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Author Topic: Gold: I smell a trap  (Read 78533 times)
ghyze
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September 14, 2011, 01:24:23 PM
 #581

Sorry if this has been said before, I didn't read the entire thread.

@cypherdoc:
I think you're wrong, gold still is a good buy. I'm still buying metals. Here's just a few reasons why:
- Just over a month ago, GS said the price of gold is going to $2500 by the end of this year.

since when have they been trustworthy?  they don't even make good calls anymore.
It's complicated, but I'll try to explain. GS has a major short position in silver. Since silver moves with gold, GS does NOT want a higher gold price. They are predicting a $2500 gold price to prevent more damage to their short position. (when they say $2500 by the end of the year, they're trying to set a psychological barrier) Most bulls are predicting $5000, $8000 or higher, based on the price in the late '70s/early '80s and inflation rates.

Quote
- Everywhere I look I see small companies popping up that buy your old jewelry. That means these people think gold is still an extremely good buy.

its amazing how diff ppl see the same things but interpret them differently.
Good to hear you see the same thing Wink

Quote
- The FED and the ECB are printing lots of money, meaning the euro and the dollar are going down in value.
The book "The Creature from Jekyll Island" explains a lot about the global money system. It's an excellent read, I suggest you pick up a copy...

i've read it twice.  and it IS a fantastic book.  i just don't agree about the one world currency thing though.  nor the gold part at this pt in history.

To quote you: its amazing how diff ppl see the same things but interpret them differently Wink
I tend to agree with Bill Stills when it comes to currency: it doesn't have to be gold. It can be anything, even BTC. However, since gold has been money for a long time, in different empires, I'm going for gold right now.
As long as big central banks are printing money and the public is NOT buying gold/silver en masse, I'm buying.
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cypherdoc
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September 14, 2011, 01:41:45 PM
 #582

Sorry if this has been said before, I didn't read the entire thread.

@cypherdoc:
I think you're wrong, gold still is a good buy. I'm still buying metals. Here's just a few reasons why:
- Just over a month ago, GS said the price of gold is going to $2500 by the end of this year.

since when have they been trustworthy?  they don't even make good calls anymore.
It's complicated, but I'll try to explain. GS has a major short position in silver. Since silver moves with gold, GS does NOT want a higher gold price. They are predicting a $2500 gold price to prevent more damage to their short position. (when they say $2500 by the end of the year, they're trying to set a psychological barrier) Most bulls are predicting $5000, $8000 or higher, based on the price in the late '70s/early '80s and inflation rates.

Quote
- Everywhere I look I see small companies popping up that buy your old jewelry. That means these people think gold is still an extremely good buy.

its amazing how diff ppl see the same things but interpret them differently.
Good to hear you see the same thing Wink

Quote
- The FED and the ECB are printing lots of money, meaning the euro and the dollar are going down in value.
The book "The Creature from Jekyll Island" explains a lot about the global money system. It's an excellent read, I suggest you pick up a copy...

i've read it twice.  and it IS a fantastic book.  i just don't agree about the one world currency thing though.  nor the gold part at this pt in history.

To quote you: its amazing how diff ppl see the same things but interpret them differently Wink
I tend to agree with Bill Stills when it comes to currency: it doesn't have to be gold. It can be anything, even BTC. However, since gold has been money for a long time, in different empires, I'm going for gold right now.
As long as big central banks are printing money and the public is NOT buying gold/silver en masse, I'm buying.

you'd best read this entire thread.

my point with this thread is to make sure everyone here has the tools and in depth understanding of how the deflation works so that IF i'm right and gold starts heading down you won't be confused, disoriented and doing stupid things like catching a fallen knife.  i DID this in 2008 with gold stocks and it was brutal.  

but that was only the opening shot of this huge deflationary deleveraging wave we're about to commence.  you can't afford to make mistakes.
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September 14, 2011, 01:45:21 PM
 #583

the stock mkt has just opened.  i'm looking at China and the EEM (emerging mkt ETF) getting slaughtered yet again.  THEY are getting hurt more than us.  i don't think gold support comes from them.
ghyze
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September 14, 2011, 01:55:24 PM
 #584

<skip>

you'd best read this entire thread.

my point with this thread is to make sure everyone here has the tools and in depth understanding of how the deflation works so that IF i'm right and gold starts heading down you won't be confused, disoriented and doing stupid things like catching a fallen knife.  i DID this in 2008 with gold stocks and it was brutal.  

but that was only the opening shot of this huge deflationary deleveraging wave we're about to commence.  you can't afford to make mistakes.

