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Author Topic: Gold: I smell a trap  (Read 78585 times)
cypherdoc
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September 25, 2011, 01:14:49 AM
 #721

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.

you can't use gap analysis on ratio charts.  gaps are EVERYWHERE.  if i use the $USD/$SILVER chart, there is a gap way up there at 5.00 from June 2010.  are you saying the ratio is going to go there too?  

oh btw, that same ratio chart is up 44% since the bottom.  quite the trade, long USD short silver, huh?
the $USD/$GOLD is up 27% from the bottom too.

GLD has a small gap down at 132.  are we going there too?
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cypherdoc
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September 25, 2011, 03:06:31 PM
 #722

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.

yes, in the sense that i do see it dropping below 1600 short term.
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September 25, 2011, 03:17:55 PM
 #723

@misreality and MatthewLaMe:

http://www.recover-from-grief.com/7-stages-of-grief.html

you sirs are only in #1.  but you're in good company.  the gold pundits are out in force this weekend desperately trying to stem the panic out of pm's.  Ben Davies at least says he was smart enough to minimize his positions in pm's (meaning he was selling) but i seriously doubt it.  he and everyone else are trapped at the top and will be forced to go thru all 7 stages of grief which end in selling capitulation.  thats how markets work in our boom bust age.  severe swings in the pendulum killing speculators at each end of the swings.  when you're silent and long gone from this thread will the pain finally end.

you're in trouble and you know it.
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September 25, 2011, 03:24:03 PM
 #724

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.

i'm glad we have a timeline in place.  let's see.
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September 25, 2011, 03:46:13 PM
 #725

The worst time to sell is on a dip. It's the best time to buy. Sensible to allow prices to stabilise though. Don't catch the falling knife as they say.

Max Keiser and Stacy Herbert comment on it here -> http://ia700707.us.archive.org/28/items/MaxKeiserRadio-TheTruthAboutMarkets-24September2011/TaM-240911.mp3


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cypherdoc
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September 25, 2011, 03:50:04 PM
 #726

The worst time to sell is on a dip. It's the best time to buy. Sensible to allow prices to stabilise though. Don't catch the falling knife as they say.

Max Keiser and Stacy Herbert comment on it here -> http://ia700707.us.archive.org/28/items/MaxKeiserRadio-TheTruthAboutMarkets-24September2011/TaM-240911.mp3



the trouble with this theory is that all the gold bugs like yourself are standing around waiting for the other guy to go first.  we've run out of buyers.  we're at the end of an 11yr bull.

what happened to all the Big Buyers that were supposed to jump in at the 1680 gold gap or the silver 200 DMA misreality was talking about?  we knifed thru those levels like butter.  the pain has just begun.

listen to Ben Davies podcast.  he's waiting for everyone else to stabilize the situation too.  you'll be waiting a long time.
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September 25, 2011, 04:10:22 PM
 #727

The worst time to sell is on a dip. It's the best time to buy. Sensible to allow prices to stabilise though. Don't catch the falling knife as they say.

Max Keiser and Stacy Herbert comment on it here -> http://ia700707.us.archive.org/28/items/MaxKeiserRadio-TheTruthAboutMarkets-24September2011/TaM-240911.mp3



ask yourself, what are commodities in general telling me?  for that matter ALL markets.  copper, wheat, rice all topped in Feb.  TLT began its long rise. they were the first warning signs.  then in May, stocks, oil, and silver topped.  i shorted the hell out of silver then and made a fortune.  that was a huge confirmatory red flag for me.  i told you way back that these different markets top not all at once but sequentially over months time to create maximum confusion.  the silver retrace to an exact 61.8% was classic.  you already know i was watching that like a hawk.  when it refused to penetrate weeks ago i warned, waved my hands, jumped up and down here on this thread but no one esp. yourself would listen.  silver is now down 38% from the top.  AND the motive move for this wave 3 of 5 down is only 2 days old.  its broken convincingly its support at 34 on high volume.

i told you Ben's decision on Wed was one for the ages.  the 3rd or 4th confirmation that no more USD printing was in store.  you can kick and scream all day long that this is what he's done up til now and this is what he wrote in his 2002 paper but the fact of the matter is he hasn't and he won't.  the USD is headed up in an unrelenting move and is going to crush all risk assets in its path.  best get out of the way.

edit:  i should add that SLW and other silver stocks peaked in April.  just another in the sequence.
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September 25, 2011, 06:38:29 PM
 #728

I guess I should hope you are right so we can buy gold and silver at ridiculously low prices again.

