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- Gold, Silver ETFs Not Immune To The Broad Sell-Off
- Welcome To The Collapse Of 2011
- UBS' Shady Dealings Are A Lehman Deja Vu
- Investors Find Refuge In U.S. Dollar, Treasury ETFs
- Non-Dollar Currencies Tank
- India Markets Thursday Wrap-Up: Sensex Takes 4% Hit
- Billboard Signals of Collapse
- WATCH: James Turk Interviews James McShirley
- Gold continues to correct as forecast in a 4th wave pattern
- FOMC Focuses on Slower Growth, Eyes Further Easing, Gold Lower, Equities Fall
- WATCH – Gold and Silver News 9.22.11
- An important chart you cannot afford to ignore any longer
- Commodities are getting hammered this morning... Have now given up all gains for the year
- Global SELLOFF: The U.S. dollar and Treasurys are up... Everything else is down
- Time Grows Nearer to Begin Deploying Some Gold
- BrotherJohnF – Silver Update – “GATA” – 9.21.11
- Did the Fed Just Clear the $USD for Takeoff?
- Here we go....
- There's a Raging Battle in Gold Below $1,800 - James Turk
- Swiss first to use gold in securities payments
- Elko, Nevada takes the gold boom with a grain of doubt
- Is gold becoming Theglobe.com? - Comparing gold and 1990s dot-com bubble
- Gold and Stocks Plunge, Dollar and Govt. Bonds Rally, Fed "Setting Up for More QE"
- Compromised Global Markets Thwart Any Possibility of Economic Recovery: Gold to Benefit
- Gold & Silver Market Morning, September 22, 2011
- Chavez Decision to Recall Overseas Gold Reserves Could Reflect Sanctions Fear
- Escape Velocity
- What Future US Monetary Policy Means For Gold Prices--¤
- What Future US Monetary Policy Means For Gold Prices
- This past week in gold
| Gold, Silver ETFs Not Immune To The Broad Sell-Off Posted: 22 Sep 2011 06:21 AM PDT By Tom Lydon: While the equities markets are taking a nosedive on Thursday, the commodities asset class, including gold and silver exchange traded funds (ETFs), have been dragged down along with the markets, mirroring the broad market sell-off of 2008. iShares Gold Trust (IAU) was down 2.76% at last check, and the ETFS Physical Silver Shares (SIVR) was down 8.20%. Gold contracts for December delivery dropped below $1,750 an ounce, a four-week low, while silver contracts for December delivery fell more than 8%, slipping close to $37 an ounce, reports Matt Day for The Wall Street Journal. "You got to a point today when [losses across markets] accelerated, that people will be liquidating whatever they can," Frank Lesh, a broker with FuturePath Trading, said. On Wednesday, gold prices began falling after news of the Fed's $400 billion plan to increase its holding of long-term Treasuries. However, the Fed's warning of "significant downside risks" Complete Story » |
| Welcome To The Collapse Of 2011 Posted: 22 Sep 2011 06:05 AM PDT By Karl Denninger: Welcome my friends to the collapse of 2011. Remember the mantra that "consumers have delevered" which has been run over the last two years as an incessant bark from the media, attempting to goad you, the consumer, into more spending and more consumption to "lift the economy." This claim has been a lie and a fraud upon the public and the new Fed Z1 makes this clear. The peak household credit liability was $13.92 trillion. It currently stands at $13.30 trillion, a reduction of a mere 4.6%. This all came from home mortgages going ka-boom; $10.6 trillion to $9.9 trillion, a reduction of $700 billion. Total net reduction in liability was $620 billion; ex-mortgages consumer leverage has actually increased. The DAX is now down nearly 10% in two days and the rest of the global markets are reacting in the same sort of fashion. This should not surprise; the same Complete Story » |
| UBS' Shady Dealings Are A Lehman Deja Vu Posted: 22 Sep 2011 05:53 AM PDT By Jake Zamansky: Last Thursday marked the three-year anniversary of the spectacular collapse and bankruptcy of Lehman Brothers. Fittingly enough, the next morning a UBS (UBS) trader in London was arrested on fraud charges for his role in a trading scheme that triggered losses of at least $2.3 billion at the increasingly rickety Swiss investment bank. Lehman's collapse shattered the world financial markets in 2008 and has left a legacy of decimated retirement and life savings accounts for ordinary, Main Street investors. The revelations that a UBS trader cooked the books for perhaps as long as three years raises the specter of a banking system so devoted to greed it will ignore reality. Wall Street's love of easy money, along with its uncanny ability to look the other way when the truth is inconvenient, are by now well documented. Investors were sickened to learn of the risky bets and 30-1 leverage that Lehman Complete Story » |
| Investors Find Refuge In U.S. Dollar, Treasury ETFs Posted: 22 Sep 2011 05:52 AM PDT By Tom Lydon: The uncertain global outlook and the heavy blow to global stocks on Thursday pushed investors to the relative safety of U.S. dollar and Treasury exchange traded funds. Powershares DB US Dollar Bullish Fund (NYSEArca: UUP) was up 1.00% at last check; the fund has recently crossed its 200-day EMA. The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was up 3.49%. "A big-time asset allocation trade is going on, which seeks the safety of U.S. dollar fixed-income Treasury product," Chris Rupkey, managing director and chief financial economist at Bank of Tokyo-Mitsubishi UFJ, commented, reports Ellen Freilich for Reuters. Yields on 10-year Treasury notes touched 1.76%, a 60-year low, earlier during the day. "Investors know the Fed will be buying bonds so they think Treasuries Complete Story » |
| Posted: 22 Sep 2011 05:47 AM PDT |
| India Markets Thursday Wrap-Up: Sensex Takes 4% Hit Posted: 22 Sep 2011 05:44 AM PDT By Equitymaster: In what was one of the weakest trading sessions over the past twelve months, the BSE-Sensex shed around 4% in today's trade. It echoed the negative sentiment across global markets after the Federal Reserve warned that the US faces an extremely dire economic outlook. The indices opened below the dotted line and continued to bleed with each passing hour of trade. The Indian stock market finally closed the day deep in the red zone. Thus, while BSE Sensex recorded a decline of around 704 points, losses on the NSE-Nifty came in at around 210 points. The Nifty dropped below the psychological level of 5,000. The BSE Mid Cap and BSE Small Cap indices were also trading extremely weak and both closed lower by over 3%. Almost 4 stocks declined for every one that advanced on the Sensex today. We believe that the knee-jerk reaction by investors should be seen as Complete Story » |
| Posted: 22 Sep 2011 04:28 AM PDT
Wow!! The billboard signals of extreme crisis are overwhelming. Three years of near 0% with no recovery. A full year of ample USTreasury and mortgage bond monetization with no recovery. Tons of cash aid deliveries to the big US banks with no recovery. Some key corporate nationalizations with no recovery. Oodles of errant stimulus programs with no recovery. Some important misdirection in home loan aid initiatives with no recovery. The US Federal Reserve admits it can do nothing more as a recovery remains elusive. The USGovt is paralyzed by disguised fascist warmongers opposed by disguised marxist collectivists, but intent on maintaining the status quo among bank fraud. An approved accounting fraud directive is kept in place to present a picture of bank solvency. Intermediate credit markets have come to a standstill. The US stock market is in tatters. The USTreasury Bond market is the only conventional rally at work. And with all these programs, developments, and events, the USEconomy moves toward a recession with relentless determination and purpose, In today's age of lying about price inflation by at least 5%, that means the recession is about to turn into a Minus 5% Recession after never exiting the recession recognized in 2009. The billboard messages are dire, ugly, dreadful, dangerous, and full of destruction, typical of systemic failure. Too bad the Keynesian textbooks do not have a chapter on banking system insolvency, or one quarter of the households living in negative equity, or central bank toxic paper pits, or global currency war, or confiscation of tyrant accounts. The ineffective monetary & fiscal policy has ushered in the nightmarish systemic failure. That is what is occurring.