Thanks for the warning. I'm sorry to hear you've made a bad call in 2008. However, you were buying paper gold, I'm buying actual gold that I can hold in my hand. If gold goes down against the dollar, everything else is going down as well. And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.

If you're right, and gold starts going down, I'll sell at my break even point. But that's a long way down...

But in the end we all have to think for ourselves.
cypherdoc
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September 14, 2011, 01:58:27 PM
 #585

<skip>

you'd best read this entire thread.

my point with this thread is to make sure everyone here has the tools and in depth understanding of how the deflation works so that IF i'm right and gold starts heading down you won't be confused, disoriented and doing stupid things like catching a fallen knife.  i DID this in 2008 with gold stocks and it was brutal.  

but that was only the opening shot of this huge deflationary deleveraging wave we're about to commence.  you can't afford to make mistakes.

Thanks for the warning. I'm sorry to hear you've made a bad call in 2008. However, you were buying paper gold, I'm buying actual gold that I can hold in my hand. If gold goes down against the dollar, everything else is going down as well. And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.

If you're right, and gold starts going down, I'll sell at my break even point. But that's a long way down...

But in the end we all have to think for ourselves.

please read the thread.  i've already told everyone that my main position was gold/silver bullion that i started buying in 2005.  i made quadruple/quintuple profits on them before i sold most of it.  i also called the top of the stock mkt decline in 10/07 so i did extremely well on that so don't feel sorry for me.
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September 14, 2011, 02:14:53 PM
 #586

And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.

i'm really glad you brought this up.  i've been meaning to talk about this.

miscreanity calls gold an asset as do i.  i believe that gold as an asset can inflate just like any other asset via USD inflation.  the derivatives mkt is no different.  as is the gold derivatives mkt.  gold pundits argue that if we get a gold derivatives implosion there will be a scramble for physical gold which will drive it to the moon.  but you have to ask yourselves:  what were those derivative positions funded with?  Answer:  USD's.  so if anything, a gold derivatives implosion should cause a scramble for USD's (or a shrinking of the total virtual USD's depending on how you like to think about this) causing a further skyrocketing of the USD.  if THAT happens, what becomes of the physical gold price?
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September 14, 2011, 02:18:17 PM
 #587

how much further does Goldcorp (GG), a bellwether gold stock, have to fall beneath its breakout line for it to be considered a "failed breakout"?
ghyze
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September 14, 2011, 02:51:07 PM
 #588

And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.

i'm really glad you brought this up.  i've been meaning to talk about this.

miscreanity calls gold an asset as do i.  i believe that gold as an asset can inflate just like any other asset via USD inflation.  the derivatives mkt is no different.  as is the gold derivatives mkt.  gold pundits argue that if we get a gold derivatives implosion there will be a scramble for physical gold which will drive it to the moon.  but you have to ask yourselves:  what were those derivative positions funded with?  Answer:  USD's.  so if anything, a gold derivatives implosion should cause a scramble for USD's (or a shrinking of the virtual USD's depending on how you like to think about this) causing a further skyrocketing of the USD.  if THAT happens, what becomes of the physical gold price?

Gold can only inflate if the supply times the velocity (speed at which it changes hands) increases faster than the value of goods in the economy. I don't see that happening, but that's just my opinion.

If there is a massive shrinking of the USD supply, the USD price of gold will go down to nearly nothing. But that's irrelevant. Everything will go down in USD price, so I will be able to buy just as much for my gold. However, there is another more interesting aspect to this scenario. If there are no dollars, there's no trade in dollars. People will trade is a different currency, or barter.

