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Author Topic: Gold: I smell a trap  (Read 78638 times)
cypherdoc
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September 30, 2011, 01:54:32 PM
 #821

well, this is sure to bring out all the howls.

i put on my first UST short via TBT a few minutes ago.  there have been a couple of compelling articles published recently about a double top in UST's and you know how i like technicals.  THIS is what could be different than 2008.  and i think it will also help in creating a stronger USD.
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cypherdoc
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September 30, 2011, 01:58:45 PM
 #822

for the second day now, retailers and momo stocks are going in the tank.  this is bad news.  we're on the verge of going down big.

i also see that AMZN and AAPL have cracked.
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September 30, 2011, 02:03:19 PM
 #823

USD up, everything else down.
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September 30, 2011, 02:16:03 PM
 #824

I haven't read the whole thread but some posts.

As hugolp pointed out, the increase in margin requirements is probably what had caused more damage. Remember the las silver sudden drop (April/may)? They did the same back then, precisely in the middle of a bull run.

Gold hasn't any economic value? Of course it has, it has had monetary value for thousands of years. The worse other moneys do, the better for gold.
It would also be extensively used in industry if it were as cheap as silver.

USD deflation won't hurt gold, because it is cash, not credit. At the bottom of the deflation you sell the gold and buy investments with yields on the cheap.
But will we have deflation? I don't think so. Hyper-inflation and the destruction of the dollar (at least as the world reserve currency) is the most probable outcome in my opinion.

If NATO had not invaded Libya, gold would be even better and USD even worse. But if you suggest you're going to sell your oil for anything different than USD you get a bullet in your head. Gadaffi did it (he even proposed the golden dinar as a supra-national African currency) for gold. Saddam did it for EUR. That's what makes USD the world reserve and not the US economy, which is no longer the soundest in the world.

Anyway, QEn will stop it all. With each iteration they need to print much more to prevent deflation. And exponential functions don't last forever.
I don't plan to sell my silver until the USD has collapsed. And I'm completely certain that will happen sooner or later. The monetary value that the USD contains will move to other places, and precious metals will get a great part of that value.
On the other hand, if they allow deflation to happen, gold won't suffer a great loss, probably rises too.


well, i think that the silver price and pm stocks lead the gold price so i expect further lows in gold.

if the bankers have already been bailed out (debatable yes) then a deflationary crash would allow them to buy things up at the bottom for pennies on the USD, yes?  at least those able to survive.  i think they've made plans for this scenario.
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September 30, 2011, 02:19:21 PM
 #825

another deflationary development:  junk bonds have gone into the tank since July.  small businesses?  toast.

where's the growth and jobs there?  inflation?  i think not.
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September 30, 2011, 03:03:50 PM
 #826

in addition, there are NO AVAILABLE SHARES TO SHORT OF GLD at Fidelity.
Iseree22
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September 30, 2011, 03:07:03 PM
 #827

in addition, there are NO AVAILABLE SHARES TO SHORT OF GLD at Fidelity.

Mmmm, how long has it been like that? And you mean all gold based stocks in the U.S market?

 Learn how modern money really works.  (http://alturl.com/e4hu5) Ctrl-F : 1. What is Money?

How can a State(Country) that creates its own currency run out of Money?? It can't.
cypherdoc
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September 30, 2011, 03:11:11 PM
 #828

http://globaleconomicanalysis.blogspot.com/2011/09/shilling-sees-evidence-of-deflation-in.html

"the Fed is out of bullets"
cypherdoc
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September 30, 2011, 03:12:20 PM
 #829

in addition, there are NO AVAILABLE SHARES TO SHORT OF GLD at Fidelity.

Mmmm, how long has it been like that? And you mean all gold based stocks in the U.S market?

as of today.  i'm sure Fidelity could go out into the market and get shares of GLD for you to short but ALL IN HOUSE SHARES ARE GONE.

edit:  SLV shares have been gone for weeks.
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September 30, 2011, 03:19:04 PM
 #830


Nice find. Now that the Banks have used the debt ceiling non-issue to get the cuts they need, they are preparing us for more fiscal stimulus driven by higher national debt. Watch the markets go up in response to this. Well Gold will go down of course.

At least more people will become employed, now that TPTB have what they want.