MANY DIRE MARQUEE MESSAGES Big US banks remain insolvent. The claim is greater financial health versus 2008, but only because they grade their own balance sheet assets and shove much toxic paper to the USFed. As credit engines, they sputter. As USTBond carry trade mechanics, they hum along. Their REO home inventory is strangling them. DEBT DOWNGRADES TO BANK OF AMERICA, WELLS FARGO, AND CITIGROUP HAVE COME FINALLY.
Central bankers finally see the futility of attempting to recapitalize the giant insolvent hollow trees called the big banks. The banks are losing capital faster than they can take in new capital, either from gifts by central banks (toxic bond redemption) or secondary stock issuance (long gone opportunity). BIG BANK RECAPITALIZATION RECOGNIZED AS FUTILE.
The US housing market is stuck in quicksand. Low mortgage rates mean nothing to home loan applicants who must pass very strict FICA tests. They mean nothing to home loan applicants who must refinance their loans or default, suffering under the weight of negative home equity. RESUMED HOME PRICE DECLINE IN THE LAST FEW MONTHS DESPITE FALLING MORTGAGE RATES.
The USFed enjoys falling long-term rates since their credit assets rise in value. That makes the central bank look less broken. They cannot send back the so-called Excess Reserves to the big banks (actually Loan Loss Reserves) since the central bank would look more wrecked. USFED BALANCE SHEET WORTH OVER MINUS $1.3 TRILLION.
The Shadow Banking system requires $1 trillion per year in replenishment, as the bone marrow rapidly vanishes within the US banks. Mortgage bonds and asset backed financial products lead the way in colossal erosion on their balance sheets. QE3 PROGRAM NEEDED JUST TO AID THE FALLING CAPITAL IN THE GREAT DE-LEVERAGE PROCESS.
USGovt budget process has turned into tragic comedy in a powerful stalemate. The emphasis has been on spending austerity and management of the debt limit. The reality is that the limit has been reached again, probably breached. The reality is that renewed spending for urgent economic stimulus will overwhelm any budget prudence. A WORSE $2 TRILLION USGOVT DEFICIT SET FOR NEXT YEAR.
The US leaders have squandered time, money, and political capital. They have missed the opportunity for reform and remedy. Devotion to bank redemptions and avoidance of liquidation have wasted money. Vacant vapid stimulus programs have wasted time. The nation has run out of time. Breakdown and panic have begun in earnest. The political arena has a closed door toward well conceived actions. THE POLTICAL ARENA AS GIGANTIC OBSTRUCTION TO THE USECONOMY, WITH MASSIVE DEFICITS ACTING LIKE CLOTS.
The central bank franchise system is being recognized for its failure, ineptitude, helplessness. The system is saturated with debt. The solution to treat the excess of debt is to add to the debt levels and to let loose the dogs of monetary hyper-inflation. CENTRAL BANKS SEEN AS PART OF THE PROBLEM, MAKING CONDITIONS WORSE.
A bank run has begun in Europe, with epicenter in France. The land of France belongs among the PIGS nations, since the big French banks are the primary broken shepherd creditors for the PIGS. They hold more than all the other nations combined almost in Greek debt. They own huge levels Italian debt. Siemens and Lloyds have abandoned France, yanking money out. A BANK RUN IN FRANCE GATHERS SPEED TO MAKE A CRATER IN EUROPEAN BANKING SYSTEM.
China had been gobbling up PIGS sovereign debt bought at discount. They took a truckload from Greece and Portugal, in return for consideration on key conversions of assets or gold bullion. They are in talks with Italy. But they have a different treatment for France, pulling out of the currency market forward and swap contracts in trading lines for the benefit of French banks. China is angry about the European Union decisions against a market economy. CHINA HAS BECOME A PLAYER IN EUROPEAN BANKING TO BE RECKONED WITH.
The Competing Currency War spreads like wildfire, still not properly recognized, seen as isolated actions by central banks. Nations like Brazil and Switzerland suffer from a rising currency, as their export trade is damaged on higher prices. Rate hikes backfire. Nations whose currencies are falling have seen an associated steep decline in business investment and seizures in the interbank lending. Rate cuts do not address insolvency. ALL NATIONS LOSE IN THE CURRENCY WAR.
Central bankers met in Poland to address the worsening chronic global financial crisis. They agreed on nothing except they despise US Treasury Secy Geithner. The European bankers believe the Financial Stability Fund for bailouts is adequate, a very wrong view. THE EURO BANKERS FEEL HELPLESS LIKE THEIR AMERICAN COUNTERPARTS.
Grandiose aid to PIIGS nations failed to halt their momentum into the pits. A ripe $360 billion in collective aid failed to put these broken nations on a proper footing off cloven hoofs. The aid was actually bank aid to the Central European and London bankers. The key is the Poison Pills forced down the PIIGS throats in the pigpen. Now comes a string of sovereign debt downgrades, extending to Italy. NO REMEDY TO THE PIIGS NATIONS SINCE THE ENTIRE AID PROCESS IS MISDIRECTED.
The USFed does not comprehend the principles of capitalism. They believe that the USEconomy is driven by disposable cash in consumer hands, and by stock market investment trickle down. Economists and banking officials are ignoramuses one and all. The reliance upon Panhandle Doctrine for consumers and Parasite Doctrine for banks has killed the nation. THE UNITED STATES LOST ALL CONCEPT OF CAPITAL FORMATION.
The deep acceptance and tolerance of constant war and preoccupation with security has led to $2.5 trillion in squandered war costs and $600 billion in squandered security agency costs. The United States embrace of Fascism has killed the nation. HALF THE USGOVT DEBT FROM WAR, HALF THE USGOVT DEBT FOREIGN OWNED, AN ENTERPRISE DIRECTED AT DESTRUCTION.
The USDollar is losing its secure status of global reserve. The Chinese Yuan is expanding in bilateral trade accords and supporting currency swap facilities. The London bankers aid China in creating viable off-shore Yuan trading centers. Times are really bad when even Nigeria diversifies away from US$-based assets. THE CHINESE YUAN TO BE CONVERTIBLE IN A COUPLE YEARS AHEAD OF SCHEDULE, A GREAT CHALLENGE TO THE USDOLLAR.
Raids on foreign national accounts continue unabated. The funds in Egypt were taken ($60 billion) as London offered sanctuary, while Mubarek faces a bizarre court procedure for murder and theft. The funds in Libya were frozen ($90 billion) as the US, London, and Europe did confiscations through freeze, but give assurance that it will be returned when the stated 348 requirements are met, as in never. US & ANGLO BANKS SO DESPERATE FOR CASH THAT THEY TAKE IT FROM DESPOTS, AS NATIONS ARE DISRUPTED AND THE FIRE OF WAR IS LIT.
The entire system from numerous different corners attempts to translate the list of ailments into simple terms of confidence and volatility. The actual watchwords are insolvency and deterioration, with momentum gathering toward systemic collapse. The implication is that the monetary system is breaking down. THE CRITICAL CATCH PHRASE IS CONFIDENCE, THE MAIN REQUIREMENT TO A FIAT PAPER BASED MONETARY SYSTEM.
The interconnection of financial firms extends within continents and across the vast oceans to render them tied to the same global fate. If one big bank fails, or one nation fails, then the contagion will be rapid. GREECE PUSHED THE WESTERN BANKS TO THE EDGE, BUT ITALY AND FRANCE PUSH THEM OVER THE EDGE.