You seem to know everything about Ben Bernanke's mind, maybe you are Ben Bernanke?

Bernanke obviously wants to destroy the stock market and cause havoc for the banks. The federal reserve wants another political drama but this time I guess they will just allow banks to fail. What will the US government do afterwards? Create a single nationalised bank?

It totally makes sense, thank you.

Oh, all the fake paper gold... hmmm I suppose they'll ensure no one knows by forcing people never to take delivery on their paper. If people demand physical gold, the police force will send anyone that disobeys into gulags. This makes total sense. In fact, the US government will do a deal with all other governments to fix the price of gold indefinitely through force, removing all market influence!

Gold and silver are definitely turning into bear markets now. And the USD will rule the world with the new US centralised bank and police state! Thanks, Mr. Bernanke it all makes sense to me now.

In all seriousness: I really can't figure out what is going on in your head, sorry.

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September 25, 2011, 07:21:34 PM
 #729

I agree with Mish's explanation on silver (gold) drop:
- Fed did far less than expected
- Mutual fund redemptions
- Margin calls at hedge funds
- China growth story fading

+ higher margin requirements on PM

Cypherdoc "won" a battle, we'll see about winning the war. I am certain the option LET BANKS FAIL is not acceptable to either politicians or bankers, so money printing will have to resume eventually. There is just no other way.

Big day tomorrow...

P.S.: Cypher, what's up with all those personal attacks on miscreanity
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September 25, 2011, 07:28:25 PM
 #730

The federal reserve in creating new money now. How else do they fund the debt ponzi scheme?

Monetary creation is not quantitative easing. Quantitative easing is a label slapped on a particular round of monetary creation used as a mind game to pump confidence into stock markets.

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miscreanity
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September 25, 2011, 08:04:05 PM
 #731

you can't use gap analysis on ratio charts.  gaps are EVERYWHERE.  if i use the $USD/$SILVER chart, there is a gap way up there at 5.00 from June 2010.  are you saying the ratio is going to go there too?  

oh btw, that same ratio chart is up 44% since the bottom.  quite the trade, long USD short silver, huh?
the $USD/$GOLD is up 27% from the bottom too.

GLD has a small gap down at 132.  are we going there too?

You'd be correct under normal circumstances, trading in a legitimate market environment geared toward price discovery instead of perception management. This is a non-linear aspect.

Which is in a bull market? Gold or USD? Backing and filling isn't guaranteed for the bull, ratio or otherwise. The GLD gap at 132 will not be filled until the paper/physical connection fails. Then GLD will appear to be in a bear market. Again, that will just be the paper or official pricing, not the actual asset price. The illusion will be maintained even in spite of decreasing effectiveness so as to prevent a precipitous decline.

The facts are glaring, yet opinion based purely on heavily managed price data reigns. How linear is that? What has your study of game theory told you about rigged games? You need to have accurate information.

Data for Friday was made available from the CME Group. I've reproduced numbers to date of September's deliveries made, delivery orders outstanding and the all-important December contract information.

As of Friday, 09/23/2011:

Deliveries made
FuturesDeliveriesMonth Total
Gold:652,886
Silver:181,269

Delivery orders outstanding
FuturesOpen Int.Prior Day Delta
Gold89+16
Silver179-34

December contracts
FuturesOpen Int.Prior Day Delta
Gold311,141+3,355
Silver72,367+112

After such a massive down day, open interest should have fallen - and heavily. Instead, demand has increased to a very large degree. Also of critical importance is the difference in deliveries and front-month open interest. There were 65 gold deliveries, but open interest rose instead of falling. Yesterday, there were 73 contracts outstanding; with 65 deliveries, that would mean that only 8 should be left today. Instead, there are now more contracts awaiting delivery of physical gold than there were yesterday, by a sizable margin. It is normally very rare for deliveries to be requested during the month, yet it has been a regular occurrence for the past two months.

Silver had been seeing increases in front-month open interest until today, and this only pushed out a pitifully small handful of contracts. Meanwhile, the December silver contract rose to far more than offset September's 34 contract decline. October also saw an increase of 22 contracts (not shown in tables above), making the overall near-term open interest increase by 100 contracts (Oct 22 + Nov 0 + Dec 112 - Sep 34 = 100 rise for 2011). If we go to the March 2012 contract, it rose by an enormous 855 contracts. Futures open interest rose for both gold and silver in all but four monthly contracts, and the declines were miniscule by comparison to the increases. Demand is unrelenting.