 Learn how modern money really works.  (http://alturl.com/e4hu5) Ctrl-F : 1. What is Money?

How can a State(Country) that creates its own currency run out of Money?? It can't.
cypherdoc
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September 30, 2011, 03:47:08 PM
 #831

http://video.cnbc.com/gallery/?video=3000048484
cypherdoc
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September 30, 2011, 03:51:18 PM
 #832

of ALL the gold and silver mining shares including all the etf's at Fidelity, the ONLY one available with shares to short is NEM.

and its forming a picture perfect ascending wedge.  we know how those resolve.
cypherdoc
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September 30, 2011, 04:21:56 PM
 #833

http://www.forbes.com/sites/investopedia/2011/09/29/should-you-follow-soros-out-of-gold/
Iseree22
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September 30, 2011, 04:33:36 PM
 #834


What did you get out of that? To me the guy doesn't understand how Government Debt works.

 Learn how modern money really works.  (http://alturl.com/e4hu5) Ctrl-F : 1. What is Money?

How can a State(Country) that creates its own currency run out of Money?? It can't.
hugolp
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September 30, 2011, 04:42:54 PM
 #835

Three things:

another deflationary development:  junk bonds have gone into the tank since July.  small businesses?  toast.

where's the growth and jobs there?  inflation?  i think not.

1. Stagflation: There is not going to be growth (real growth, GDP could improve) and meaningful reduction of unemployment, while at the same time prices are going to go up. Keynesians are still in denial about stagflation. They keep repeating that salaries can not go up as long as unemployment is high, and therefore prices can not go up either. This is utter bullshit, salaries and prices are already going up while unemployment is high and it will accelerate. If anyone is interested I can go into more detail why.

2. Banks want prices to go up. People keep saying that they want prices to go down so they can buy everything on the cheap. It this were the case they would have already done it. Banks have what they want and are in the bussiness of debt, not running bussiness. Why do banks need prices to go up? Because otherwise they go broke. The banks have a lot of underlying assets for the loans they gave. Those assets have plummeted in price and they are technically broke. Thats why one of the first mesures of the USA gov was to remove mark to market. Banks have assets on their balance sheet marked to inflated prices because otherwise they can not meet the reqired ratios. They need those assets to regain their previous prices so they can go back to normal. Its important to understand that if prices of those assests dont go up banks will eventually have to admit they are broke because they are blocking the credit system. And its important to understand that those prices were inflated and wont be inflated again, so they need the whole price level to rise a lot.

3. "The Fed is out of bullets" Everytime I hear this I ask a question and never get an answer: Whats stopping the Fed from monetizing more government debt? (apart from the fear of producing hyperinflation).
cypherdoc
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September 30, 2011, 04:56:21 PM
 #836

This is utter bullshit, salaries and prices are already going up while unemployment is high and it will accelerate. If anyone is interested I can go into more detail why.

i am an employer.  i have never had such wage control power since i've been in business since 1993.  i don't offer health care or a pension plan yet i have dozens of apps for any openings i advertise.  i'm also seeing older ppl enter the workforce that will accept lower pay than younger ppl b/c of the squeeze Ben's put on them.


2. Banks want prices to go up. People keep saying that they want prices to go down so they can buy everything on the cheap. It this were the case they would have already done it. Banks have what they want and are in the bussiness of debt, not running bussiness. Why do banks need prices to go up? Because otherwise they go broke. The banks have a lot of underlying assets for the loans they gave. Those assets have plummeted in price and they are technically broke. Thats why one of the first mesures of the USA gov was to remove mark to market. Banks have assets on their balance sheet marked to inflated prices because otherwise they can not meet the reqired ratios. They need those assets to regain their previous prices so they can go back to normal. Its important to understand that if prices of those assests dont go up banks will eventually have to admit they are broke because they are blocking the credit system. And its important to understand that those prices were inflated and wont be inflated again, so they need the whole price level to rise a lot.

this whole discussion presupposes that they'll have a choice in this whole deflationary event.  they don't.