USD price for gold is pretty much irrelevant, if you use gold as a store of value. The USD isn't exactly stable either. Besides that, I'm talking about gold that you can actually touch. Not paper gold.
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September 14, 2011, 03:16:06 PM
 #589

And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.

i'm really glad you brought this up.  i've been meaning to talk about this.

miscreanity calls gold an asset as do i.  i believe that gold as an asset can inflate just like any other asset via USD inflation.  the derivatives mkt is no different.  as is the gold derivatives mkt.  gold pundits argue that if we get a gold derivatives implosion there will be a scramble for physical gold which will drive it to the moon.  but you have to ask yourselves:  what were those derivative positions funded with?  Answer:  USD's.  so if anything, a gold derivatives implosion should cause a scramble for USD's (or a shrinking of the total virtual USD's depending on how you like to think about this) causing a further skyrocketing of the USD.  if THAT happens, what becomes of the physical gold price?

Decoupling.

Back in 2008, hedge funds and investment banks were selling whatever they could get their hands on so that they could meet redemption requests.  Of course, these redemption requests were for dollars, so the cost of the dollar went up and the price of everything else went down, which was strange to people that thought this was the collapse of the dollar system that they had been waiting for.

But, there were some oddities.  Funds sold a lot of their holdings of paper metals, like GLD.  Now GLD and gold are linked through a complicated relationship (which is the entire point of GLD), so as GLD was dumped, the price of gold went down with it.  Except that if you wanted to get your hands on actual physical shiny yellow metal, you had to pay a ridiculous premium for it.  At several times, the premium was so high that it actually cost more to buy physical gold than it had cost before the spot price tanked.

At the time, I was watching silver much more closely than I was watching gold.  One day when spot silver was under $10/oz, I remember the local coin store wouldn't part with a round for less than $20, and if you wanted Eagles, they were at least $22 each.  I called around, and other dealers were demanding pretty similar prices.  I don't think the gold premium was anywhere near 100%, but it was still pretty steep, maybe 30%-50%.

The price of actual physical metals had very much decoupled from their paper prices.  Over time, they converged again, mostly by waiting for the paper prices to rise up to meet the physical prices.  The funny part is that I've never ever seen historic data on premiums, so it is easy to forget that it happens, or even to never know about it in the first place.

So, the next time there is a panic (now?) and funds need to dump stuff to buy dollars, the paper price of physical metals will certainly drop, like you say.  But that doesn't mean that those prices will have any bearing on the actual transaction prices in the real world.

I'm of the opinion that the situation back in 2008-2009 was very unusual.  I wouldn't be willing to bet that the next event of this sort will actually cause the markets to decouple to the same extent, but there are quite a few gold and silver pundits that would be.

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cypherdoc
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September 14, 2011, 04:36:54 PM
 #590


If there is a massive shrinking of the USD supply, the USD price of gold will go down to nearly nothing. But that's irrelevant. Everything will go down in USD price, so I will be able to buy just as much for my gold. However, there is another more interesting aspect to this scenario. If there are no dollars, there's no trade in dollars. People will trade is a different currency, or barter.

USD price for gold is pretty much irrelevant, if you use gold as a store of value. The USD isn't exactly stable either. Besides that, I'm talking about gold that you can actually touch. Not paper gold.

thats pretty much conventional wisdom and history is on your side!  i, however, like to think out of the box you may have noticed and i think Bitcoin is a game changer.  in fact, the only reason i sold my gold/silver recently is BECAUSE of Bitcoin.  i sure hope i'm not wrong thats for sure but i think its a paradigm change and will make gold obsolete.  i guess that's why we're all here isn't it?

edit:  thats a little dramatic.  its not the ONLY reason i sold gold.  its also b/c i truly do think we've topped out for all the reasons i've said in the thread.
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September 14, 2011, 06:13:17 PM
 #591

most of you know i went to Alaska to fish last month. 

i met a family group who are Austrian believers like many of us here.  the father in the group pulled out a torn, weathered German Mark of about 20M marks and gave it to me as a gift.  i about fell out of my chair thanking him for such a memento.  i kept asking telling him i can't believe this isn't worth alot given the significance of that era.  he kept saying don't worry about it, i got plenty more.  so being selfish i asked him if he'd send me a better conditioned one.

