Gold: I smell a trap

[cypherdoc]

I agree that it's a long-shot right now.  Wall St. has more than enough assets to play with and manipulate, I don't think BTC is on their radar at this point.  Then again, the BTC market is so small it really only takes one or two big investors.

be patient, it will come and perhaps sooner than we all think.

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[cypherdoc]

@cypherdoc:

You are soooo right.

Gold will surprise almost everyone when it goes down hard against the USD. We have have seen already the top today (went short at 1766 $ today) . But even if not, it will start from a bit higher levels and still has huge downside.
Based on my chart analysis, 1300-1400 is the first target, but will fall soon to lead then to 1000-1100. And then we will see. If this does not hold, 600-800 are next.

ah, S3052 my favorite tech analyst!

yes, i think this will be the short of a lifetime.

[S3052]

Agree with the addition that Silver will be going down even harder and further than Gold (in my humble p.o.v)

[cypherdoc]

I still suspect that a day will come when all the holders of paper gold and paper silver will wake up and panic.  The dwindling COMEX inventories seem to confirm that it is inevitable.  On that day, all hell will break loose.

But I don't know if that day will come soon, or even really ever.  People that underestimate the market's ability to outlast them get burned, even when they are right.

don't forget these papers were funded with debt based USD's.   if the USD skyrockets they'll be forced to liquidate back to those same USD's which will plunge the gold/silver price.

[cypherdoc]

I agree that it's a long-shot right now.  Wall St. has more than enough assets to play with and manipulate, I don't think BTC is on their radar at this point.  Then again, the BTC market is so small it really only takes one or two big investors.

actually i disagree that its not on their radar yet.  i think they've entered the market already but are patiently accumulating.  Ruxum is a big deal for BTC.  they're professionals entering the merchant economy which will really help.  derivatives for btc which will also be huge.

[CurbsideProphet]

@cypherdoc:

You are soooo right.

Gold will surprise almost everyone when it goes down hard against the USD. We have have seen already the top today (went short at 1766 $ today) . But even if not, it will start from a bit higher levels and still has huge downside.
Based on my chart analysis, 1300-1400 is the first target, but will fall soon to lead then to 1000-1100. And then we will see. If this does not hold, 600-800 are next.

Can you expand a little on what you're seeing?  The bull run in gold has been long, so a correction makes sense, I just don't see it yet.  All I see is it trending within its channel as it has at 1400, 1500, 1600.....  

Outside of the charts, I can see some evidence.  No QE3.  Both the AUD and CAD (ie. the commodity currencies) basically back to parity.  Then again CHF still taking off...

Speaking of which, are you short CHF?  Seems to be the safer play to me.  If gold drops, so will CHF.  The Swiss have come out publicly and stated they're trying to devalue on top of that.  Seems like more avenues for success.

[S3052]

I am indeed short CHF since today (larger position) and Gold/USD (small initial position) on top

[Murwa]

@cypherdoc:

You are soooo right.

Gold will surprise almost everyone when it goes down hard against the USD. We have have seen already the top today (went short at 1766 $ today) . But even if not, it will start from a bit higher levels and still has huge downside.
Based on my chart analysis, 1300-1400 is the first target, but will fall soon to lead then to 1000-1100. And then we will see. If this does not hold, 600-800 are next.

ah, S3052 my favorite tech analyst!

yes, i think this will be the short of a lifetime.

Demand for gold is too high. Is somehow gold drops to 1300 dues to manipulation i would sell everything and buy gold.

Silver was managed to be subdued because the market is small.

[cypherdoc]

note the increasing slope of the ascent lines.  caution.  this is how parabolic blowoffs pop.

[cypherdoc]

the 10 yr UST is down to where we were in 12/08.  it screams deflation.  who you gonna believe?

[kjj]

I still suspect that a day will come when all the holders of paper gold and paper silver will wake up and panic.  The dwindling COMEX inventories seem to confirm that it is inevitable.  On that day, all hell will break loose.

But I don't know if that day will come soon, or even really ever.  People that underestimate the market's ability to outlast them get burned, even when they are right.

don't forget these papers were funded with debt based USD's.   if the USD skyrockets they'll be forced to liquidate back to those same USD's which will plunge the gold/silver price.

I hear this version a lot, and I don't really believe it.  If COMEX needs to switch to paper settlement, people will be confronted with a very explicit reminder that gold and silver are not the same as pieces of paper with GLD and SLV written on them.  I would expect the physical market to diverge wildly from the paper market at that point.  In fact, if this scenario plays out, it will be the severing of the link between the two markets that sets it all off.