Attention has gathered on the corrupted accounting of the popular but tainted exchange traded Gold & Silver funds. The gold inventory is under scrutiny for usage in COMEX deliveries, enabled by questionable shorts to the GLD and SLV shares by its own custodians. The Bar Lists are regularly seen as erroneous and suspicious. THE BIGGEST GOLD & SILVER FUNDS ON THE DEFENSIVE, SOON TO FACE EITHER MASS EXITS OR HEAVY DISCOUNTS TO THE PRECIOUS METAL SPOT PRICES.
The central banks of Shanghai Coop Org (SCO) member states, observer states, and dialogue partners are almost all purchasing gold, overtly or covertly. Or else they are demanding the return of their gold bullion from the US & London centers. The latest demand was from Chavez of Venezuela. Russia is accumulating gold, shutting off its export. China is accumulating gold, making citizen ownership easier. SCO LEADERS IN RUSSIA & CHINA ORCHESTRATE A POLICY TO ACCUMULATE GOLD AND PRESSURE THE WEST.
The rally to ruin is in the USTreasury Bond market. Despite the downgrade slapped on the USGovt debt by Standard & Poors, the long-term bond yield has fallen well below the benchmark 2.0% level. It is under 1.8% today. The official government bond market is crowding out the business credit market. The end of the road is around 1.5%, at which point little if any profit potential will be perceived. The role of Interest Rate Swaps is critical, but not well understood to start a phony process that the public joins. The machete slices doled out to the saving community in puny interest yield is harsh and cruel. Gold will be seen as taking in diverted profits from USTreasury Bond proceeds. END OF USTREASURY CARRY TRADE IS NEAR, AS BIG BANKS TO BE FORCED TO FIND ANOTHER EASY MONEY RIGGED TABLE.
ENDURING GOLD CONSOLIDATION The uptrend in the Gold chart is intact. A massive breakout is in a period of consolidation since August. Expect more USFed monetization purchase of USTreasury Bonds, a process that has not stopped. The main emphasis of the USFed and QE discussion is simple. They continue the debt monetization but have decided not to talk about it anymore, in an end to transparency. Expect more USGovt stimulus, as austerity is shoved aside. Expect $2 trillion in USGovt deficits next year, as revenues are on the decline and urgent new stimulus programs will be eventually passed. Gold rises from the ruin of the monetary system and elimination of all safe havens. People should not be discouraged by the relatively minor selloffs in Gold & Silver. The gold price is still at or above the uptrend line even after the minor panic on Thursday. Even at $1740, a hefty 12% gain in gold asset appreciation has been seen since the June $1550 price, for only one quarter in time. What a rout! What a distortion! What a joke! Climb aboard! When the storms pass and need for bank recapitalization occurs, the need for economic stimulus occurs, the need for more sovereign bond redemption occurs, the need for more debt monetization (new & rollover) occurs, the Gold price will fly past the $2000 mark. Memories are indeed very poor and fleeting. The market slammed the Gold price in early May back down to $1500 during ambushes, yet in only four months new highs over $1900 were registered. History will repeat itself, but without the weak hands on the wagon train. They never learn, and neither do the nitwit Deflation Knuckleheads. They are consistently half blind. They were overrun by the gold train this summer, but maintain their arrogant erroneous views. Prepare for a massive Gold rally when the recapitalization, stimulus, redemption, and monetization comes forth in a very public manner. During the collapse underway, Gold & Silver will be among the very few assets standing. The USTreasurys eventually will be wanted by nobody except the USFed central bank. Their bid will be alone, leading to a USDollar symbolic of the failed monetary system. The USTBond will be in retreat from the 1.5% low point in yield, as foreign creditors will finally jump off the asset bubble zeppelin before it lights up in flames. Few people know the story behind the Hindenburg. The United States denied supply of helium to Germany in a trade war, which resulted in the high risk usage of hydrogen. In parallel, foreign creditors will deny legitimate funding to the USTreasury Bond market, a process well along. The USGovt in turn has resorted to the high risk usage of direct monetary inflation, in the perverse debt monetization window. The investment community wants even more of it (hydrogen). History will repeat itself. Who could ever forget the New York Post headline after the death of Leonid Brezhnev during the Cold War? REDS BREZH DEAD! The next headlines could read: YANKS JIG UP!! home: Golden Jackass website
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS. From subscribers and readers: At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.
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| WATCH: James Turk Interviews James McShirley Posted: 22 Sep 2011 03:58 AM PDT James McShirley, President of the Allied Building Center, and James Turk, Director of the GoldMoney Foundation, talk about gold price manipulation and the statistically significant caps on daily gold price rises. These caps seem to apply regardless of fundamental, technical or news driven factors. They see this as a clear sign of market intervention and as evidence that GATA's thesis on gold market manipulation is correct. They also point to exceptions to these rules as red flags, marking the end of the gold price suppression scheme. ~TVR |
| Gold continues to correct as forecast in a 4th wave pattern Posted: 22 Sep 2011 03:44 AM PDT David A. Banister- www.MarketTrendForecast.com I got a bit of hate e-mail over the last few weeks from the Gold Bugs who thought I didn't know what I was talking about when I forecasted a multi-month consolidation and correction in Gold was imminent. I've written ad nauseum about crowd behavioral patterns as they related to both stock markets and precious metals. It should not come as a surprise that Gold is continuing to drop after a 34 Fibonacci month rally from $681 to $1910 per ounce. That rally came in five clear Elliott Waves and ended with a parabolic race to the top. I consistently warned my subscribers and readers of my articles about not being caught holding the bag and to take defensive measures. My most recent update was to simply try to figure out whether the continuing correction in Gold would take the form of an ABC pattern or an ABCDE Triangle Pattern. It is becoming more clear that the official pattern is ABC. In English it means that the first leg down from 1910 to 1702 was the "A" Wave, the rally back up to 1920 was the "B" wave. The C wave is continuing underway and one of my longstanding targets is $1643, which is a Fibonacci fractal relationship to the prior lows and highs, and also conveniently fills in a "Gap" in the Gold chart in the 1650's. During these 4th wave consolidation periods, it reduces sentiment back down to normal levels and lets the economics of the move in Gold catch up with the price action that was extended. The first area to watch is the re-test of $1702 spot pricing for a C wave low, but the evidence is for a further drop to $1643 before I would get too interested in trying to game Gold to the upside. Here is the chart I sent out 9 days ago with Gold at $1837 forecasting a possible C wave continuing lower: I've stayed away from either shorting Gold or going long gold while I watch and confirm the 4th wave pattern. It's simply the smart way to go knowing that upside will be difficult to obtain and downside risks are high. It does now appear that I am eliminating the Triangle pattern and sticking with the ABC Correction with the C wave still working its way lower. If $1702 breaks, then you should expect to see 1620-1643 as next pivot low ranges. If you'd like to stay ahead of the SP 500, Silver, and Gold trends, check out TMTF at www.MarketTrendForecast.com and take advantage of our free occasional reports or a 33% 48 hour coupon to sign up for 5-7 updates a week. |
| FOMC Focuses on Slower Growth, Eyes Further Easing, Gold Lower, Equities Fall Posted: 22 Sep 2011 01:51 AM PDT |
| WATCH – Gold and Silver News 9.22.11 Posted: 22 Sep 2011 01:32 AM PDT Todays, recorded last night, gold and silver news. |
| An important chart you cannot afford to ignore any longer Posted: 22 Sep 2011 01:08 AM PDT From Kimble Charting Solutions: ... The "Power of the Pattern" in the chart below suggested the markets would be "UNDER PRESSURE" in a way not seen in years! ... When I look back on the 2007/2008 time frame, the "Great Escape" movie comes to mind... investors reached a point where they just said, "Get me out of here/let me escape from all risk assets!" When did the real downside action/waterfall in prices take place? Investors really started heading for the exits when the CRX [commodities index] broke support and the dollar broke resistance at... Read full article (with charts)... More on the U.S. dollar: The next leg of the selloff could be about to begin A "game-changing" chart you need to keep an eye on This chart could hold the key to the next big move in gold and stocks |