sure enough he mails me 5 different mint condition bills from around 1923, 3 Weimar, 1 Russian, and 1 something else.  one was like a 50M Mark.  anyways point being these things are still worthless all these years later.  why?

its because they were "printed" into existence and were impossible to remove from circulation once done.  this is why the 2 hyperinflations everyone always points to occurred; Zimbabwe and Weimar Germany.  they did not have mature debt markets like we do in the US.  this is why i don't think we see HT here.  these debt dollars (virtual dollars) will just vaporize on default thus shrinking the money supply to be gone forever.
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September 14, 2011, 06:22:04 PM
 #592

What are central banks thinking right now?

There is a new document available online, a speech by Adam Posen of Bank of England:
http://www.bankofengland.co.uk/publications/speeches/2011/speech517.pdf

Few interesting points which confirm inflationists views:

Quote
I hope that you will agree with my arguments that:
  • More monetary ease will lead to greater restructuring of the economy in the right and necessary
    direction;
  • More of the same Quantitative Easing [QE] program that the Bank already undertook would be
    where to start, especially if done on sufficient scale;
  • More cooperation between the Bank and HM Government to promote investment and credit to small
    and medium business should be the beneficial next step.
Monetary policymakers must also free themselves from unfounded concerns and take these necessary
actions.  There are too many excuses for passivity being offered, none of which stand up to scrutiny or to the
data.  In essence, central banks can improve matters by doing more, even if we have to act alone.  In so
doing, we would make constructive actions by other policymakers in the fiscal and financial arenas outside of
our remit more – not less – likely, and those actions more likely to succeed when undertaken.   
...

More Good Old Fashioned QE is Needed, Much More

Another source of policy defeatism is widespread claims that our previous “unconventional” efforts to
stimulate the economy either were not terribly effective or are likely to be ineffective if extended today.  This
is another false belief.  It is as though the fact that the British economy (or the American, for that matter) is
not fully recovered after our previous rounds of QE is evidence that QE failed to work.  Even on the face of it,
that is a strange type of logic.  We know that infusions of QE to the economy have been closely associated
with large falls in interest rates out the yield curve of comparable size in the UK and the US.  We know that
the relative price of riskier assets has gone up, indicating greater demand for them, when QE has been
undertaken.  And we know that banks have received increased deposits and investors and households have
expressed increased confidence in the wake of each round of additional QE, in both the UK and the US.
In any understanding of how the economy works, this has a stimulative impact, just as a cut in Bank Rate does
through the very same channels.

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September 14, 2011, 06:23:32 PM
 #593

Could the 'something else' have been Hungarian (Magyarország, Magyar Köztársaság)?



Oh and Milliarde = US Billion, 9 zeros.

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September 14, 2011, 06:33:11 PM
 #594

Could the 'something else' have been Hungarian (Magyarország, Magyar Köztársaság)?



Oh and Milliarde = US Billion, 9 zeros.

netrin, i'll check when i get back to my other office.
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September 14, 2011, 08:34:58 PM
 #595


I'm more of a Goldschlager man, myself. Grin



since when have they been trustworthy?  they don't even make good calls anymore.

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

Whats with this obsesion of eating gold a lot of paperbugs have? You can not eat paper neither (well, you can but you get me) and they defend it as money. If you want to eat get food, money is not for eating, money is a mean of exchange. Why would you want to eat money?!?

If you lick it, you get a buzz. Smiley

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.

yes, absolutely.  in the sense of:  "perhaps you ought to consider quoting me as i am the only one i know that had predicted this manipulated central bank induced USD rally weeks ahead of it happening".  there is a huge distinction btwn what that lame article you referenced was saying and what i predicted.  just saying "i think it might rise now b/c its time" is way diff than saying "why or when" it might rise.  the fact that its CB intervention means everything and is precisely why it has ramped so viciously.

...

look.  i made this call on 8/9/11.  IF i happen to be right on this top but happen to be off by only a month and $100 i'd bet most ppl here on this thread would call me "A Legend" looking back at this years from now as opposed to someone just yelling "fire".  not that thats my motivation though.

