wealth is stored in this country.  most of the debt in the world is denominated in USD (60%).  there was a great article someone posted about how the bankers have been complaining to Ben that they're being hurt by the weak USD.  Duh.

let me list the warnings i see:

1. silver has broken down badly from $50. it continues to this am.
2. silver stocks are in an obvious decline and got hit yesterday hard.
3. gold stocks are no better.  they usually lead.
4. we're at 11 yrs of the bull.  some ppl say theres an extended 9 yr cycle going on.
5. asset classes don't all break down simultaneously.  it took gold and miners several months to break down after the Dow in 2007 so i don't expect them to have followed the Dow down since May 2011.
6. gold is trying to or has, depending on how you look at it, entered a parabola.  do you really want to buy a parabola now if we're entering a major deflationary phase when cash is King?
7. its debatable how widespread the evangelism about gold has spread but everywhere i turn, on street corner stores, tv ads, and my secretary everyone's buying gold.

ok, now for the tinfoil hat stuff.  stop right here if you want to stick with the technical trading stuff above.  over many years of trading i've learned to think like a criminal and this is what i see happening.

1. GS and JPM have huge short positions in the metals.  do you think they will let them double, triple from here even if they represent hedges?  i think thats the last thing they want to see.
2. gold has acted very strange the last coupla weeks to me ramping in the face of a severe selloff in the Dow and the clear threat of deflation.
3. altho GS & JPM probably never saw the bull in PM's they aren't stupid and know how to handle them.  so how do you handle a losing situation?  Buy into it. Profit as well.  create a huge parabola. Build up an even greater short position. Get Ben to squelch liquidity. Then sell it off at the top when everyone's in and short the crap out of it. this is what happened in silver.
4. why is btc rallying all of a sudden?  could it be that its exerting itself in the economic scene based on the virtues of what we all know?  it also could be that Wall St is rotating out of stocks and soon pm's into btc.
5. when would the trap go off?  i think todays FOMC meeting with lack of any further QE would be the perfect timing for a gold selloff.

so guys, just give me a few hours to see if my theory proves correct.  if it doesn't work by all means buy the parabola.  personally i'm going to give it a few days from today to let it work but you can all call me a tinfoiler if gold doesn't start going down after the announcement.

Disclosure:  i do have a huge short position in bullion in place.

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[cypherdoc]

as long as the USD stays in its consolidation pattern and doesn't breakdown i don't see gold going much higher.  if the USD starts to ramp like i think it will, gold should go down.

[foggyb]

Jeff Nielson has an interesting slant:

http://blog.ml-implode.com/2011/08/why-2011-is-not-2008/

[walidzohair]

i've been telling ppl for quite some time now that i've been selling my bullion for btc for several months now.  and its true, i've liquidated hundreds of thousands of the stuff since April that i first bought in 2005-2007.  i'm an ardent suporter of btc for the longest time.  i've also been warning ppl about divergences in the PM market i've been exploiting via shorts such as the divergence in silver, miners, and the gold price.  i understand what gold is all about and i love the stuff but when btc came along my allegiance switched.

the basis of my thinking has been and always will be that its all about the USD.  the Fed controls the issuance of the USD and its its only franchise.  i don't think they want to relinquish that control of the worlds reserve currency.  the USD is also how most billionaires wealth is stored in this country.  most of the debt in the world is denominated in USD (60%).  there was a great article someone posted about how the bankers have been complaining to Ben that they're being hurt by the weak USD.  Duh.

let me list the warnings i see:

1. silver has broken down badly from $50. it continues to this am.
2. silver stocks are in an obvious decline and got hit yesterday hard.
3. gold stocks are no better.  they usually lead.
4. we're at 11 yrs of the bull.  some ppl say theres an extended 9 yr cycle going on.
5. asset classes don't all break down simultaneously.  it took gold and miners several months to break down after the Dow in 2007 so i don't expect them to have followed the Dow down since May 2011.
6. gold is trying to or has, depending on how you look at it, entered a parabola.  do you really want to buy a parabola now if we're entering a major deflationary phase when cash is King?
7. its debatable how widespread the evangelism about gold has spread but everywhere i turn, on street corner stores, tv ads, and my secretary everyone's buying gold.

ok, now for the tinfoil hat stuff.  stop right here if you want to stick with the technical trading stuff above.  over many years of trading i've learned to think like a criminal and this is what i see happening.

