Gold collapsing. Bitcoin UP.

[cypherdoc]

Gold collapsing.  Bitcoin UP.

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[lebing]

misreality,

you keep saying "it iz tim".  either you're lying to me or you're an idiot.  which is it?:

A while back, I stated that I would no longer offer time estimates. The "markets" have been destroyed and offer no ability of price discovery now. I also had said that a dollar spike with no correction before consolidation, combined with a commodity collapse (esp. gold), would indicate paper/physical separation; general lack of dollar support in terms of real assets.

I do like the ad hominem, though. You'll end up eating your words regarding gold. Maybe you'll donate some of your BTC to a worthwhile organization when it happens.

The price for gold will surely go down rapidly as the divorce from paper to physical occurs. Are you saying that the price will rise even in excess of where it is now even with the split? I'm not so sure.

[rpietila]

misreality,

you keep saying "it iz tim".  either you're lying to me or you're an idiot.  which is it?:

A while back, I stated that I would no longer offer time estimates. The "markets" have been destroyed and offer no ability of price discovery now. I also had said that a dollar spike with no correction before consolidation, combined with a commodity collapse (esp. gold), would indicate paper/physical separation; general lack of dollar support in terms of real assets.

I do like the ad hominem, though. You'll end up eating your words regarding gold. Maybe you'll donate some of your BTC to a worthwhile organization when it happens.

The price for gold will surely go down rapidly as the divorce from paper to physical occurs. Are you saying that the price will rise even in excess of where it is now even with the split? I'm not so sure.

When the actual "USD/$1 face" price of 90% circulated coins started to go up, while the paper silver was crashing, in Sept. 14-16, 2008, I had less than a week before the friendly SWAT team from Finnish government raided my home and offices, confiscating almost all gold and silver that they could find. When they gave them back several months later, the "paper discount" had already disappeared.

Guys, if you want to buy silver right now, consider buying paper! Last time it gave a windfall to those who dared to buy at $9/"oz" in 2008. Of course there is a risk that it will not be honored, but last time it was. Don't think "this time it is different". Have your physical stash in a safe place, but don't run into the already thin market to buy more - in the event that COMEX defaults, your present stash will be more than enough of an insurance.

[cypherdoc]

It was paper trading alone that stove off this inevitability. There is yet a long way to go to mid 1990's levels.

yes, it was the paper gold that contributed to the drive into the $1923 top in Aug 2011.  USD's were leveraged into paper gold and that is now reversing.

this is what miscreanity has ass backwards.

[MatthewLM]

Demand goes down:


Supply goes up:


Dur.

It was paper trading alone that stove off this inevitability. There is yet a long way to go to mid 1990's levels.

1. Where is the investment demand in that picture?

2. If gold were to go down to mid-90s levels then the gold production would fall to almost zero as it wouldn't be profitable to mine gold. So that's about 95 million ounces of gold supply gone.

[miscreanity]

If miscreanity were correct we would be seeing a divergence between COMEX and London Fix—which is totally not happening.

Those are both paper gold prices. Paper does not diverge from paper.

[sunnankar]

If miscreanity were correct we would be seeing a divergence between COMEX and London Fix—which is totally not happening.

Those are both paper gold prices. Paper does not diverge from paper.

Correct, until it does. But it is not right now.

[miscreanity]

yes, it was the paper gold that contributed to the drive into the $1923 top in Aug 2011.  USD's were leveraged into paper gold and that is now reversing.

Paper prices reflect demand for the underlying asset. Expectation of actualization should physical be requested is the basis for acceptance of paper trading. Since ABN AMRO defaulted, that acceptance of paper is being rejected - it's now physical or nothing.

Result:

Paper trading for gold will be based on the value of paper. Physical metal will be valued independently.

If paper will be traded for physical on exchanges, it will be on a cash basis as Jim Sinclair has stated - no leverage will be permitted. If the west can continue the market charade and obscure the purpose of holding real assets like gold, the paper price may still plummet further rather than retaining or even strengthening the connection.