[Yuvea]

very interesting discussion going on here, will keep reading

[cypherdoc]

I still suspect that a day will come when all the holders of paper gold and paper silver will wake up and panic.  The dwindling COMEX inventories seem to confirm that it is inevitable.  On that day, all hell will break loose.

But I don't know if that day will come soon, or even really ever.  People that underestimate the market's ability to outlast them get burned, even when they are right.

don't forget these papers were funded with debt based USD's.   if the USD skyrockets they'll be forced to liquidate back to those same USD's which will plunge the gold/silver price.

I hear this version a lot, and I don't really believe it.  If COMEX needs to switch to paper settlement, people will be confronted with a very explicit reminder that gold and silver are not the same as pieces of paper with GLD and SLV written on them.  I would expect the physical market to diverge wildly from the paper market at that point.  In fact, if this scenario plays out, it will be the severing of the link between the two markets that sets it all off.

most of the ppl IMO that own GLD or SLV are just investors who want to ride the wave.  they want a fast exit when it pops.  if the stock, commodity market declines force a risk off margin call which drives the USD up, the gold price will drop and the last thing those GLD, SLV investors will want is to switch into physical bullion.  they'll want their USD's back ASAP.  as i suspect as well, GS and JPM have probably bought into these vehicles as well driving the parabolic move only to sell out quickly at the top along with establishing short positions.

[The_JMiner]

the 10 yr UST is down to where we were in 12/08.  it screams deflation.  who you gonna believe?

Yes, except you forget in 2008 the credit markets were frozen and people were not sure if the banks had the capital (paper) to cover their losses and deposits. This time around we KNOW they have the capital and so do many corporations that made 25%+ profits this past few years and that these huge mountains of money are sitting there untouched. The second that money is released into the economy (my prediction is it will chase commodities) inflation is going to ram us hardcore. We already got a taste of it early this year when there were "signs of a recovery" these companies started just barely opening the tap and inflation was on everyones radar ( a reason gold is at the price its at imo).

[kjj]

Ahh, we are talking about very different scenarios.

Your are looking at a replay of 2008 when everyone had to sell whatever they had to raise cash, which caused the prices of both metals and papers to fall.  I'm looking at a day when someone stands for delivery of their silver futures contract at COMEX and gets told that they can't deliver the physical metal so they have to take the cash value.

[cypherdoc]

the 10 yr UST is down to where we were in 12/08.  it screams deflation.  who you gonna believe?

Yes, except you forget in 2008 the credit markets were frozen and people were not sure if the banks had the capital (paper) to cover their losses and deposits. This time around we KNOW they have the capital and so do many corporations that made 25%+ profits this past few years and that these huge mountains of money are sitting there untouched. The second that money is released into the economy (my prediction is it will chase commodities) inflation is going to ram us hardcore. We already got a taste of it early this year when there were "signs of a recovery" these companies started just barely opening the tap and inflation was on everyones radar ( a reason gold is at the price its at imo).

they don't have the capital to cover all the bad debt on their books.  billions of bad residential and now commercial RE sit marked to model, ie, fictitious valuations.  why do u think FASB was forced by threat of Congress to relax the rules?  if they were forced to mark to market you'd hear a detonation the likes of a nuclear bomb.  look at the charts of the financials.  it tells the whole story.  BAC is going to be the next Lehman.  their exposure to European sovereign debt is significant altho not as large the the French or German banks. 

all that cash in excess reserves and in corps balance sheet is stockpiling for the next crisis.  the banks refuse to lend b/c the consumer is in terrible shape and a huge risk.  no wage inflation here boys and thus consumption is gonna slump big time.  only a few large corps have signif cash stores like Apple but this is far from the typical case.  have you looked at the small biz survey from NFIB?  heres a quote from the President:

"Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great," said NFIB Chief Economist Bill Dunkelberg. "At the two year anniversary of the expansion, the Index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the 'Small-Business Pessimism Index' from now on."

http://www.scribd.com/doc/61924141/Small-Business-Optimism-August-2011

small biz is what drives employment and innovation in this country.  its in the TANK.  the large corps with cash piles are few and far btwn such as Apple.  why do they refuse to invest?  b/c they're bracing for the storm.  its here right now.  this next downturn will sweep all inflation assets under the rug for the next decade.

[cypherdoc]

oh, and i forgot, Bernanke just told you the economy will be in the tank for the next 2 yrs by being forced to keep interest rates at 0% until mid 2013.  and BTW what do you think the drop in the 10yr yield will do to banks net interest margin?  KILLS IT.

now they can't make money making loans even if they wanted to which they aren't.  and whats an economy w/o any debt based money?  DEAD.