With the declines in precious metal prices from yesterday, demand is being brought forward from the October and December. It is also having an opposite-of-intended effect, wherein demand overall is increasing relative to past declines in price that moderated demand. There is less than a week to go before the delivery deadline and there are only tiny amounts of metal being supplied. This means that the banks are loathe to part with physical metal, opting instead for other methods to secure contract completion.

COMEX warehouse stocks, in troy ounces:

FuturesRegistered Supply2011 Remaining DemandDeficit/Surplus
Gold1,930,640 oz34,039,900 oz-32,109,260 oz
Silver31,041,080 oz365,295,000 oz-334,253,920 oz
Palladium548,400 oz1,797,300 oz-1,248,900 oz
Platinum230,700 oz871,150 oz-640,450 oz

2011 Remaining Demand is the total open interest remaining for September, October, November and December in ounces (gold: 100 oz/contract; silver 5,000 oz/contract; palladium 100 oz/contract; platinum 50 oz/contract).

The banks must ensure that much less than 10% of oustanding futures contracts for gold and silver stand for delivery, and that less than 30% of palladium and platinum call. This is why the massive volatility is occurring - the banks are trying to shake off demand to avoid contract default.

Failure means complete annihilation of the major financial institutions associated with commodities, first from trading losses, then through lawsuits for breach of contract. Success gives the banks more time to save their own asses by trying to procure more physical metal in various ways.

Political games are a cover for this hidden war, only buying some time. If the banks do not rectify the situation in a timely manner, the effects will spill over into the larger economy and force nations to engage in actual warfare because of a dislocation in supply of basic resources (esp. energy - oil, and food) triggered by the destructive price action of precious metals and fiat currencies that try to manage them.

These delaying tactics have disproved the call for the GLD Puke Indicator triggering by Friday and for Japan engaging in intervention during the same week. However, delay does not mean it won't happen. If anything, the likelihood has risen for both of those events to occur in the very near future. Keep in mind that specific events might be shocking, but they do not change the trend - they are caused by it. It is very important to determine cause and effect appropriately.

yes, in the sense that i do see it dropping below 1600 short term.

Key words.

@misreality and MatthewLaMe:

http://www.recover-from-grief.com/7-stages-of-grief.html

you sirs are only in #1.  but you're in good company.  the gold pundits are out in force this weekend desperately trying to stem the panic out of pm's.  Ben Davies at least says he was smart enough to minimize his positions in pm's (meaning he was selling) but i seriously doubt it.

Ad hominem and baseless assumption.

he and everyone else are trapped at the top and will be forced to go thru all 7 stages of grief which end in selling capitulation.

Opinion, again based on unfounded presumption.

thats how markets work in our boom bust age.  severe swings in the pendulum killing speculators at each end of the swings.  when you're silent and long gone from this thread will the pain finally end.

you're in trouble and you know it.

Speculation.

Where are your facts? I trade options. I buy physical gold and cheap equities, mostly in the mining sector (some ag & energy). All of this is done without margin. The metal is in no way in "trouble". The shares pay dividends and some have increased those. My return is not so dependent upon the rise and fall of gold as one might think.

Your emotions appear to be running the show. Is it because of dismissal toward facts, or fear that you might actually be very wrong? These are questions only you can answer.

the trouble with this theory is that all the gold bugs like yourself are standing around waiting for the other guy to go first.  we've run out of buyers.

As pointed out in the facts above, buying is far greater than selling. The selling is illusory and creating a false image. Demand is being brought forward now because shortages are being seen and there is a building stampede to procure physical metal.

we're at the end of an 11yr bull.

More opinion presented as fact.

what happened to all the Big Buyers that were supposed to jump in at the 1680 gold gap or the silver 200 DMA misreality was talking about?  we knifed thru those levels like butter.  the pain has just begun.

listen to Ben Davies podcast.  he's waiting for everyone else to stabilize the situation too.  you'll be waiting a long time.

Once more, the facts show demand is overwhelming supply on all fronts: it just can't be seen yet because of the smoke and mirrors games. I actually hope there's a dip below $1,600 this week - it's the perfect opportunity to grab a deep, risk-free discount before the next launch. It's also earlier than I was expecting, which is an added bonus because now I only have one direction to be concerned about for a short time.

ask yourself, what are commodities in general telling me?