So yes, leverage into paper gold is unwinding and that price may continue falling.

[cypherdoc]

so i just called my local gold coin dealer and asked the price of a 1 oz Krug.

answer:  $1450 which is a 4% premium over the current spot of $1394.  i then asked what is their usual premium markup and she said it varies anywhere from 3-4.5% which has not varied for many years.  nothing unusual.

but i'm willing to accept your supposition miscreanity and sell you my remaining gold coins for a mere $2500/oz which is a great deal given what you supposedly believe.

[Adrian-x]

answer:  $1450 which is a 4% premium over the current spot of $1394.  i then asked what is their usual premium markup and she said it varies anywhere from 3-4.5% which has not varied for many years.  nothing unusual.

Oh how sad to think just a few months ago I cashed out of Bitcoin at around an average of $12 to buy gold coins, After reading this tread religiously. (Bitcoin hasn't crashed, its my commons sense investing that has crashed)

Silverbox Update:
Gold:  -6%
Bitcoin:  +71%
Diff:  +77% advantage Bitcoin

It's a little silly to gloat about these most recent movements.  They're going to be corrected.  This simply can't last.

The pin that tiped the scale @ about $9/BTC

[SkRRJyTC]

so i just called my local gold coin dealer and asked the price of a 1 oz Krug.

answer:  $1450 which is a 4% premium over the current spot of $1394.  i then asked what is their usual premium markup and she said it varies anywhere from 3-4.5% which has not varied for many years.  nothing unusual.

but i'm willing to accept your supposition miscreanity and sell you my remaining gold coins for a mere $2500/oz which is a great deal given what you supposedly believe.

Why do you still own gold coins?

[cypherdoc]

so i just called my local gold coin dealer and asked the price of a 1 oz Krug.

answer:  $1450 which is a 4% premium over the current spot of $1394.  i then asked what is their usual premium markup and she said it varies anywhere from 3-4.5% which has not varied for many years.  nothing unusual.

but i'm willing to accept your supposition miscreanity and sell you my remaining gold coins for a mere $2500/oz which is a great deal given what you supposedly believe.

Why do you still own gold coins?

very small # compared to before. 

mementos of an Ancient Age.

[paraipan]

...

mementos of an Ancient Age.

True, true, just like Yap stone money. "Yapbug" and his stash...

[molecular]

The price for gold will surely go down rapidly as the divorce from paper to physical occurs. Are you saying that the price will rise even in excess of where it is now even with the split? I'm not so sure.

When the actual "USD/$1 face" price of 90% circulated coins started to go up, while the paper silver was crashing, in Sept. 14-16, 2008, I had less than a week before the friendly SWAT team from Finnish government raided my home and offices, confiscating almost all gold and silver that they could find. When they gave them back several months later, the "paper discount" had already disappeared.

excuse me, WHAT? Your metal was confiscated in 2008. On what grounds? Please, can you tell this story in a bit more detail?

Guys, if you want to buy silver right now, consider buying paper! Last time it gave a windfall to those who dared to buy at $9/"oz" in 2008. Of course there is a risk that it will not be honored, but last time it was. Don't think "this time it is different". Have your physical stash in a safe place, but don't run into the already thin market to buy more - in the event that COMEX defaults, your present stash will be more than enough of an insurance.

You can't be taking to me because my stash is miniscule... Isn't it a good time to increase ones physical silver/gold stack? I wouldn't even know how to buy paper silver. Seems like pure gambling to me anyway.

[miscreanity]

The London Fix comes from the London Bullion Market... It is simply the securitized market at COMEX that drives the curves for price expectation.

I actually think that Bitcoin has highlighted the Achilles Heel of gold markets... That gold has a proof problem. The securitized gold markets provide much needed liquidity, and it is that liquidity that has been driving the price increase over the last decades because gold is goddamn heavy. Once belief in the value of that liquidity is eroded, so will the price support that it provides.

Your assertion seems to assume that the LBMA has not been acting as a fractional banking system, and actually holds sufficient physical to satisfy all outstanding claims.