1. GS and JPM have huge short positions in the metals.  do you think they will let them double, triple from here even if they represent hedges?  i think thats the last thing they want to see.
2. gold has acted very strange the last coupla weeks to me ramping in the face of a severe selloff in the Dow and the clear threat of deflation.
3. altho GS & JPM probably never saw the bull in PM's they aren't stupid and know how to handle them.  so how do you handle a losing situation?  Buy into it. Profit as well.  create a huge parabola. Build up an even greater short position. Get Ben to squelch liquidity. Then sell it off at the top when everyone's in and short the crap out of it. this is what happened in silver.
4. why is btc rallying all of a sudden?  could it be that its exerting itself in the economic scene based on the virtues of what we all know?  it also could be that Wall St is rotating out of stocks and soon pm's into btc.
5. when would the trap go off?  i think todays FOMC meeting with lack of any further QE would be the perfect timing for a gold selloff.

so guys, just give me a few hours to see if my theory proves correct.  if it doesn't work by all means buy the parabola.  personally i'm going to give it a few days from today to let it work but you can all call me a tinfoiler if gold doesn't start going down after the announcement.

Disclosure:  i do have a huge short position in bullion in place.

AAAAAA+ lot of shortcuts ... and I do not know why you are talking about grills prices while the silver i related to fish market ? 

[cypherdoc]

Jeff Nielson has an interesting slant:

http://blog.ml-implode.com/2011/08/why-2011-is-not-2008/

i guess i'm one of the Chicken Little Deflationists.

just b/c central banks have been buying gold doesn't mean they're right.  in fact they were sellers during the entire 2000's beginning with Gordon Brown and the BofE in 2000.

[Jack of Diamonds]

Your analysis is good but I disagree $1700 is the peak.
There is every reason to believe AU/oz will break $2000 within 12 months. Every fiat currency is in shambles right now except the Swiss franc, Chinese yuan and yens. Stock markets are crashing like the Titanic.

I've been holding since prices were at $1100 per ounce, I'd still buy in at $1.7k if I had significant extra fiat right now
(which I don't, I'm terrified of holding $ or € long term right now)

[foggyb]

Both silver (down to 37.50) and gold fell on their faces the last few hours. So we will see....

[cypherdoc]

Your analysis is good but I disagree $1700 is the peak.
There is every reason to believe AU/oz will break $2000 within 12 months. Every fiat currency is in shambles right now except the Swiss franc, Chinese yuan and yens. Stock markets are crashing like the Titanic.

I've been holding since prices were at $1100 per ounce, I'd still buy in at $1.7k if I had significant extra fiat right now
(which I don't, I'm terrified of holding $ or € long term right now)

i freely admit i might be wrong and only a fool tries to pick a top.  i guess i'm a fool and like to pick corners.  only b/c those are the places to make maximum profit.  i got the Dow turn perfectly and got most of this selloff and am waiting to reshort after a several day bounce which probably begins today.

the straight down drop in the indices says to me the PPT has stepped back b/c they have an objective; get the USD back up and smash PM's.  tinfoil i know.

[cypherdoc]

my ZSL is up 5.91% 

[Inedible]

i freely admit i might be wrong and only a fool tries to pick a top.  i guess i'm a fool and like to pick corners.

Sorry for the ignorance but what's a 'corner' (financially speaking)?

Google was no help except to explain the 'cornering' of a market which I don't imagine is what you're referring to.

[cypherdoc]

i freely admit i might be wrong and only a fool tries to pick a top.  i guess i'm a fool and like to pick corners.

Sorry for the ignorance but what's a 'corner' (financially speaking)?

Google was no help except to explain the 'cornering' of a market which I don't imagine is what you're referring to.

when you look at a daily chart typically, its when the primary trend changes from up to down.

[cypherdoc]

another point. 

there is such a thing as sector rotation.  perhaps the sellers/shorts now are rotating into the PM's with their profits made from selling/shorting the major indices.

[cypherdoc]

the volume on the gold futures /YG is already higher today than anytime since June 2010.  we've also formed a candle wick today.  watch out.

edit:  inverted hammer

[kjj]

I still suspect that a day will come when all the holders of paper gold and paper silver will wake up and panic.  The dwindling COMEX inventories seem to confirm that it is inevitable.  On that day, all hell will break loose.

But I don't know if that day will come soon, or even really ever.  People that underestimate the market's ability to outlast them get burned, even when they are right.

[cypherdoc]

gold has been trying to convince us that it goes up whether the stock mkt goes up OR down.  i don't believe it.

if my theory about the banks cranking up SLV and GLD to create a bubble with leverage, a major reversal will cause a selling panic of epic proportions.  i can't tell u how difficult its been liquidating my bullion at the local coin dealer.  they rape you when they can.

[cypherdoc]

Fidelity has no more shares of SLV to short.

[miscreanity]

It's good that you can understand the criminals, but be very cautious with such a US-centric perspective. The rest of the world is becoming wealthier and does not share the same views as the developed nations. That has far more clout than any bank. The same goes for governments.

Unlimited paper can be supplied, but as futures markets become full cash and no margin, the price fixing ability disintegrates. This will result in a divergence between paper markets and physical. You will be able to play in the illusion, but obtaining physical at the paper prices will be completely impossible. Remember that the paper is supposed to be a claim on physical; without that backing, it is no longer associated with value and is therefore worthless.