How can you know what they're saying without listening to the data? Price movement is not properly reflecting the data.

i shorted the hell out of silver then and made a fortune.

I bought the hell out of silver and made a fortune. What's your point?

Bulls and bears get rich; lemmings and sheep get slaughtered.

The difference here is that you were willing to throw away the actual asset in favor of an illusion. I'm glad you're holding onto at least some of it regardless of your short-term trading. Everything is pointing to progressive moves that will shatter the disguise which has allowed the paper junk to masquerade as gold, leading to an upward revaluation of real assets in terms of depreciating paper "assets".

Assets themselves will remain in close relation to each other, with the monetary precious metals' valuation (gold & silver) rising in proportion to the amount of global accrued wealth; what will amount to a century of growth over the span of less than two decades.

that was a huge confirmatory red flag for me.  i told you way back that these different markets top not all at once but sequentially over months time to create maximum confusion.  the silver retrace to an exact 61.8% was classic.  you already know i was watching that like a hawk.

Key words. Confusion. Also misdirection, leading the herd to the short side.

when it refused to penetrate weeks ago i warned, waved my hands, jumped up and down here on this thread but no one esp. yourself would listen.  silver is now down 38% from the top.  AND the motive move for this wave 3 of 5 down is only 2 days old.  its broken convincingly its support at 34 on high volume.

A better buying situation. As mentioned earlier, I use no leverage. Options allow for leveraged return without margin. Physical metal pulls the real wealth out of illusory fiat.

The paper price moves are painted to be picture-perfect. Any 2-bit technician will drool all over them and pile on with all the other lemmings.

i told you Ben's decision on Wed was one for the ages.  the 3rd or 4th confirmation that no more USD printing was in store.  you can kick and scream all day long that this is what he's done up til now and this is what he wrote in his 2002 paper but the fact of the matter is he hasn't and he won't.  the USD is headed up in an unrelenting move and is going to crush all risk assets in its path.  best get out of the way.

The Fed decision is a maneuver designed to deflect attention and guide the psychology of market participants. It does not to reverse the underlying long-term trend. Delaying tactics are extremely effective. The longer the delay, the more the weak-willed and uninformed investment categories drop off or reverse position.

As the dollar rises, it is rising against other fiat currencies. Assets can just as easily rise along with it. Of course, once the Euro arena is declared "fixed" sometime within the next few months, the course will reverse. Either way, real assets will rise overall. Short-term shocks such as we are seeing now do not depict secular shifts without accompanying changes in fundamental factors. It's like a fly buzzing around inside a big glass jar: the fly is wildly active and attracts attention, but it doesn't get anywhere unless the jar is moved as well.
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September 25, 2011, 08:40:27 PM
 #732

The worst time to sell is on a dip. It's the best time to buy. Sensible to allow prices to stabilise though. Don't catch the falling knife as they say.

That depends on the market, and the extent of the dip. In a bull market like the one gold is in now, absolutely.

With the burst of demand on the latest massive price drop, I'd say the knife has fallen and it's time to pick up the goodies. Especially after so many dealers ran out of silver. Downside is limited while upside remains out of sight; we're still too far offshore to see land.

Bernanke obviously wants to destroy the stock market and cause havoc for the banks. The federal reserve wants another political drama but this time I guess they will just allow banks to fail. What will the US government do afterwards? Create a single nationalised bank?

Does he really want to destroy the markets? I'd say it's more realistic to assume the Fed is seeking to maintain overall stability, making concessions and sacrifices where necessary. Political drama serves as an effective smokescreen.

I understand your sentiment - it just goes a bit extreme, unless good ol' Ben really is a psychopath.

I agree with Mish's explanation on silver (gold) drop:
- Fed did far less than expected
- Mutual fund redemptions
- Margin calls at hedge funds
- China growth story fading

+ higher margin requirements on PM

Agreed - those are big ones.

One major issue I have with Mish is that he dismisses readily apparent factors that have the whiff of collusion or conspiracy. He reminds me of an ostrich on these matters.

Add to the list: HFT and/or direct central/bullion bank management of precious metals.

Cypherdoc "won" a battle, we'll see about winning the war.

With trading, perhaps. We seem to have different objectives, his being short-term profit and mine being accumulation. Any trading profit I make will be on an extended time basis. This week will be one of additional accumulation (options, shares & bullion).