| Commodities are getting hammered this morning... Have now given up all gains for the year Posted: 22 Sep 2011 01:08 AM PDT From Bloomberg: Commodities erased this year's gains after the U.S. Federal Reserve said that the world's biggest economy faces "significant downside risks," boosting speculation raw-material demand will falter. To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net. More on commodities: Copper could be the "pin" that pops the China bubble A shocking development in Brazil you need to pay attention to The No. 1 reason you should still be accumulating gold for the long term |
| Global SELLOFF: The U.S. dollar and Treasurys are up... Everything else is down Posted: 22 Sep 2011 01:02 AM PDT From Bloomberg: Stocks and commodities tumbled, Treasury 30-year yields dropped to a record and the Dollar Index climbed to a seven-month high as the Federal Reserve signaled "significant downside risks" in the U.S. economy. |
| Time Grows Nearer to Begin Deploying Some Gold Posted: 22 Sep 2011 12:56 AM PDT HOUSTON – The world seems to be in an angry and fearful mood this Thursday morning. We have to note harsh pressure on just about all asset classes and commodities. Index futures in the U.S. pre-open are a sea of red. Precious metals are also under assault, but unlike popular equities, the metals are under attack because margin clerks and investors are very keen to raise liquidity in a hurry and there is no faster place to raise liquidity than with precious metals and their paper derivatives. In short, it's a good day to go fishing and turn the screens off, which we very well may do! First though, we thought we would share a chart that answers the question of what some of our own accumulated gold is destined for. The idea is simple. The price of gold is not really the goal, it is what the gold will acquire for us that matters. With that seed of the issue, consider the chart just below of the S&P 500 Index expressed in gold. Here the idea is simple and elegant. Our accumulated gold today buys a great deal more of the best U.S. dividend paying companies than it used to. We believe the time to begin using some (not all but some) of our accumulated gold to buy shares of the best dividend paying companies for the long-term is growing near. (Some gold, for good businesses that pay us to hold them.) Continued… Riverstone – Roxgold Deal a 'Win-Win' For those who may have missed it, there is an important update on our Vulture Bargain #3, Riverstone Resources (TSX:RVS.V) in the VultureInReview Section. The new update was posted yesterday afternoon. The quick version is that Riverstone has killed the proverbial two birds with one stone with a letter of intent agreement to sell its interest in one promising project (Yaramoko, and two other properties, Bissa West and Solna) to its earn-in joint venture partner, Roxgold (TSX:ROG.V) for $17 million in cash and 16 million ROG shares valued at a deemed price of C $1.03, or about $33 million all in. Described by the Coffin Brothers of Hard Rock Analyst fame as a true "win-win" for both companies, the deal, if closed in early October, removes any "financing hangover" for RVS shares and it does so with zero dilution for RVS shareholders. Over the past few months the market has been attempting to factor in an equity raise by Riverstone and that uncertainty has kept the share price trading at a discount, most analysts would agree. Riverstone can now focus on its flagship Karma project and fund its six drills flat-out now that the rainy season is winding down. For more on the news see the related item in VultureInReview Section. *** Apparently the world has had a belly full of worry, has read the actions and words by the U.S. Fed as dire, has noted the weakening economic data out of China and has weak or no confidence in our political leaders and policy makers to make it all better. Apparently they have decided to hit the red button en masse this morning. We will personally be interested to see if the SPX dips below 1,100 today, and if it does, what happens. Oh, and maybe watch for where overwhelming support tries to form on gold and silver. Other than that we plan to sit tight and just maybe go fishing. We have an idea that our accumulated gold will come in handy sometime in the not-too-distant-future. Not today though – at least not for us personally. When the fears are literally of systemic risk, as they are today, there is every reason to hang onto our gold and the case for lower Big Market equity prices is easy to make. It won't always be that way, however. |
| BrotherJohnF – Silver Update – “GATA” – 9.21.11 Posted: 22 Sep 2011 12:23 AM PDT Brother John on the ongoing silver crash and precious meals manipulation: |
| Did the Fed Just Clear the $USD for Takeoff? Posted: 21 Sep 2011 11:51 PM PDT
Remarkable action in forex this morning – the Aussie dollar in particular is getting crushed (AUDUSD), down nearly 2.5% as of this note. This goes hand in hand with the bloodbath in copper — carry traders are being taken out and shot. Having cashed out our short NFLX around $130 yesterday, our three strongest positions are all dollar related now — short EURUSD, GBPUSD and AUDUSD (instituted weeks ago). The British pound is also cratering on the possibility of quantitative easing in the UK, a prospect mentioned last month. Bottom line: Yesterday's Fed announcement, and the market's temper tantrum reaction to it, has the feel of a potential sea change as far as currencies go. For quite some time, Ben Bernanke has been a relentless destroyer of $USD rallies. The ECB (European Central Bank) had the hawk motif, and the U.S. Fed had the dove motif. But now, with "Operation Twist" being seen as weak beer — and the Fed possibly backing off a bit, urging legislature to pick up the slack for U.S. economy woes — it may be that the psychology, and the strongest bulwark against global economic slowdown, has shifted. Watch the dollar, watch copper, and watch oil. In addition to being well positioned for a $USD resurgence, we shorted oil yesterday and would look to short copper on a meaningful retracement. Regardless of long term doom projections for the greenback, if we are now headed into a sustained period of countertrend rally for the $USD, that changes a lot of things.  |
| Posted: 21 Sep 2011 10:38 PM PDT I have limited time so I'll lay it out in point form: 1. Morgan Stan is going to need a bailout soon (confirmed by JPM inside) 2. Silver is down the most overnight out of ALL comods(shocking) 3. We need Gold to hold 1650 4. Start protecting yourself for the worst kind of scenario for equities 5. I told you this would happen if he didnt print, they need a catastrophic selloff to print more and its here, trust me 6. I am expecting a 2008 crash type of scenario (for equities) 7. Gold and Silver will hold up the best, but will be pounded nonetheless because of the paper game, and watch out if Paulson has to sell his GLD 8. I give this 6 weeks before the printing presses ramp up another $1 trillion 9. Survive October, and you may find yourself buying the PM rally you bought at a manufactured get out of JP short beatdown. The printing presses will arrive shortly. No way out now. Take away the crack, and you have a dried up stinky crack head convulsing on the ground (the market). 10. Welcome to the paper game. Smile. Its not the end of the world....or is it...? I will keep up to date via Twittter today.  |
| There's a Raging Battle in Gold Below $1,800 - James Turk Posted: 21 Sep 2011 09:14 PM PDT ¤ Yesterday in Gold and SilverThe gold price didn't do much in early Far East trading during their Wednesday morning. But there was a spike up to gold's high of the day right at 12 o'clock noon Hong Kong time. From that high, gold was down just under ten bucks shortly before lunch in London...and at that point, a somewhat more serious selling episode got under way. This bout of selling ended at precisely 10:30 a.m. in New York, before a buyer showed up...and that took the price up $30 by 1:00 p.m. Eastern. The price drifted a bit lower from there, but the moment the Fed made their 'announcement'...gold spiked up to its New York high of the day, which Kitco recorded as $1,816.30 spot. Then 'da boyz' showed up...and in about thirty minutes they had the price down about thirty-eight bucks. The subsequent rally met the same fate...and gold closed virtually on its low of the day...down $24.30 spot. Net volume wasn't overly heavy...around 170,000 contracts.
Here's the New York Spot Gold [Bid] chart on its own. The 24-hour chart [above] doesn't capture the smaller details of the New York trading day. In this chart, you can see the work of JPMorgan et al quite clearly.
