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Author Topic: Gold: I smell a trap  (Read 78404 times)
cypherdoc
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September 23, 2011, 06:38:44 PM
 #701

http://www.zerohedge.com/news/goldsilver-plunge-fest

"Rumors vary from very prominent hedge funds to Central European (as in geographically) central banks."

looks like my prediction might be coming true even sooner than i thought.

https://bitcointalk.org/index.php?topic=35956.msg525162#msg525162
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September 23, 2011, 06:41:37 PM
 #702

my ZSL up 27.23% just today.

I don't post much here anymore but had to come back because I knew you'd be smiling.  It was a good call.  My last gold purchase was somewhere in the $800oz territory so I've been on the sidelines for a while now.  Think I'll stay there for now, I just wish the damn S&P 500 would come to a resolution with this bear flag.  I still need to work on my patience  Cool

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September 23, 2011, 06:50:50 PM
 #703

my ZSL up 27.23% just today.

I don't post much here anymore but had to come back because I knew you'd be smiling.  It was a good call.  My last gold purchase was somewhere in the $800oz territory so I've been on the sidelines for a while now.  Think I'll stay there for now, I just wish the damn S&P 500 would come to a resolution with this bear flag.  I still need to work on my patience  Cool

good to see you back.  i hope you haven't given up on Bitcoin.  i personally think its bottomed.

i think the Dow is retesting the 8/09/11 underbelly and then heads lower for a wave 3.  then we'll get a bounce for sure.  too much bad news and Ben's disappointment.
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September 23, 2011, 07:47:08 PM
 #704

i'm sitting here looking at my trading screens and the entire rest of the stock mkt is barely trading as they watch the destruction of the gold/silver market.  they're trying to decide what this means.  what it means is the DEFLATION i have been warning about this entire thread. 

looks to me like the BOJ has entered the currency mkt and is pushing up the USD.  eventually stocks will resume the next leg down wave 3.

I'm still not 100% convinced on your gold predictions yet given how we're still up double digits for the year but on silver I must say, hail to the king. You definitely called it there and this drop is monolithic. There is simply no logic in this selloff given the public starting to realize that this is a depression rather than a rebound and the "hedge fund" selloffs are mighty suspicious.
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September 23, 2011, 08:04:27 PM
 #705

Quote
CME Group daily reports, including deliveries. There are also trends in volume and open interest that can be contrasted with price action to provide direction as to whether buying or selling is occurring. Some of the information can also be calculated by using the disaggregated Commitment of Traders reports in coordination with trends from reported warehouse stocks. Harvey Organ does an excellent job of posting most of the information on a daily basis, although his site and written grammar are horrible.

Thanks but I don't know what data proves that contracts are not going to delivery.

Also I should say silver is rife with manipulation. I read the premiums over spot have increased around many silver dealers after this crash in the exchange's spot price. I bet it will get really hard to buy significant amounts of physical silver at these low prices unless those premiums are significantly large.

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miscreanity
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September 24, 2011, 12:29:14 AM
 #706

Thanks but I don't know what data proves that contracts are not going to delivery.

The front month for delivery is currently September. Current month delivery information is here. From that report, the columns to pay attention to are "DAILY TOTAL" and "CUMULATIVE" for the respective date. The former shows how many deliveries were made that day and the latter shows how many total for the month. As an example. as of 09/22/2011 there was 1 gold contract delivery made which brings the total contracts fulfilled so far this month to 2,821. This is normally a month that only sees a few hundred contracts standing for delivery, not thousands. All numbers from the current reporting day pertain to the prior trading day, so numbers from 09/23/2011 are for 09/22/2011 activity.

On the COMEX Volume and Open Interest Report page, generate a report for the appropriate day and desired item (in this case "Asset Class/Totals: Metal" and "Product Name: Gold"). The information will be present under the "OPEN INTEREST" column. For 09/22/2011, gold futures open interest is "73 - 50" which means the present OI is 73, down 50 from the prior trading day's reading of 123 contracts outstanding.

Now we know that, on 09/22/2011: 1 contract was delivered and the total open interest fell by 50 contracts. This leaves 49 contracts disappearing into the ether with 73 still to be delivered and only a week remaining to do so on what should be a negligible amount, so why the delay? Since the full amount must be paid on the delivery notification day in order to request delivery, there is no margin involved here. Therefore, the most reasonable assumption is that these contracts were settled privately, most likely for cash instead of the physical metal.

Since the requesting party wanted physical metal, it is also reasonable to expect that a sizable premium is being paid for the receiving party to accept cash in lieu of metal. How much, we don't know - it could be 5% or 50% above and beyond the agreed-upon contract price. In other words: a gold contract for $1,800 being $118,000 (100oz per contract), if the premium paid for the recipient to accept cash instead of metal were 5% the amount paid would be $123,900. This is irrespective of current prices and wholly dependent on availability of whatever product the contract is for, again in this case gold.