Make sure you understand the concept of bad money driving out good; valuable assets will be hoarded (gold) while depreciating assets will be a hot potato that everyone tries to get rid of as quickly as possible (fiat). As velocity of the depreciating asset increases, commerce becomes more difficult as the valuation rises in volatility - hyper/inflation even as other assets depreciate. If nobody relinquishes their store of valuable assets, the price for them is driven even higher.

It's foolish to be solely in the deflation or inflation camp. Determining which will occur in a particular asset is critical. For instance: I think housing will deflate while food costs inflate.

Selling your bullion now means you might not be able to acquire the physical again; certainly not at the price range from several years ago. Thinking $1780 is a parabolic top catches you in a myopic magnitude trap - the capital flows have much more wealth to transfer between asset classes, so a few hundred dollar move in gold is small beans.

If London devolves to chaos, I would take the most cost-effective wealth conveyance as I leave - gold and silver... and a flash drive with my Bitcoin wallet. I think it's unwise to discard one for the other.

Again, just a warning.

[cypherdoc]

if our fiat money system was based primarily on the printing of money as you say you would be right.  but in fact the amount of money printed since 2008 has only been on the order of 1.6T give or take and mostly is retained on the balance of the Feds balance sheet as excess reserves.

as most of us here realize, USD's mostly exist as debt or virtual money so to speak.  this is a key differnence btwn what happened in Weimar Germany and Zimbabwe.  both had no or insignificant debt markets with which to issue debt backed money.  this is why when they printed money they went into hyperinflation b/c once printed they can't be removed from circulation.  

contrast this with what we've done with the USD.  the amt of leverage in the world dwarfs the actual currency by orders of magnitude.  private debt is around 55T.  the derivatives mkt is a quadrillion.  how many trillion do we owe in entitlements being paid with debt.  whats happening now is widespread defaults on this same debt which is CONTRACTING the money supply (amt of debt) hence deflation.  there won't be enough leverage to sustain prices at these levels even gold and silver.  its all about the USD as you said.  but instead of managing it down, i think they are trying to manage it back up.

UST's is betraying your arguments as well having rallied since the downgrade.  the setup is here.

[The_JMiner]

let me list the warnings i see:

1. silver has broken down badly from $50. it continues to this am.
2. silver stocks are in an obvious decline and got hit yesterday hard.

Silver is 50% investment (or more now) and 50% used by industry. There is less being mined than the year before. It is going down because of the demand from industry not from the demand of investments. Even if we enter another recession silver may go down to 25$ the lowest before taking off again.

3. gold stocks are no better.  they usually lead.
4. we're at 11 yrs of the bull.  some ppl say theres an extended 9 yr cycle going on.

During the crash of 2008 gold dropped from 1000$ to 800$ and has not looked back since. So with current prices and if we do have another recession then I would suspect another 20% drop being a great buying opportunity. (If you have the money for gold) Like you said in your other thread the Feds want gold to go down but they have the economy to deal with first and the economy (aka Wall Street) wants them to print more money which means gold will continue its climb.

5. asset classes don't all break down simultaneously.  it took gold and miners several months to break down after the Dow in 2007 so i don't expect them to have followed the Dow down since May 2011.
6. gold is trying to or has, depending on how you look at it, entered a parabola.  do you really want to buy a parabola now if we're entering a major deflationary phase when cash is King?
7. its debatable how widespread the evangelism about gold has spread but everywhere i turn, on street corner stores, tv ads, and my secretary everyone's buying gold.

I am not bullish on gold short term I suspect as I mentioned a 20% correction. I am very bullish on silver though.

ok, now for the tinfoil hat stuff.  stop right here if you want to stick with the technical trading stuff above.  over many years of trading i've learned to think like a criminal and this is what i see happening.

1. GS and JPM have huge short positions in the metals.  do you think they will let them double, triple from here even if they represent hedges?  i think thats the last thing they want to see.
2. gold has acted very strange the last coupla weeks to me ramping in the face of a severe selloff in the Dow and the clear threat of deflation.

Deflation to who? The economy has a whole? Remember these companies are sitting on MOUNTAINS of money. So many companies do not want to spend, this is why this illusionary deflation is happen when infact it will be inflation that smacks us in the face when all these companies open the faucet. Unlike the Fed companies do not close their faucet to control inflation. We got a taste of it already imo with the insane prices for these new ".com" companies (LinkedIn, Groupon etc)

[cypherdoc]

another argument gold bulls like to make is this supposed push for a one world currency in which gold will play a central role and the USD is extinguished.

i would submit to you whats happening to the Euro experiment is evidence that this concept cannot work.  its impossible to have diverse separate sovereign entities with a unified currency.  the laggards like Greece just doom the project.

in this light how's a one world currency going to work?