Gold: I smell a trap

[MatthewLM]

I'm not talking about the buying of gold from central banks, I'm talking about the deliberate devaluation of fiat.

Central banks possibly now see they need gold for when the fiat ponzi schemes collapse.

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[miscreanity]

OMG, facepalm #2 (twice in one day!)

once again, an investment thesis depending on the whims of central bankers whom you should trust the least.

When you're done breaking your nose, take note: CME raises margin requiremets 27%.

Of course, they waited until gold was declining just as with silver. However, the act has been much less effective than it was in silver three months ago. Leveraged investors are going to be knocked out of the game entirely.

This is systematic control of an asset. If that can't be seen, there's no amount of hard data that will convince such an individual. Statistical concentration had developed prior to the Frankendodd act being implemented on July 15th and was followed by an almost immediate ramp up in the price of gold. Now, a further removal of margin players from the pool while unleveraged big money is statistically concentrated on the buy side. As MatthewLM pointed out, silver is in backwardation again.

The activity is subtle because the price action is so glaring. Looking at factors outside of the price action (and beyond even the volume) will take you down the rabbit hole. This is a shake-out to ensure the run on major banks that have obligations does not yet occur. They are holding the system together. Once that control finally breaks, gold will be impossible to obtain at any fiat-denominated price. Gold will be traded only for real goods; other assets.

i remember so well from 2002-2009 guys like Eric Sprott and James Turk getting up to a podium and saying "why are central banks selling gold?  oh well, we'll be happy to take gold off their hands.  haha!!!".  And the price kept rising.

From 2002-2009 they were right. They're still right.

so, i submit to you, now when they are buying, the price can very well keep dropping.

Let's get that logic straight:

• Biggest buyers sell and asset rises in spite of selling.
• Biggest buyers buy and asset is supposed to drop?

In the first scenario, demand overwhelmed central bank selling. In the second scenario, central banks are now part of that demand. In what way does that portend a drop in prices?

You're going to get blasted and rush to reverse your positions at the worst possible time. Impatience will drain your trading account. If you insist on trading, take what profits you've made and put on a fully hedged position from here so it won't matter which direction the price goes.

[MatthewLM]

If central banks begin selling gold in massive amounts, that would be quite a scare but I on't think that will happen.

[AyeYo]

I'm not talking about the buying of gold from central banks, I'm talking about the deliberate devaluation of fiat.

Central banks possibly now see they need gold for when the fiat ponzi schemes collapse.

You really need to give them more credit than that.  I know every economic e-expert thinks he could run every one of this central banks better, all by himself, but that's simply not the case.  This is chess, not tic-tac-toe; you don't have it all figured out and they are always one step (more like twenty) ahead of you.

[miscreanity]

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.

You really need to give them more credit than that.  I know every economic e-expert thinks he could run every one of this central banks better, all by himself, but that's simply not the case.  This is chess, not tic-tac-toe; you don't have it all figured out and they are always one step (more like twenty) ahead of you.

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.

[cypherdoc]

“We exited one third of our gold position yesterday, and in retrospect we should have exited 150 percent of our long position,” Dennis Gartman, an economist and the editor of the Gartman Letter, wrote today in his daily report."

“This is classic,” Gartman wrote. “It reminded us of the times past when the valuation of Japan’s Imperial Palace surpassed the valuation of all of California.”

http://www.bloomberg.com/news/2011-08-24/gold-extends-drop-heads-for-biggest-fall-since-2008-as-haven-demand-wanes.html

[cypherdoc]

http://www.youtube.com/watch?v=YgHu02zN0p8

Harry Dent

[CurbsideProphet]

When you're done breaking your nose, take note: CME raises margin requiremets 27%.

Of course, they waited until gold was declining just as with silver. However, the act has been much less effective than it was in silver three months ago. Leveraged investors are going to be knocked out of the game entirely.

I don't think the CME waited for gold to decline, like the article says they raised margin requirements a few weeks ago.  It's all due to heavy volume and volatile price swings.  It's more likely that traders started to sell in anticipation of the margin hike.  The Shanghai GE raised margins on Tuesday so it's not like this could not have been anticipated.

[cypherdoc]

http://financialsurvivalradio.com/

Jim Rogers bullish on the USD.

[MatthewLM]

You mean bearish.

Commodity prices are largely supported through leveraged speculation so it is obvious that the few commodities exchanges can manipulate the prices easily. Prices can be shoved downwards harshly if they get the timing right for margin rises.

[cypherdoc]

You mean bearish.

i said what i meant.  Rogers is BULLISH on the USD.

[MatthewLM]

The website is wrong then? What has this to do with anything?

[cypherdoc]

The website is wrong then? What has this to do with anything?

did you listen to the podcast?

[foggyb]

“This is classic,” Gartman wrote. “It reminded us of the times past when the valuation of Japan’s Imperial Palace surpassed the valuation of all of California.”

Context?

“We’ll hold a core position in gold and we remain long term bullish of gold.”

[miscreanity]

http://www.bloomberg.com/news/2011-08-24/gold-extends-drop-heads-for-biggest-fall-since-2008-as-haven-demand-wanes.html

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.

Harry Dent

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.

I don't think the CME waited for gold to decline, like the article says they raised margin requirements a few weeks ago.  It's all due to heavy volume and volatile price swings.  It's more likely that traders started to sell in anticipation of the margin hike.  The Shanghai GE raised margins on Tuesday so it's not like this could not have been anticipated.

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.

Jim Rogers bullish on the USD.

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.

[MatthewLM]

I didn't listen to the podcast it is too long. I started listening to it. The host is clearly bearish for the USD.

[miscreanity]

I didn't listen to the podcast it is too long. I started listening to it. The host is clearly bearish for the USD.

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.

[cypherdoc]

The GLD short puts that I bought at the beginning of the week are now closed and additional Jan '12 long calls have been opened. Bullish vertical put spreads due to expire in September are maintaining neutral Theta. Now, I let them sit and patiently wait because the daily gyrations are largely irrelevant.

after all that bullish talk throughout this thread, you now reveal that you bought puts.  are we now supposed to think you're smart?  at least everyone here knows my positions up front and i've done what i said i'd do.

[miscreanity]

after all that bullish talk throughout this thread, you now reveal that you bought puts.

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.

[netrin]

Fascinating to read this entire thread on returning to the Greenlandic wilderness while gold drops from $1900. Thanks. It is worth watching Austin Goolsbee's face after Greenspan suggests the US prints money. Cypherdoc, you asked several pages back how to reduce the image width/size; Hit quote and see how I've done it.