Professional gold buyers, relaxed and waiting for the sellers to exhaust themselves:



Professional gold sellers, scaring the amateurs off with fake weapons and ammo:



Bitcoin seems to have reasserted its quasi-status as an equity currency with almost a predictive element toward equity markets. Not that I have any empirical data for any of that yet, but it certainly seems to move as equity markets do shortly before the big ones shift, and stabilize a bit earlier as well.
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September 25, 2011, 08:57:34 PM
 #733

Quote
Does he really want to destroy the markets? I'd say it's more realistic to assume the Fed is seeking to maintain overall stability, making concessions and sacrifices where necessary. Political drama serves as an effective smokescreen.

I understand your sentiment - it just goes a bit extreme, unless good ol' Ben really is a psychopath.

No, I was being sarcastic. I was pretending to be cypherdoc with the conspiracy that the federal reserve is out to kill the banking system, the housing market, the stock market and all other bubbles so it can "save the USD" and destroy gold. It's the complete opposite of what we know. Also gold markets depend on international circumstances not just the USA. I guess cypherdoc thinks all central banks have now turned into "STOP THE PRINTING PRESS" mode. It's funny because they are now going to do another round of bank bailouts to cover the losses of the Greek default.

Quote
Add to the list: HFT and/or direct central/bullion bank management of precious metals.

I think that needs to go to number one. Also by management I'm sure you meant manipulation as a better term.


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September 25, 2011, 09:09:34 PM
 #734

No, I was being sarcastic. I was pretending to be cypherdoc with the conspiracy that the federal reserve is out to kill the banking system, the housing market, the stock market and all other bubbles so it can "save the USD" and destroy gold. It's the complete opposite of what we know.

Gotcha. It can be a little tough to pick up on at times in text format.

Also gold markets depend on international circumstances not just the USA. I guess cypherdoc thinks all central banks have now turned into "STOP THE PRINTING PRESS" mode. It's funny because they are now going to do another round of bank bailouts to cover the losses of the Greek default.

You've got that right... and how! The US-centric view is soooooo linear.

Quote
Add to the list: HFT and/or direct central/bullion bank management of precious metals.

I think that needs to go to number one. Also by management I'm sure you meant manipulation as a better term.

"Management" is more palatable for Mish-types. Smiley
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September 25, 2011, 10:44:01 PM
 #735

Also gold markets depend on international circumstances not just the USA. I guess cypherdoc thinks all central banks have now turned into "STOP THE PRINTING PRESS" mode. It's funny because they are now going to do another round of bank bailouts to cover the losses of the Greek default.
You've got that right... and how! The US-centric view is soooooo linear.

Isn't it easier or more familiar to most Europeans to move out of euros and buy up dollars? That is my thesis for dollar appreciation. It's the best of the worst in class.

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September 25, 2011, 11:43:52 PM
 #736

Isn't it easier or more familiar to most Europeans to move out of euros and buy up dollars? That is my thesis for dollar appreciation. It's the best of the worst in class.

Yes, easier mostly due to temporal availability/liquidity within the established infrastructure (i.e. "convenience"). Other currencies also benefit in relation to whichever region is under pressure at the time, so the principle you've outlined applies across the board. The Euro and numerous other currencies (as well as asset classes) benefited from USD depreciation during its time in the crisis spotlight.

That's the forced demand. Gold (with silver & platinum to lesser degrees) are in demand by choice. The Swiss Franc was experiencing this relentless demand because it was the only currency not being debased, but its much smaller quantity relative to the Euro and USD meant that its price would shoot up far more rapidly than the other two would decline. Such a rapid rise in currency value causes structural instability within the respective economy, and without anything else to alleviate that building pressure, the SNB intentionally devalued.

The only way to debase gold is with a composite tungsten core and a pile of hope that the buyer doesn't realize he's being duped...
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September 26, 2011, 12:40:59 AM
 #737

Or by using paper. People are duped by that all the time.

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September 26, 2011, 01:18:40 AM
 #738

Here's the current AU spot price chart, it should be constantly updating:

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September 26, 2011, 05:20:29 PM
 #739

@misreality:  you're buying right here, aren't you?  or is it puts you're buying?
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September 26, 2011, 09:43:16 PM
 #740

notice how this whole new EFSF proposal is based on leveraging up 8:1.  that means more debt piled on top of existing debt.  if they try this it will undoubtedly explode in their faces and we all know what happens when the debt goes boom.
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