3. "The Fed is out of bullets" Everytime I hear this I ask a question and never get an answer: Whats stopping the Fed from monetizing more government debt? (apart from the fear of producing hyperinflation).

and i keep answering it:

Politics, the sheer size of the bad debts, the rioting that you'll see if they try (Middle East) and self preservation.  if they destroy the USD what would be their function?  what about the billions of USD wealth these bankers have?
cypherdoc
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September 30, 2011, 05:02:57 PM
 #837

oh geez.  the gold/silver share setup i was seeing this am and a few posts ago is playing out.

NEM has clearly broken the perfect ascending wedge from this AM and is now heading down.  they walked it up to the top of the leader board to get everyone in and now they'll take em down.
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September 30, 2011, 05:27:24 PM
 #838

and you wonder why your wealth is slowly slipping away?

miscreanity
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September 30, 2011, 06:29:45 PM
 #839

@miscreanity:  you know, i haven't read a post of yours for a long while now that i agree with more.  everything you said in that last post is true and we agree on alot of things.

where we do disagree though is what you said yourself. we're in a new age of volatility where i think markets will prevent the Fed and gov't from walking the thin narrow line you think they'll be able to in order to achieve price stability.  that would be too easy.  i believe in cycles where markets swing from extreme to extreme, ie, boom bust, panic to greed, giddiness to despair.  this is how traders make money.  they will force these swings to strip the little guys of their money.  we're at a price peak now; we'll be at a price trough in a few years.

I think it's hilarious that we agree on so much, yet have such a profound difference on one or two niggling points.

The Fed's purpose was to mediate those cycles. Also, remember that there is no single cycle: there are many for each sector and at different scales. Dismissing the multi-generational cycles in favor of a yearly cycle is folly. The former overrides the latter every time.

... its clearly obvious that all markets including pm's are moving inversely to the USD almost on a tick for tick basis.  this is the inverse correlation i have been talking about.  IMO this means the USD is the dog and all other markets including gold are the tails.

The dollar has been declining for a century. Gold has been rising for a century. This inverse correlation is nothing new: it's been present for longer than anyone reading this has been alive.

i put on my first UST short via TBT a few minutes ago.  there have been a couple of compelling articles published recently about a double top in UST's and you know how i like technicals.  THIS is what could be different than 2008.  and i think it will also help in creating a stronger USD.

Welcome to the club! I still prefer buying puts on TLT, but to each his own. I'm also still wary of committing in size - there could very easily be a spike that rattles investors and triggers stop-loss orders.

if the bankers have already been bailed out (debatable yes) then a deflationary crash would allow them to buy things up at the bottom for pennies on the USD, yes?  at least those able to survive.  i think they've made plans for this scenario.

Yet the banks are still exhibiting signs of stress (piles of bad debt still on their books, major civil and possibly criminal lawsuits, political and public ire, etc.). Apparently, they haven't been bailed out enough. I'd be more interested in knowing who owns the real assets and gold than pieces of paper.

another deflationary development:  junk bonds have gone into the tank since July.  small businesses?  toast.

where's the growth and jobs there?  inflation?  i think not.

Conflating asset value deflation with monetary inflation results in nonsensical conclusions.


They still have crude instruments - backed into a corner with nothing other than fists, a booming voice and a printing press. Lie to the world so reason is drowned out, beat the banks into providing funding for gov't and print to keep the economy moving.

and its forming a picture perfect ascending wedge.  we know how those resolve.

And we know that chart formations are 100% guaranteed. "Past performance is not necessarily indicative of future returns."

Should I point at the bear trap now?


As mentioned earlier in this thread: Soros dumped almost all holdings in the GLD ETF. This is what has been hawked as "gold". He immediately turned around and bought gold mining shares with the proceeds.

The article plays on ignorance of the dichotomy in paper and physical gold, as well as the difference between bullion and mining shares. It is nothing more than a plausibly authoritative-sounding piece of propaganda that anyone who understands how the precious metals industries work can see right through. Therein lies the power of the post - very few people understand the precious metals industries.

i am an employer.  i have never had such wage control power since i've been in business since 1993.

i don't offer health care or a pension plan yet i have dozens of apps for any openings i advertise.  i'm also seeing older ppl enter the workforce that will accept lower pay than younger ppl b/c of the squeeze Ben's put on them.

Have you run numbers on the wonderous forced healthcare plan? Does your business manufacture or produce anything real?