Only the banks and the recipient of payment know how much the premium is and there hasn't been any information I've found regarding that. If the premium on $1,800 contracts is 5%, the effective price of gold would be $1,890 and for 50% premium - $2,700/oz. As mentioned, Harvey Organ does this daily so you don't have to, but understanding how this information is obtained does help a lot.

Another piece of information that may or may not be entirely forthcoming, but is still very telling, is the warehouse stocks report. The eligible numbers are owned by a third-party and being stored at COMEX warehouses. The registered numbers show the amount of metal available for delivery. Thus registered is the important value, especially when considering that Thursday's raid only brought the October open interest down 728 to 29,569 contracts from just over 30,000. I'll convert the contract values to ounces in the data below.

Current COMEX warehouse stocks of registered gold:1,930,640 oz
Current October contract open interest in ounces:2,956,900 oz

Translating in reverse, the amount of available gold can only supply 19,300 contracts. As you can see, demand is far greater than supply. Now consider the OI of 307,786 for the December contract, which hasn't budged much at all even with the massive raids. There is no way that the COMEX can supply 30,000,000+ ounces of gold without truly drastic measures, such as raiding the GLD trust.

Silver is even worse.

COMEX registered silver:31,041,080 oz
December contract OI:361,275,000 oz

Failed delivery means a bank run ensues among the highest echelons of the financial world. That leads to a complete collapse of the global economy with the greatest impact on those nations most heavily tied to western banking institutions. The games being played to put this off are saving all of us by providing some time to acquire the assets which will provide means to be self-sufficient and/or escape the regions which will be hardest hit (expatriation).

Price information alone is not enough!

Also I should say silver is rife with manipulation. I read the premiums over spot have increased around many silver dealers after this crash in the exchange's spot price. I bet it will get really hard to buy significant amounts of physical silver at these low prices unless those premiums are significantly large.

All markets are being manipulated now. That doesn't change reality. As mentioned earlier, pushing down monetary metal prices (gold & silver) has created an undercurrent of demand that will eradicate physical supply. The result is that paper markets become nothing more than fiat trading houses because there is no way to supply the amount of physical metal demanded. Everyone will be throwing in greater amounts of cash while competing for a dwindling share of real assets.

Once again: if the paper/physical link is broken, ALL market control is lost and gold will rise on a daily basis with no pauses as we have seen so far. There will be no corrections, no slow-downs, no reasonable entry points. The banks and governments are playing an incredibly dangerous game, for if they fail, the consequences will be immensely destructive. Not just to the markets, but to peoples' lives - many will die should the financial system freeze up.

I do not believe that will happen this time around. The people manipulating the system certainly aren't stupid. Gaming the system is just like fishing - you don't want your quarry to swim off because of a broken line, so you give some slack to tire it out. The problem is that banks and governments might be professional, commercial-level fishing operations, but the beast they're hunting is many times larger than their own vessel. If they don't let the line out soon, it will either break or everyone on-board will be dragged under.

I'm more concerned about gold rising rapidly than I am of the value falling into the abyss, mostly because the latter is an impossibility at this point. Official numbers might obscure the truth for now, but that will only last for so long. Short term success will be met with long-term reversal.

For the final point, I defer to Jim Sinclair: Market Violence Will Create Large Bear Trap
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September 24, 2011, 01:26:53 AM
 #707

Thanks a lot miscreanity. I've looked around for interest data before, including on the cme website but not enough to find out the raw data which backs up the knowledge on fake futures. The CME Group likes to make the data reasonable hard to find.

It's all interesting stuff, has anyone made any interesting graphs on the data such as disappearing futures over time?

I'm sure the institutions behind the paper fraud has enough money and influence to prevent a collapse of the futures markets entirely but to do this eventually they still will have to allow prices to rise. I guess we can hope more people demand physical delivery on the futures markets. It's also good information to share.

Thanks again for the information.

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miscreanity
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September 24, 2011, 02:28:59 AM
 #708

Thanks a lot miscreanity. I've looked around for interest data before, including on the cme website but not enough to find out the raw data which backs up the knowledge on fake futures. The CME Group likes to make the data reasonable hard to find.

It's all interesting stuff, has anyone made any interesting graphs on the data such as disappearing futures over time?

I'm sure the institutions behind the paper fraud has enough money and influence to prevent a collapse of the futures markets entirely but to do this eventually they still will have to allow prices to rise. I guess we can hope more people demand physical delivery on the futures markets. It's also good information to share.

Thanks again for the information.

No problem.

Anything below 30mm oz registered silver is critical. Gold... well, let's just not go there. There are charts for gold and silver from 24hgold.