Gold does not really have a proof problem so much as it has a scaling problem (it can be argued that counterfeiting dollars is easier than faking physical gold). At local levels, it functions well. At large scales, physical limits preclude efficiency unless sufficiently large quantities or relative value is used in trade.

Yes, securitization provided liquidity in a convenient form, just like gold certificate dollars did (there are >150 billion grams of gold, making liquidity less of an issue than suggested). The value of that liquidity enabled gold to function on a wider scale and at higher volume than it could normally. It also concentrated custodial trust for too many participants. With only governments and other major institutions participating in the gold market, it becomes very difficult to obscure supply and demand. When millions of individuals are involved, accountability is fleeting due to societal momentum - who watches the watchers?

The price support for securitization will collapse, but that concerns the securitization instrument only; the underlying asset still has value. Physical gold remains a very strong store of value, and no amount of price decline changes the number of protons and neutrons in a gold atom.

[miscreanity]

so i just called my local gold coin dealer and asked the price of a 1 oz Krug.

American gold markets will have a delay. There is little understanding of gold's nature in the west, not to mention lack of funds among much of the populace. Supply shortages starting elsewhere take time to propagate, like an earthquake.

Let's accelerate the issue: ask your dealer what the price is for physical delivery of 32,150 troy ounces (1 metric ton). See what the reply is both hypothetically and practically, with and without shipping costs.

[miscreanity]

That doesn't do anything but highlight the liquidity problem. If gold is illiquid that does not make it more valuable. That makes it less valuable.

With appropriate valuation, liquidity is determined by physical supply, not overly-diluted fractional shares. Gold is too scarce for its present price in fiat denominations.

If gold were $31,000/oz, one gram would be $1,000 of savings. Not everyone would be able to scoop up kilos of the metal. While not ideal for transactional purposes, it functions very well for debt and trade settlement.

The same situation applies to Bitcoin, with the difference being that Bitcoin is used by a tiny subset of those using gold; i.e. the room for growth is much greater for Bitcoin than gold.

[MatthewLM]

Where is it? It is in the price divergence.

As you can see, it took years for the price divergence from "investment demand" to wind up, and it will take a little while for it to wind down. Gold mining will necessarily become unprofitable because we already got all the easy gold. We are waaaay past peak gold, but demand for the phys is also way off. And there is little reason for the paper markets, because people are realizing that the risk profile of securitized gold does not actually help you in the scenario in which there would be high demand for the otherwise useless metal... Perhaps a fashion trend can reverse things.

Gold has various uses such as in electronics and dentistry, not only as jewellery and as money. But the most important aspect for the price right now should be the demand for gold as an investment and/or money.

[tvbcof]

...
And yes, the most important aspect for the price right now is the demand for securitized gold—that demand is waning.

Couldn't happen to soon in my opinion.  To bad for the people who will realized in one big batch that the value is actually right around zero.

[tvbcof]

...
And yes, the most important aspect for the price right now is the demand for securitized gold—that demand is waning.

Couldn't happen to soon in my opinion.  To bad for the people who will realized in one big batch that the value is actually right around zero.

Yup. And once you remove that value what you are left with is about $400/oz gold.

I'm betting on several things:  1) Absence of an outlet for demand via the paper markets, and observation of tightness in the physical markets will result in increased interest in physical PM's.  2)  The $400-ish baseline observed since the 80's bubble was a result of PM's not being a competitive asset relative to other forms of investment, and turmoil and uncertainty with instruments displaying counter-party risk will preclude such an environment for the foreseeable future.  Very possibly in a BIG way.

Time will tell.

That would be neat. Hopefully Bitcoin is trading for a similar rate when this happens. I feel the need to diversify a bit and 1 bitcoin for 1 ounce of gold would suit me fine for a few ounces.

I'm only half joking that I wish to see 1BTC/kg-Au.  The supply/demand functions favor valuations in that range by my seat-of-the-pants guestimations.  But I won't be holding out that long before starting my move.