Desperation indeed. Let's get non-linear. What do the people who don't have jobs do? If they can't support themselves, is it reasonable to expect that many will move back with family - perhaps with those same older people you're employing? This is a foregone conclusion, as it's already happening. The entrepreneurial-types might try to stake their claim in another country that has better economic prospects than the dying western nations, which completely removes that higher level of productivity from the domestic pool.

Now how do households function with the additional financial burden of extra members? Savings can be tapped to make up any difference, greater wages or benefits might be demanded, etc. On the plus side, those unemployed who double up could provide support to the income-earner(s). If that support is not financial, the aforementioned results are still likely.

What seems like a boon to (non-manufacturing or agricultural) business owners now has a greater likelihood of turning out to be a pitfall later.

this whole discussion presupposes that they'll have a choice in this whole deflationary event.  they don't.

In the end, no. But they've been quite adept at putting doomsday off for quite some time now, haven't they?

Politics, the sheer size of the bad debts, the rioting that you'll see if they try (Middle East) and self preservation.  if they destroy the USD what would be their function?  what about the billions of USD wealth these bankers have?

So linear and US-centric. Banks don't operate in the USD arena alone. They also deal in gold, among other assets.

Next: if a billionaire were to see 50% depreciation his USD holdings, he'd just be a half-billionaire. He won't be hurt by that, unless you consider construction of a man-made island critical to his quality of life. On the other hand, a baby-boomer with $100,000 retirement fund losing 50% of that could mean the difference between being able to retire or working to his dying days. Going more extreme, a 90% depreciation in USD means the billionaire is only a mega-millionaire and the former retiree might as well be penniless.

Stick with the rioting.

oh geez.  the gold/silver share setup i was seeing this am and a few posts ago is playing out.

NEM has clearly broken the perfect ascending wedge from this AM and is now heading down.  they walked it up to the top of the leader board to get everyone in and now they'll take em down.

Have you been paying attention to what day it is? I'll give you a hint: it's the last day of the month. It also happens to be the last day of the quarter. Reports on performance are due, which means profits are taken to shore up balances that make clients think happy gumdrop thoughts when they get their statements. Anyone who's been trading longer than a few years ought to recognize these patterns.

and you wonder why your wealth is slowly slipping away?

Hmm...



No.

That sure doesn't look like 2008, does it?

Since you admire technicals: a new high in September 2010, a higher low in March 2011 (from previous low in January 2010) with a supported retest three months later, another new high this month... should we contrast this with the broader equity markets? Because technical chart patterns are guaranteed, of course - especially short-term ones. </sarcasm>

Did you even bother to take into account dividends? Quit making this so easy for me - you were offering genuine challenges recently. Smiley
miscreanity
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September 30, 2011, 06:36:30 PM
 #840

Btw, the mainstream media has not commented on this piece of news: The Russian central bank has started to offer gold backed loans: http://af.reuters.com/article/metalsNews/idAFL5E7JQ0Q020110826

I haven't seen anything about China's gold-backed bank accounts, either. This makes it easy for anyone with one of these accounts to effectively use gold as a transactional medium - instant conversion from gold savings to a spending currency and vice versa - with banks getting transaction fees, obviously.

1. Stagflation: There is not going to be growth (real growth, GDP could improve) and meaningful reduction of unemployment, while at the same time prices are going to go up. Keynesians are still in denial about stagflation. They keep repeating that salaries can not go up as long as unemployment is high, and therefore prices can not go up either.

... salaries and prices are already going up while unemployment is high and it will accelerate.

I can't help but interject here. Nominal prices can rise despite growing inflation because a smaller number of people are participating in the active economy. This is the same reason that unemployment appears to remain under 10% - fewer people are qualifying for the politician-defined term "unemployed" even as a greater percentage of the entire population aren't working. This doesn't require QE to happen; gov't meddling in other ways is more than enough.

Nominal depictions versus real performance. It's like trading in your luxury sports car for an economy model because times are difficult, but you notice that the new car's speedometer starts at 100km/h. Suddenly, you're speeding every time you get behind the wheel - by all measures taken from that speedometer, it's exciting because you've been breaking records across the board. In reality, if you look out the window you'd see you aren't actually going any faster and everyone else is laughing at you for being so gullible.
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