The silver price rose in fits and starts...and its interim high of the day came at 12 o'clock noon in London...which is the time of the daily silver fix. From there it got sold off more than 50 cents...rallied a bit at the Comex open...then got sold off until precisely 10:30 a.m. Eastern. From there it rallied, just like gold...but suffered the same fate as gold the moment that Mr. Bernanke spoke. According to Kitco, from its New York high to its New York low, the bullion banks smacked the silver price by a bit more than $1.50 spot. The silver price closed about 20 cents off its low of the day...and 'only' down 12 cents from Tuesday's close. Net volume was around 41,000 contracts.
Of course, all the bad news for the dollar yesterday resulted in a huge increase in its 'value'...as it was up over 100 basis points in no time at all from its absolute Wednesday low in New York. The hit on the precious metals...and the rise in the dollar...were most likely co-ordinated events, as this would not be the normal free-market reaction to such Fed news. Here's the 2-day dollar chart for entertainment purposes only.
The gold shares hit a preliminary low at 10:30 a.m...but rallied along with the gold price after that...rolling over a hair once the gold price topped out. Then came 'the news'. From there, the HUI pretty much followed the price path of gold...and the Dow, which also headed south at the same moment...a natural reaction. The HUI, which had been up more than 2% at one point, finished down 1.78% on the day...as nervous weak hands sold their positions. The Dow had been down slightly most of the day.
The silver stocks, along with their golden cousins, were having a good day yesterday as well, until 'the word' came out. They also turned on a dime, with most ending down on the day. Nick Laird's Silver Sentiment Index finished down 1.69%.
(Click on image to enlarge) One has to wonder what the price of the precious metals might have been [along with their associated shares] if the bullion banks hadn't been waiting to smash the rally after the Fed meeting was over. The CME's Daily Delivery Report showed that 40 gold and 19 silver contracts were posted for delivery on Friday. The link to yesterday's Issuers and Stoppers Report is here...and it's worth a quick look. There were no changes reported in either GLD or SLV...no U.S. Mint sales...and, for whatever reason, the CME Group did not update the Comex-approved depository data for Tuesday's trading day. Silver analyst Ted Butler sent out his mid-week commentary to his paying subscribers yesterday...and here are a couple of free paragraphs... "The biggest single obstacle to terminating an increasingly obvious ongoing manipulation in silver and the imposition of legitimate silver position limits has been the ability of those opposed to marginalize the issue and shroud it in a blanket of silence. Those who allege there is a silver manipulation [like me] are invariably cast, at best, as outsiders lacking in sophistication and industry knowledge and, at worst, as conspiracy wing nuts with some unspoken personal agenda. This then leads to the position that there is no point in even discussing the merits of the allegations. It's all rather circular with the end result being that there never is an open debate. Silence reigns supreme. As I've written previously, I find this behavior on the part of opponents to position limits and ending the silver manipulation to be repulsive and un-American." "The main antagonists against enacting position limits and ending the silver manipulation appear to be JPMorgan and other leading silver shorts on the COMEX and the CME Group, which owns and operates the exchange. Certainly, both JPMorgan and the CME lead the way in attempting to silence discussion on the issue. After all, even when repeatedly accused of manipulating silver and being sued privately for such, JPMorgan refuses to discuss the matter. Neither do I recall the CME ever commenting. Clearly, if there is ever found to be a manipulation in silver and JPMorgan and/or the CME are found to have been involved, their liabilities would appear to be enormous." Nick Laird over at sharelynx.com, thinking well in advance of the Fed's decision, sent me this chart showing U.S. bonds across the various yield curves the day before the meeting ended. The Fed's objective is to get the 10 and 30-year bond yields down in the general area of where the 5-year bond yield is...if "Operation Twist-2" works as they hope.
(Click on image to enlarge) Here's the updated version with Wednesday's numbers plotted as well. You can see that the 10 and 30-year bond yields are already heading lower.
(Click on image to enlarge) Despite my best editing efforts, I still have quite a few stories again today. Now it's just a matter of waiting it out. Once the bullion banks have covered as many shorts as they possibly can in both silver and gold, then the price bottom will be in. Swiss first to use gold in securities payments. Is gold becoming Theglobe.com? - Comparing gold and 1990s dot-com bubble: Mark Hulbert. How Far Can Gold and Silver Climb? - Jeff Clark ¤ Critical ReadsSubscribeFed Will Shift Debt Holdings to Lift GrowthThe Federal Reserve announced an unconventional plan on Wednesday to reduce borrowing costs for businesses and consumers, trying once more to spur economic growth despite urgings from Republicans that it refrain from any expansion of its stimulus program. The Fed said that it would invest $400 billion in long-term Treasury securities over the next nine months, using money raised by selling its holdings of short-term federal debt, in an attempt to drive down interest rates on mortgage loans, corporate bonds and other forms of credit. Well, it's hardly an "unconventional plan"...as this is exactly what Jim Rickards said they were going to do...and he's been saying it for more than a month. This Roy Stephens offering was posted yesterday afternoon over at The New York Times...and the link is here.  Why the Fed's exit strategy is now in peril: Michael PentoWith today's Fed announcement leaving interest rates unchanged and kicking into gear "Operation Twist," Michael Pento of Pento Portfolio Strategies writes for the King World News blog, "The Fed has it all wrong by launching 'operation twist' and extending the duration of their balance sheet. And the Dow Jones Industrial Average, which fell over 280 points today, seems to agree. The 10-year note is trading at an all time low nominal yield and its real rate of interest is already extremely negative." Eric sent me this KWN blog shortly after Bernanke did his thing...and the link is here.  Bank of England Policy Makers See Greater Stimulus as Increasingly LikelyBank of England officials said they may need to buy more bonds to bolster a faltering recovery after holding off adding stimulus this month in a decision that was "finely balanced." Most policy makers said it was "increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point," the minutes of the Monetary Policy Committee's Sept. 8 decision said. "For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting." This Bloomberg story is courtesy of reader Scott Pluschau...and the link is here.  Bank of England and Federal Reserve stimulus gets lukewarm response from marketsAttempts by central banks on both sides of the Atlantic to reignite faltering economic recoveries left stock markets underwhelmed on Wednesday. The US Federal Reserve announced "Operation Twist", which will see the central bank buy $400bn of government bonds with longer maturities and sell the same amount of shorter maturities. Hours earlier, the Bank of England delivered its clearest signal yet that it is poised to restart quantitative easing. But with both the Fed and the Bank of England having already deployed much of their ammunition since the crisis started, investors focused on the deteriorating outlook that's forcing the fresh stimulus. This story was posted in The Telegraph very late last night...and is courtesy of Roy Stephens. The link is here.  Moody's downgrades big banks on changed US policyMoody's Corp cut the debt ratings of Bank of America Corp, Wells Fargo & Co and Citigroup Inc on Wednesday, saying the U.S. government is getting less comfortable with bailing out large troubled lenders. The government is "more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled," the ratings agency said. Moody's decision hit Bank of America hardest as it cut both the long-term and short-term debt of the holding company and long-term deposits at its lead bank. The ratings agency cut only the short-term debt of Citigroup and limited the Wells' cut to its senior debt and to deposits at its lead bank. I note that the Fed's bank, JPMorgan Chase, did not receive the same downgrade. What a surprise. This Reuters story is courtesy of West Virginia reader Elliot Simon...and the link is here.  |
| Swiss first to use gold in securities payments Posted: 21 Sep 2011 09:14 PM PDT  Gold will soon be accepted in payments against the delivery of securities on the Swiss stock exchange, in what will be a world first. SIX Securities Services announced the plans after the successful settlement of transactions involving gold with a pilot set of customers. "Gold is the new currency," said the company. This very short absolute must read story was posted over at the swissinfo.ch website on Monday...and is Washington state reader S.A.'s third and final offering of the day. The link is here. |
| Elko, Nevada takes the gold boom with a grain of doubt Posted: 21 Sep 2011 09:14 PM PDT  Mining firms are hiring, but the city government, and even mine employees, are wary. Only a decade ago, tanking gold prices saddled the region with abandoned homes and tarnished dreams. |