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. Smiley

funny you should mention that.  this last weekend when i was debating this with hugolp, i came to the realization that my viewpoints are clearly US centric and based on the USD being the worlds reserve currency.

... you would then argue that means gold is still a great buy b/c the ROW demand will surely send gold skyrocketing.

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.

however.  if you'll recall my inverse pyramid example...

... emerging mkts are going to be hurt even more than us.  i could very well see that foreigners will be forced to sell their gold to eat or pay taxes.  THIS is what i think the CB's are gunning for and is the clearest example of USD hegemony.  a worldwide collapse in the gold markets.  obviously i'm betting they'll be successful via brutal liquidity drains and no more QE.  they need to save the system that has made them Masters of the Universe.

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 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.

this came as no surprise to me.  not when you predict that the USD rally will come from CB intervention as i have.  i have said several times the USD will "skyrocket".  this is how markets are manipulated.  in the middle of the night interventions when most investors are asleep at the wheel to create maximum psychological impact at the open via a huge GLD gap down; extreme ramps to force margined gold players out of their positions; small descending triangle formations to "tempt" bulls in gold into buying and leveraging up before "the trap" is snapped shut; extreme ramps in the USD to force USD shorts to cover overextended positions; waiting until sentiment reaches extremes before initiating an attack; all the while to create huge profits for insider bank traders that have been notified ahead of time.  this is where technical analysis combined with intuition and a thorough understanding of fundamentals, criminality, and sentiment come in handy.  i can "see" the setups.

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.

now you're just being defiant.  give me a little credit here.  the fact that Dan Norcini and other gold bulls are just now coming to this realization of CB intervention that i had a month ago is significant.  there IS a fire.  i've listened to Dan every Friday for as long as KWN started after Eric King broke off from FSO.  he is an example of a linear thinker.  not to mention that he owns a bullion business if i recall correctly which severely biases his views.  this is a high stakes game of tactical chess.  i'm not just one or two moves ahead of him, i'm twelve moves ahead.

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.

you would be wise to not ignore this failed breakout.  i've already told you the confusion and diverging signals is b/c we're at a fundamental transition btwn bull and bear markets.  as we get in gear to the downside then the picture suddenly clarifies to everyones horror.

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

as i said above, i'm neutral about foreigners and gold.  i still think its dangerous for them b/c of the severe drain in liquidity they will experience as the CB's drain liquidity out of the system to kill gold.

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.

i used to think that gold would go up in deflation or inflation too.  until 2008. i learned.  it won't protect in a CB coordinated effort to kill it via a severe drain in liquidity.

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.

of course you have to learn from these guys which is why i read and listen to all the same guys you do.  but heres the thing:  you have to learn NOT to stand on the shoulders of giants but learn to stand on your own 2 feet.  much of what they're saying is herd mentality and based on linear thinking.  YOU are smarter than them.  thats one thing i know for sure  Smiley

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.

ok, everyone listen up, i'll go out on a limb and make my next non linear prediction:  somewhere along the line here you'll get an announcement from some CB that they are going to sell some of their gold.  i wish i could give you an exact time but i'd guess somewhere in the range of 6 months.  this will further accelerate the panic out of gold and will help serve the interests of the CB's to save their precious monetary system.  i KNOW you haven't read this anywhere.  who knows?  maybe they'll trade gold in for Bitcoin Smiley

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.

But in the end we all have to think for ourselves.

One of the best points in this thread. Smiley

miscreanity calls gold an asset as do i.  i believe that gold as an asset can inflate just like any other asset via USD inflation.  the derivatives mkt is no different.  as is the gold derivatives mkt.  gold pundits argue that if we get a gold derivatives implosion there will be a scramble for physical gold which will drive it to the moon.  but you have to ask yourselves:  what were those derivative positions funded with?  Answer:  USD's.  so if anything, a gold derivatives implosion should cause a scramble for USD's (or a shrinking of the total virtual USD's depending on how you like to think about this) causing a further skyrocketing of the USD.  if THAT happens, what becomes of the physical gold price?