Who knows if the major futures markets collapse can be staved off? It would be a pretty horrific event with far-reaching effects. As long as they can keep the illusion in place to prevent gold from rising too quickly and the dollar (all fiat currencies, actually) from falling too quickly, there's a possibility that Europe and the US might survive intact. They'd just be so emaciated that it'll take decades to recover. I actually hope fewer take delivery so the time to prepare is longer, but spreading demand increases run entirely counter to that.
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September 24, 2011, 02:50:02 AM
 #709

@misreality (Boris)

who's getting lost in the trees?

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September 24, 2011, 02:58:00 AM
 #710

This is a remarkably impressive thread. Too bad, for me, that I didn't discover it earlier...caught a 'falling knife', er, driven spike, yesterday (thur).

I will definitely keep checking in here.
-Jack

http://BitcoinRedLight.com A men's magazine of liberation.
miscreanity
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September 24, 2011, 04:54:54 AM
 #711

Premiums have been discussed previously. I still haven't been able to find any long-term data set, but there is a good resource for a general idea on current rates.

As limited as it is, 24hgold's Ebay pricing data for gold and silver is very interesting, especially being that it includes global information instead of just US-based data. Assuming that at least some of the bidding is done by savvy investors, the prices there indicate that the real view of gold's value (and silver's) is rising. Current premiums are around 10-20% over spot for gold and ranging between 30-70% for silver.

When the relationship between the paper markets and physical detach, this type of tool will be invaluable. The only other way to determine price will be from direct dealer quotes, not all of which are available online.

It would be interesting to see a categorical breakdown on certain items from MIT's Billion Prices project.
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September 24, 2011, 02:38:43 PM
 #712

for all those looking for more insight at this point i will provide what i can.  obviously any good investing strategy tries to predict what will happen so that one can frontrun the move leading to maximum profit.  not call things in hindsight like Dan Norcini and all the other gold pundits. 

all things pertinent to what has happened has been already said by me since i began this thread on 8/9/11.  i have also provided my longterm view of things.  of course, markets are dynamic and i will add things realtime as things evolve.  i've poured my heart and soul into this thread and everything is here. so i'm not about to regurgitate the same concepts.   these are my own theories and no one elses so i take full responsibility for the accuracy or inaccuracy of what i say.

quite honestly, despite the huge amounts of green on my screen the last coupla weeks, during yesterdays plunge my heart rate didn't budge.  no excitement, glee, laughing, jumping up and down; perhaps just a little smile.  investing is about being unemotional, humble, adaptable, and constantly looking forward in anticipation for the next move.  truly, the PM's call was an easy one.  my focus right now is on the stock mkt and what happens there.

good luck to everyone here and their investing.
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September 24, 2011, 04:41:40 PM
 #713

Well, that played out nicely. The drop in silver is madness. Congratulations to you for your prediction and probably short on Gold. Now time to stock up on Bitcoins. Grin

This cheers me up a bit, as I have watched the rise in Gold during the last months with disappointment, while Bitcoin continued its decline. Though Bitcoin until now seems unaffected by everything and a completely detached, independent market. It could be the ultimate hedge, especially when its inflation rate decreases to bearable levels.

Will be interesting to see if deflation will decrease Bitcoin’s attractivity.

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September 24, 2011, 05:28:59 PM
 #714

truly, the PM's call was an easy one.  my focus right now is on the stock mkt and what happens there.

Have you closed your shorts? You don't see gold dropping below $1600 in the short term?

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September 24, 2011, 05:52:08 PM
 #715

I'd like to make a prediction here, just for the record.

I see the latest drop as the third of a three-wave (Elliott) correction from the $50 silver top ($1900 gold), with 3 ($30) lower than 1 ($33).

It will resume the upward trend for a fifth and final wave (silver past $50 and gold past $2000), before the big crash / reversal.

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September 24, 2011, 07:23:31 PM
 #716

truly, the PM's call was an easy one.  my focus right now is on the stock mkt and what happens there.

Have you closed your shorts? You don't see gold dropping below $1600 in the short term?

no and yes.
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September 24, 2011, 07:27:21 PM
 #717

Well, that played out nicely. The drop in silver is madness. Congratulations to you for your prediction and probably short on Gold. Now time to stock up on Bitcoins. Grin

This cheers me up a bit, as I have watched the rise in Gold during the last months with disappointment, while Bitcoin continued its decline. Though Bitcoin until now seems unaffected by everything and a completely detached, independent market. It could be the ultimate hedge, especially when its inflation rate decreases to bearable levels.

Will be interesting to see if deflation will decrease Bitcoin’s attractivity.

i too believe that money from gold will start flowing into Bitcoins.  it won't take much to launch this market much higher.
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September 24, 2011, 07:30:24 PM
 #718

I'd like to make a prediction here, just for the record.