| Is gold becoming Theglobe.com? - Comparing gold and 1990s dot-com bubble Posted: 21 Sep 2011 09:14 PM PDT  Here's Mark Hulbert being as bullish on gold as I've ever seen him. It seems that way to many, given its stunning rise in recent months. Their speculation has been fueled by no shortage of posts in the blogosphere that declare gold to be in a blow-off similar to the final stage of the Nasdaq Composite's rise before the Internet bubble burst in March 2000. But I'm not so sure. Compare gold's rise over the last decade to that of the Nasdaq Composite over the 10 years through March 10, 2000 — the day of its all-time closing high at 5,048.60. At least in comparison to that bubble, gold still has a long way to go. |
| Gold and Stocks Plunge, Dollar and Govt. Bonds Rally, Fed "Setting Up for More QE" Posted: 21 Sep 2011 09:01 PM PDT |
| Compromised Global Markets Thwart Any Possibility of Economic Recovery: Gold to Benefit Posted: 21 Sep 2011 09:00 PM PDT |
| Gold & Silver Market Morning, September 22, 2011 Posted: 21 Sep 2011 09:00 PM PDT |
| Chavez Decision to Recall Overseas Gold Reserves Could Reflect Sanctions Fear Posted: 21 Sep 2011 07:52 PM PDT Hugo Chavez' decision to recall Venezuela's gold reserves and nationalize the industry could reflect his paranoia about being hit with financial sanctions, analysts said. Chavez and other officials in his administration claimed on Wednesday that the move to recall about $11 billion in reserves stored in U.S. and European banks was being done to protect the country from economic troubles in the developed world... Read |
| Posted: 21 Sep 2011 07:24 PM PDT I have been tracking the gold stocks since gold began to rise in 2001. I am a self-confessed screen jockey so I have seen every phase, quirk, lull and rocket ride this sector has had to offer over since it all began. I love the markets. There have been exciting explosive rallies for gold stocks; a new one has been long overdue. I have watched, analysed and successfully traded this Gold Bull Market (GBM) since it started therefore I hope am well qualified to bring you a valid point of view and an important message. If I told you that we have a number of gold stocks breaking new highs at the moment in this market would you sit up and listen? Operational issues for a larger gold stock are hiding the overall sector performance in the weighted ASX – XGD index. This one stock distorts the real picture on the index because the stock is overweighted in the index. I am not saying there is a mistake I am saying the disproportionate influence of one stock is clouding the picture for investors who do not closely analyse the ASX – XGD index like I do. Most mainstream investors only watch the Top20, therefore they are missing the overall sector performance and activity. There is no doubt that economic sentiment in Europe and the US has been dragging on our market here in Australia. The DOW is crashing, Greece has defaulted and the smell of contagion is in the air. When I look at the DOW however I see that after months of fear and gnashing of teeth it is still sitting up at 11,400 this morning. A correction is needed you say well one observation I have made is that if you adjusted the current DOW level for inflation of just 3%, then the high of 14,000 in late 2007 is equivalent to 15,757 now. This adjusts the current level and correction significantly with it equating to a fall of 27.6% from the inflation adjusted high. Gold traders know well that inflation measured by the official rate is a massaged price inflation measure not a monetary inflation measure. Monetary inflation is measured by the increase in debt which is an increase in the money supply. We live with a debt based monetary system. Money is created as new debt. The brilliant work at shadowstats.com shows us that money supply (as measured by the broadest measure M3) was still increasing at an average of approximately 13% in 2008. In 2009 the rate of increase in M3 money supply was falling rapidly however it still averaged around 4-5% as it fell from a 10% increase in supply to an actual decrease in supply by the end of that year. This was caused by deleveraging; the greatest debt bubble in history is unwinding as the corporate and private sectors bunker down and repair their balance sheet. The actual supply of money has effectively flattened since mid-2008 which is why we are back to more historic growth rates. Higher growth rates in former years were turbocharged by the debt binge. Eventually the corporate and private sectors became debt saturated and had to back off, take a breather. Governments have taken on the job of borrowing to keep the game going. This is now coming into question as seen in the news of recent times. Sovereign debt levels are very serious yet countries are actively trying to weaken their own currencies for competitive reasons so they dig deeper into debt. This government borrowing has also offset the monetary destruction caused when people actually pay off some debt. Create money via new debt; destroy money by paying debt levels down. There is another aspect to all this however and it is the driver of all markets. Capital waves in this day and age are extreme due to the massive amount of debt / money in the system. I hope you have all seen the charts on monetary growth since 1913. Now M3 is not a perfect measure of money in the system yet is the best we have. It shows we are still hovering at nose bleed highs after the debt binge that accelerated this supply after 2001. All this money is now in the system at least for now and it seeks a home which will be determined by sentiment. Sentiment drives the direction of money in between asset classes. The money has to go somewhere and at present the talk is of a banking crisis. Do you really feel safe with cash in the bank during a banking crisis? A portion of this money is working out where to go, trying to pick a trend. The US Treasuries have seen a massive inflow of late pushing yields to record lows. This is likely to reverse soon even if yields do fall a little further. Talk about a trade getting over crowded. I called a top approaching and time for a reversal signal to form when we first reached these highs a number of weeks back. This will reverse eventually as all crowded trades do. Fear in the system has resulted in a rising gold price due to the safe haven trade. This is not only reason gold has been going up in price just an added factor lately. This fear is also leading to cash hoarding by corporations and individuals who see lower growth or recession on the horizon. A massive amount of capital has sloshed over to the Treasuries. We are talking about trillions of dollars being liberated when this eventually reverses and the cash sitting in bank accounts will also get nervous if fear of bank default rises back to extreme levels. The direction of capital flow depends on what the market is fearful about at the time because it all comes down to sentiment. Gold will benefit from the fear whichever way the capital flows are headed on this fear trade. Until the imbalances and uncertainty in the financial markets are sorted out; gold and fear will remain in bull market trends. This will remain volatile. Negative real interest rates create a certain loss for bank deposits. This is also what we see at present. Conditions are gearing up for a change in market conditions again in the near future. The capital wave will slosh back the other way and you have to be asking which way will it flow next? Which asset classes will benefit next? Gold is facing the strong seasonal demand from India now and you have to combine this with Chinese demand to calculate price support or appreciation over the near term. The gold equities (gold stocks) are now recognised to be in bargain territory compared to gold. Should gold continue to remain bid and up near these levels or higher things will quickly get interesting in this space. The action on the DOW lately and in the European stock markets has suggested a negative capital flow. In fact this has been in force for some time. We have seen a greater correction in inflation adjusted terms than is evident by the raw data. Chances are the next capital wave will seek yield and capital growth as risk off swings back to risk on. Then again it might just be that the bonds start to sell off on severe US dollar selling, yields spike back upwards in the sell off and the capital wave leaves bonds in the process. This capital wave has to go somewhere. Where am I going with all this? There is an opportunity of such magnitude before you now, if all market participants realized the upside potential of this Australian gold index right now it would rally from market open to the end of settlement every day. Rallies often begin in the grip of fear and rally into a wall of more fear. Sentiment is changing / has changed on the gold stocks and some excellent research is emerging to support this view. My long study of the sector has taught me the signs to look for and more importantly the optimum strategies to exploit such opportunities. The first thing to establish in order to communicate this message effectively is to provide a backdrop. My research indicates that the last time we faced such an opportunity was in about March 2005. That year the larger gold stocks started to rise aggressively. We saw them take off one by one from around the end of March. Firstly they broke out of base formations and then through old resistance levels. By July the more prospective mid-cap stocks and many explorers began to move with the larger low cost producers. The rally took on a life of its own at this point. Most days saw a sea of green arrows (rises) as the index was pushed higher. Of course nothing goes up in a straight line so this was punctuated by brief pull backs that threw those who were not in tune with the market. By November all boats were floating higher as small cap explorers joined the party. They rose with the rising tide as the excitement spread through the sector, then came the December lull. The mixed nature of the activity, defined as share price behaviour (SPB) was sufficient to fool some investors as the rally progressed. However on balance the