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.

how much further does Goldcorp (GG), a bellwether gold stock, have to fall beneath its breakout line for it to be considered a "failed breakout"?

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.

USD price for gold is pretty much irrelevant, if you use gold as a store of value.

Another excellent point.

Decoupling.

...

At the time, I was watching silver much more closely than I was watching gold.  One day when spot silver was under $10/oz, I remember the local coin store wouldn't part with a round for less than $20, and if you wanted Eagles, they were at least $22 each.  I called around, and other dealers were demanding pretty similar prices.  I don't think the gold premium was anywhere near 100%, but it was still pretty steep, maybe 30%-50%.

The price of actual physical metals had very much decoupled from their paper prices.  Over time, they converged again, mostly by waiting for the paper prices to rise up to meet the physical prices.  The funny part is that I've never ever seen historic data on premiums, so it is easy to forget that it happens, or even to never know about it in the first place.

So, the next time there is a panic (now?) and funds need to dump stuff to buy dollars, the paper price of physical metals will certainly drop, like you say.  But that doesn't mean that those prices will have any bearing on the actual transaction prices in the real world.

I'm of the opinion that the situation back in 2008-2009 was very unusual.  I wouldn't be willing to bet that the next event of this sort will actually cause the markets to decouple to the same extent, but there are quite a few gold and silver pundits that would be.

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.

the father in the group pulled out a torn, weathered German Mark of about 20M marks and gave it to me as a gift.

... anyways point being these things are still worthless all these years later.  why?

its because they were "printed" into existence and were impossible to remove from circulation once done.  this is why the 2 hyperinflations everyone always points to occurred; Zimbabwe and Weimar Germany.  they did not have mature debt markets like we do in the US.  this is why i don't think we see HT here.  these debt dollars (virtual dollars) will just vaporize on default thus shrinking the money supply to be gone forever.

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.
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September 14, 2011, 08:50:27 PM
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If you lick it, you get a buzz.

I wont be buying any gold from you then.

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September 14, 2011, 09:22:43 PM
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If you lick it, you get a buzz.

I wont be buying any gold from you then.

I don't lick all the gold, just some of the freshly minted bars. Tastes like licorice. Besides, not for sale! Smiley
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September 14, 2011, 10:06:50 PM
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Whats with this obsesion of eating gold a lot of paperbugs have? You can not eat paper neither (well, you can but you get me) and they defend it as money. If you want to eat get food, money is not for eating, money is a mean of exchange. Why would you want to eat money?!?

There are a couple species of goldbug:

The common variety is what you see here: people seeking a stable value store with a predictable supply when the central banks are making unsettling moves.  Some see intrinsic value as a source of stability.  I see it as a floor with little relevance at current prices; as such I prefer to think of it as a fixed-supply decentralized currency rather than a commodity.

The second type is the sort who are planning for post-apocalypse scenarios where fiat is dead and day-to-day trade is done in gold.  "You can't eat gold" points out that rice, .223, bleach, and antibiotics will be much more reliable commodities.

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September 15, 2011, 02:58:30 AM
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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.


How does this happen, exactly? The GLD trust moves physical unleveraged, unencumbered gold, as I'm sure you know. So how could its price diverge from physical for more than however long it takes to ship gold? Or are you raising a more fundamental issue with confidence in enforcement of contracts, etc, that could arise in a scenario where fiat/existing-monetary-system really starts breaking down?



Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
But Bitcointalk & /r/bitcoin are heavily censored. bitco.in/forum, forum.bitcoin.com, and /r/btc are open.
Best info on Casascius coins: http://spotcoins.com/casascius
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September 15, 2011, 03:02:55 AM
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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.).


How about China announcing (http://www.bloomberg.com/news/2011-09-14/china-willing-to-buy-bonds-from-sovereign-debt-crisis-nations-zhang-says.html) that they're willing to bail-out debt-crises nations? Seems a natural move to make when you're trying to unseat the dollar as the world's de-facto reserve.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
But Bitcointalk & /r/bitcoin are heavily censored. bitco.in/forum, forum.bitcoin.com, and /r/btc are open.
Best info on Casascius coins: http://spotcoins.com/casascius
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