I see the latest drop as the third of a three-wave (Elliott) correction from the $50 silver top ($1900 gold), with 3 ($30) lower than 1 ($33).

It will resume the upward trend for a fifth and final wave (silver past $50 and gold past $2000), before the big crash / reversal.

nice prediction, i just think the primary direction has changed.

i see both silver and gold having a 5 wave correction downwards with silver starting the big wave 3 down now with gold starting 1.  this view correlates well with whats going on in stocks and the $DXY.
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September 24, 2011, 09:35:17 PM
 #719

truly, the PM's call was an easy one.  my focus right now is on the stock mkt and what happens there.
Have you closed your shorts? You don't see gold dropping below $1600 in the short term?
no and yes.

The individuals presenting their viewpoints are obviously very proficient with charting and savvy at financial analysis, but I haven't seen any ideas other than technical methods based on assumptions that work in a situation with stable, well-defined rules and generic explanations based on traditionally-accepted investing knowledge. There is little in the way of stability now and the rules are being changed rapidly. Wave analysis has limited function under such circumstances. Remaining unaware of factors that change the rules will make the short-term gains seem paltry and fleeting compared to buying the dips in gold.

It would be prudent to close half your shorts; at least set stops at a little above break-even. No sense in watching such a nice profit evaporate.

Hold all physical metal. I'm buying real metal hand-over-fist. My usual dealer is sold out until next week. Price can't decline with no supply and high demand. Waves can't change the fundamentals of reality.

The gap being backed and filled so forcefully introduces a larger wave of demand than would've been expected without that having been achieved - it's now a launching platform. More long call options to be opened throughout next week. Some were closed at a small profit; the rest are good until early 2012. Upper price targets still in play, although with this push down they may actually underestimate the resulting rebound. If you're worried about the downside (because of fear or margin trading), you shouldn't be in this market.

Predictable that the paper price of the metals was severely hammered after they were stabilizing; a blatant assault designed to force a margin squeeze prior to futures options expiration on the 27th. Odd that it was such a quiet final day of the week for all other markets. Not to mention margin hikes, bringing the exchanges ever closer to a full cash basis. Who do you think will be buying on the way up? I guarantee the banks that have massive outstanding delivery obligations on the horizon will be among the biggest buyers, closing out their own untenable short positions.

Japan is finally making noise about the Yen's "fair value" being between 80-90 per USD. The final week of the month will be a vicious bout of deflationary excess, creating even more pressure and delaying the inevitable. Shorts have over-extended themselves against a tidal wave of buying.

Support broke in July and is now being retested as resistance. Just as the gap in gold below $1,680 was filled, the gaps between 0.043-0.047 will be filled. That is also a rally based on "least worst" and not any form of value.



My advice: take some of your short profits now and sew your mouth shut so you won't have to pick your jaw up off the floor in a month.
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September 24, 2011, 10:11:50 PM
 #720

I think everyone is a little bit hasty to praise cypherdoc on getting the predictions correct. Wasn't the ultimate prediction here that gold was going into a longer term downward trend? This will not be vindicated for some time yet. This is what I have been disagreeing with. I think the physical prices for gold will only go higher and the futures will have to eventually follow unless the futures markets go into haywire and possibly crumble into death which I don't think will (be allowed to) happen.

I'd like to make a prediction here, just for the record.

I see the latest drop as the third of a three-wave (Elliott) correction from the $50 silver top ($1900 gold), with 3 ($30) lower than 1 ($33).

It will resume the upward trend for a fifth and final wave (silver past $50 and gold past $2000), before the big crash / reversal.

So you think the exchange spot price will go up past $50 for silver and $2000 for gold, but then turn into a major reversal like cypherdoc talks about?

Some interesting things to note:
CME raised the margins for silver and gold again, which apparently is supposed to calm down markets but it certainly cannot because more long positions will be liquidated.
The same bailout message again: http://www.theaustralian.com.au/business/markets/g20-ministers-pledge-to-maximise-euro-zone-bailout-fund/story-e6frg91o-1226144666578
Let's not bailout Greece, give the money to the banks instead!!!! http://www.telegraph.co.uk/news/worldnews/europe/eu/8786945/1.75-trillion-deal-to-save-the-euro.html

In '08 remember, the spot price of gold went down but not by very much. But people now actually know what happened afterwards, there were tons of monetary stimulus and bailouts. It is important that governments and central banks will do the same things again and again and again.

Economic crisis? Just create tons of money to cover the bad debts and investments! Pump up the bubbles! Even if the bubbles have tons of holes in them, just keep pumping to stop them from collapsing completely.

It's obvious what will continue to happen time and time again. It'd blatantly obvious. No government or central banks will allow price deflation to happen. They prefer lots of inflation. They convince people the inflation is not very bad by modifying how they calculate the inflation figures to make them look less severe.

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