sector as a whole was making strong steady gains. I now see a repetition of that early SPB at this time and this masks what is before us. Some stocks were even moving in between Christmas and new-year in 2005, as hardly anybody looked. The new-year started with a blast upwards, right from the opening bell in early January. Yet most investors in Australia were not looking so they missed it. By the end of January this sector rally had spread widely as greed entered the equation. Investors got back from the Christmas break only to find stocks had moved higher. Into mid-February however, the gold index (XGD) started to sell off as gold maintained its ground. A second gold price up-leg pushed gold up from March to highs of US$730 by May 2006 however many of the stocks refused to follow through. There was strong movement in the XGD however unless you understood the sector as a whole it would have been harder to interpret or make a profit. By April we saw an XGD top over 120% higher than a year earlier, at just below 5000 before a sell off into May of 20%. A different selection of the stocks rallied into that second up-leg, most of the early movers failed to rally higher however as the savvy market players sold off into the late demand created by the new comers. A second group of newcomers were dazzled by strong gains and bought this second group of movers. You do not want to be one of these new comers at the end of this new rally. This is the time to seek help if you are not certain how to maximize this opportunity. I digress, sorry back to 2006 and the story. Gold kept going in its long 'step up' rally formation after an 'earth shattering' 25.6% sell off from the May high of $730. If you look back at the chart now it looks minor. Get used to this phenomenon if you are new to this GBM because us long termers have seen it many times. The gold stocks remained strong at times after that initial sell off into the second half of 2006. The stronger companies recovered lost ground rising higher towards August 2007 where a sell of 15.5% reversed by the end of the month. These events have been quite common for gold stock investors as well throughout this GBM. In September 2007 we launched again however it was a mixed rally. We reached a new XGD high by January 2007 at 6940 as Newcrest Mining hit $39.75. Gold powered to new record highs at $1030.80 by March 2008 however the stocks failed to join the excitement as equity investors savvy enough to be watching the debt markets sold off their shares. The 2008 melt down then took hold all the way into the October and November period for gold stocks and March 2009 for the broader market. The crash of 2008 shocked investors causing horrible losses in superannuation funds and private share portfolios. Self-managed superannuation funds have proliferated since this time as investors took their capital into their own hands. This was a shocking event that still carries a stigma even for gold stocks. I was there telling investors to wait until we see the whites of their eyes. I wrote in September 2008 that the bottom was close which turned out to be true as the Aussie gold stocks reached their individual lows from late September through to November that year. I could not believe my eyes at the time, such were the extreme bargains. Yet investors sold or stayed away in fear. Sentiment fell even harder than the stocks; investors stayed away and still fear a repeat of this event as we watch the trouble in the financial markets. What they fail to understand is that each new phase of this global debt collapse and gold rally brings new circumstances. The XGD has gone on to make new post-crash highs however the same cannot be said for the broader market. History repeats however it is never exactly the same. Gold stocks may surprise many investors causing them to miss out this time if we do melt down. What logic do I have to support the view that the gold stocks are set to rise? Over three and a half years after January 2008 we find the gold price has nearly doubled. The cataclysmic collapse of share prices and sentiment during the GFC saw extreme gold price lows. By the end of 2008 the XGD fell below 3000 briefly to a low of 2674.4, from a high of almost 7000 a year earlier. This almost took us back to March 2005 levels on the XGD when the AUD gold price was just $553 an ounce. This was a distortion and a major dislocation in the gold stock rally that had to correct sooner or later because profits and resources were rising. This process is still not complete however and the recent gold price rise has distorted the relationship between the stocks and gold yet again. When the XGD hit the 7000 area in March 2008 gold was under A$1100. We are currently sitting nearly 70% higher for the Australian dollar price of gold with no gain in the XGD. The fundamentals have changed up a gear for the gold stocks because costs are not rising anywhere as fast as the gold price. Margins have increased by far more than 70% however far more importantly sentiment is changing now. The Australian gold stocks have not (so far) moved again as strongly as a coordinated group since March 2005. So you may ask what was it that caused that rally from mid-2005 and why do I suggest that this is a repeat or similar event? The GBM had just entered a new phase in mid-2005 as it began to appreciate substantially in all currencies. The leading gold stocks were telling us something in the early stages of that rally. They are behaving the same way again. Gold looks to have started another new phase as well as evidenced by the larger than recent price rise. No previous single up-leg has pushed the price of gold up $500 in one hit. A similar change in price rises came very soon after the gold stocks took off in 2005. One could argue when the bottom was set at the beginning of this rally however we have traded into it based on our systems and signals to get set and in a nice profit at this stage. We consider the bottom was March 2011 this time and that a second bottom was set at the end of June as well. It is easy for me to recognise the same early signs again, as I did over the past 8 months, because I have seen them before. You are about to get a heads up that such a time is again brewing. In fact my understanding and in depth analysis have progressed to a whole new level thanks to constant study. This is not a gloat it is a function of experience, practice and concentration. As a high profile contact I recently spoke to said "the more you get involved in the markets the more you discover". My analysis tells me we are starting the second stage of the initial lift as the larger stocks make their initial move. This is very similar to the May 2005 conditions. It is not too late for you to get set at base levels; that is if you do move now and get your homework done you can take advantage of this opportunity. If you wait too long you may find yourself in the 'newcomer' group at precisely the wrong time in several months' time. At this early stage I have no idea how long it will last only that the top will reveal itself when it arrives if you know what to look for. You make your money in the stock market when you buy. You get to keep it when you work hard enough to manage your risk and your portfolio with sufficient skill. We offer education on a gold stock portfolio and all important factors that influence gold and the gold stocks. You can test the quality of our information for only $25 and join for as little as $90. Escape velocity is approaching fast why not join, or join us if you wish. Good trading / investing.
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| What Future US Monetary Policy Means For Gold Prices--¤ Posted: 21 Sep 2011 07:24 PM PDT |
| What Future US Monetary Policy Means For Gold Prices Posted: 21 Sep 2011 07:20 PM PDT SUNDAY, SEPTEMBER 18, 2011 AT 01:27AM Gold has traded in a choppy lateral motion recently, with prices sliding south over the past week or so. The market looks hesitant ahead of the FOMC meeting this week, with traders cautious not to take on too much prior to what could be a game changing announcement. Bears are cautious about getting too short in case Bernanke announces a significant easing of monetary policy and bulls share a similar sentiment in case the Fed announces less easing that the market currently expects. This lack of conviction coupled with some profit taking has contributed to the recent price action in gold. As our regular readers will know, we view US real interest rates as the primarily driver of gold prices over the medium term. Gold prices exhibit an inverse relationship with US real interest rates, with looser monetary policy leading to lower real interest rates and higher gold prices. Further discussion of this relationship can be found in our previous articles "The Key Relationship between US Real Rates and Gold Prices – 5th December 2010" and "Decline In US Real Rates To Send Gold Past $1800 – 18th July 2011". We will not go into depth on the mechanics behind this relationship again in this article, but we note that the relationship is still intact and therefore it remains the cornerstone of our gold market analysis.
In order to form a view on where gold prices are going, we must also have a view on US real rates and US monetary policy. Our view for some time has been that the Federal Reserve would embark on further monetary easing as a response to a deteriorating economic outlook and persistently high unemployment. This view was based on the fact that the US yield curve had flattened to levels not seen since the Fed first hinted at QE2, as the chart below shows. A flattening yield curve is a sign of economic weakness, further discussion of the dynamics at play there can be viewed in our article entitled "US Yield Curve Flattening To Prompt Fed Easing and $1800 Gold -3rd August 2011". The increased expectation of easing in the past two months has sent gold prices dramatically higher and real interest rates lower.