[cypherdoc]

Ahh, we are talking about very different scenarios.

Your are looking at a replay of 2008 when everyone had to sell whatever they had to raise cash, which caused the prices of both metals and papers to fall.  I'm looking at a day when someone stands for delivery of their silver futures contract at COMEX and gets told that they can't deliver the physical metal so they have to take the cash value.

NO.  what we're looking at is Phase 2 of the same story which will be worse and much more brutal to everything including gold.

[miscreanity]

I hear this version a lot, and I don't really believe it.  If COMEX needs to switch to paper settlement, people will be confronted with a very explicit reminder that gold and silver are not the same as pieces of paper with GLD and SLV written on them.  I would expect the physical market to diverge wildly from the paper market at that point.  In fact, if this scenario plays out, it will be the severing of the link between the two markets that sets it all off.

Divergence of the paper and physical markets is likely closer than most expect, and many will be caught completely unaware.

Following COMEX numbers daily, I strongly suspect that paper settlement has been occurring for some time and even increasing of late. There are frequent disparities between the delivery notices (physical metal to be delivered from a bullion bank to a client), open interest (number of contracts outstanding and awaiting delivery) and actual metal reported as being delivered. Even after accounting for loans and swaps, there is a gap. The most plausible conclusion is that contracts are being settled for cash instead of physical; cash settlements are technically illegal when delivery has been requested.

From looking into information from the CME group, it appears that JP Morgan has little to no gold, silver or platinum. Other major bullion banks still have reasonable reserves, but the number of contracts standing for delivery has been putting critical pressure on warehouse stocks of the metals. Normally, delivery is made within the first few days of the month. For the past several months, delivery has been intermittent and run down to the wire, taking all month and what appear to be many cash settlements.

In addition, COMEX warehouse stores of gold, silver, platinum and palladium are dangerously low. It wouldn't take many contracts to overwhelm capacity and pull all of the metal out. During the knockdown in May, GLD and SLV were bought at the bottom in mass quantity as investors were panic selling. I think it very likely that JP Morgan acquired many shares. Since then, there has been significant activity with large quantity of metal being moved out of both ETFs. That would act as a supply of physical for JP Morgan to cover its sizable short obligations and prevent a default of both the banks and the exchanges while keeping it under their control.

Even with ETF metal, the global demand for physical may overwhelm JP Morgan, et al. This could be the reasoning behind the continual delays in delivery, persistent cash settlement and suppression of prices. If the paper short is all that's left and no longer linked to physical, the paper price could be slammed to zero while physical becomes nearly unobtainable.

This is mostly inferred from activities going on behind the scenes, but seems to be the most plausible explanation so far. It is a game of musical chairs and having gold means you get a seat. Without gold, you're out.

While I do think it could be eventually, Bitcoin is not yet mature enough to alleviate that situation and won't be for some time yet.

most of the ppl IMO that own GLD or SLV are just investors who want to ride the wave.  they want a fast exit when it pops.  if the stock, commodity market declines force a risk off margin call which drives the USD up, the gold price will drop and the last thing those GLD, SLV investors will want is to switch into physical bullion.  they'll want their USD's back ASAP.  as i suspect as well, GS and JPM have probably bought into these vehicles as well driving the parabolic move only to sell out quickly at the top along with establishing short positions.

There is only so much margin liquidation that can occur. As the market trends toward 100% collateral, raising margin requirements will no longer be an option for suppression. Nor will there be anywhere near as much panic selling. Physical gold will eventually be available only to institutional trading and very wealthy private investors as the price rises.

Do not discount fund management (hedge, money market, etc) as a prime source of GLD/SLV investment. The ETFs are attractive to institutional investors because of their liquidity. It is unlikely that most people realize what those ETFs are, let alone trade them.

Those looking to "ride the wave" in paper without holding physical do not seem to understand money or the importance of physical bullion. They also tend to sell at the worst possible times due to reliance upon conventional wisdom.

I agree with your take on JPM and other banks profiting from the volatility in precious metals. They will be among the greatest beneficiaries.

[miscreanity]

NO.  what we're looking at is Phase 2 of the same story which will be worse and much more brutal to everything including gold.

The influence the US wields in the global arena has diminished. It has become much more difficult to manipulate circumstances for its own benefit.

Precious metals downside is limited. Imminent re-inflation efforts, whether publicized or surreptitious, will continue propping up equities at the expense of the dollar.