The question becomes not "Will the Fed ease?" but "To what degree will the Fed ease and what form will the easing take?" We will now take a moment to discuss the various options available. The consensus expects that the Fed will implement "Operation Twist" – a policy that will see the Fed sell some of its holdings in shorter dated Treasury securities and buy longer dated Treasuries. This would be done with the intention of keeping longer term interest rates low and hopefully stimulating economic activity. Although this could be done without technically expanding the Fed's balance sheet, it would dramatically increase the duration risk of the Fed's portfolio and therefore still has similar effects to other forms of easing. However there are a number of other policies that could also be announced. The Fed could simply expand the balance sheet again and simply buy more bonds, as they did in QE2, except target the long end of the yield curve. The goal of this policy would be to lower longer term interest rates. However such a goal could also be achieved by the Fed announcing a specific target or ceiling on a longer term interest rate. For example by announcing that they were targeting a yield of 1.5% of the 10 year notes. This would be achieved in a similar fashion to what happened at the August meeting when the Fed announced that they would not raise interest rates until 2013, effectively capping the 2 year note. Another policy which could be announced is decreasing, or perhaps even eliminating, the interest paid to commercial banks on excess reserves. This rate (often referred to as the IOER) could be cut to 10bps to even to zero, in an attempt to spur lending. We are not sure how much of an effect this would have even implemented, and it would likely not have any significant effect on gold prices. If Bernanke really wanted to enact a controversial policy, the Fed could buy foreign securities. By purchasing say peripheral European bonds and bailing out Europe, the Fed would reduce many concerns regarding Eurozone sovereign debt and weaken the US dollar. However we think that this policy is probably to unpalatable to the Fed and it is very unlikely that we will see a policy like this any time soon. Although the technicalities of the easing are important, one must not overlook the psychology involved in the decision as well, which we view as at least equally important. Therefore we think there is a significant chance that the consensus view of the Fed stopping at Operation Twist may be in for a bit of a shock. Thinking back to August 9th, the consensus was that the Fed would simply make a stronger commitment to keeping interest rates low for an "extended period" of time. But Bernanke went further than this and announced that he would keep rates near zero until mid 2013 – going further than the vast majority of people thought he would go. Ben Bernanke has demonstrated on multiple occasions that he is not afraid of taking risks and he is willing to be very aggressive with monetary policy. With unemployment still above 9%, who can blame him? Regardless of whether one thinks that the Fed's dual mandate of full employment and low inflation is right or not, the fact of the matter is that mandate is what it is and with unemployment at these elevated levels the Fed is not achieving its targets. At the August meeting, we know both from the statement and meeting minutes that additional rounds of unconventional easing were discussed, plus Bernanke said at Jackson Hole that these such options were on the table. Therefore we feel that there is a significant risk that the Fed will ease much more than many expect. We do not think that the Fed will risk announcing something that is below market expectations, since markets would instantly tank. The Fed actively monitors what the market expects and if they were not going to announce anything then the Fed would have tactically hinted this prior to this week, to prevent markets being shocked to the downside. The fact that it is going to be two day meeting also increases the probability that we are going to see something significant. The last time a two day meeting was called was in December 2008 and QE1 was put into action. We think Bernanke will use the extra time to convince the dissenters (there were three at the August meeting) that further aggressive easing is necessary. So what happens after the Fed eases and what does it mean for gold? Of course monetary easing is bullish for gold prices, but once the easing is announced, digested and effectively priced in, gold prices will be dependent on future expectations of monetary easing and therefore the future economic outlook. If Fed easing, whatever form it takes, is successful at improving the economic outlook then this is not bullish for gold prices over the medium term. An improving economic outlook would probably see longer term US real interest rates increase, the yield curve steepen (unless longer term rates are specifically capped) and therefore flow through to a decrease in gold prices. This happened after QE2, when the flow of economic data was much more positive and US real rates began to rise. This initially capped gold prices, before causing a decline of about 11% in early 2011, a similar scenario could unfold after this Fed meeting. Also increasing US real rates in late 2009 and early 2010 was accompanied by gold prices declining some 14% in early 2010.
So considering all of the above, what is our trading strategy going forward? As a reminder, all of our trading recommendations are based on options traded on US markets. Therefore when considering gold we trade options on GLD. We do not trade gold mining companies (and have rarely touched the mining stocks since May 2008) or options on gold mining companies for reasons discussed in our previous article, "Are Gold Stocks The Real Barbarous Relic? – 11 Jul 2011". We are maintaining a moderate long position on GLD through the FOMC meeting. Our exposure is however significantly lower than it was in the run from $1600 to $1800 when we felt that the risk-reward was far more skewed to the upside than it is at present. Nonetheless we maintain a sizeable long bias and still expect gold prices to reach $2000 in 2011, but most likely within the next month. Our reluctance to take a more aggressive position is not reflective of a lack of conviction that gold will reach $2000, but more due to our view that risk looks more symmetric than it did a couple of months ago. Our plan for after the FOMC meeting will be largely dictated by the language in the statement and the behaviour of US real interest rates in the weeks following. An exceptionally accommodative statement coupled with significantly declining US real rates would likely see us increasing our gold exposure. However an announcement of easing that is within a reasonable range of current market expectations will not cause us to increase our gold exposure. In fact a scenario where the statement is more accommodative that expected, but US real rates are rising would cause us to reduce our gold exposure. Rising US real rates and rising gold prices would see us selling into gold's strength, as we view US real rates as the lead indicator here. If a situation of increasing US real rates and rising gold prices persists and we have exited our long positions then we would be considering a short bias. We are not comfortable with outright aggressive short positions on gold due to the significant event risk, but we would be open to selling call spreads into such a market. These limited risk trades carry positive Theta and would look particularly attractive if near term calls are heavily bid and we see a backwardation of the volatility curve. Further discussion of the recent examples of backwardation in the gold volatility curve can be found in our previous article, "The Market Dynamics That Sent Gold Past $1800 – 15th August 2011". A market with a vol curve in backwardation and skewed heavily towards calls is prime for selling call premium in our opinion, since both are symptomatic of a frothy market packed with speculative longs.Such a market could occur in the next month or so. To receive our trading recommendations and model portfolio, please visit www.skoptionstrading.com to subscribe. Our model portfolio is up 396.58% since inception, an annualized return of 119.04%, and our average return per trade is 42.21% including losses. Subscribers receive all market updates and trading signals via email in a simple, easy to follow format and costing less than $1 per day. This week will most likely be a game changer for the gold market, an inflection point which will be paramount to determining price direction over the coming months. With Obama's hands tied by fiscal constraints, the only really meaningful action can come from the Federal Reserve. In some of the most strenuous trading conditions of recent times, the versatility of options trading can prove to be a vital quality. Options allow the trader not only to speculate whether prices will go up or down, but also if they will go sideways or stay in/break out of a range. All our trading recommendations are possible with an account that can trade US stock options. We have closed 85 trades, with 82 closed at a profit, a success rate of 96%. Our average trade is open for 45.41 days and our full trading record can be viewed on our website. All trades are included and none have been omitted or altered. For those subscribers who are too busy to trade their own accounts we are now able to offer Autotrading programs with our SK OptionTrader service. One can sign up for autotrading with Global AutoTrading or eOption. Subscribe for 6 months – $199
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| Posted: 21 Sep 2011 07:13 PM PDT ] 9/17/2011  GLD – on sell signal. SLV – on sell signal. GDX – on buy signal. Summary Disclosure End of update By Jack Chan at www.simplyprofits.org
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