Gold Bubble goes POP?

Discussion in 'Business & Economics' started by Believe, Apr 15, 2013.

  1. joepistole Deacon Blues Valued Senior Member

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    It's been ringing for 7 years.
     
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  3. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    That's right, but my "warning bell" did nothing to advert or reduce the coming troubles. I foresaw, what anyone could, but few did, seven years ago, that now >10,000 baby boomers would be retiring each day. Just them ceasing to be in their peak earning and tax paying years was a current stress I foresaw back then. Not only do they not pay much, if anything in taxes, but most are now collecting Social Security* or soon will. That much lower SS income will mean they can not consume as much as they did, or if they try to, they will be "dis-investing" and that too is bad for an economy.

    I was however, cautious - I choose Halloween 2014 for the start of a run on the dollar as historically October has been the worst month for stock markets etc., but said I would feel I was either lucky (in a perverse sense) or amazingly clairvoyant, even if my date for the dollar run was within 7% of the seven years. I. e. Error margin of + or - 0.07 x 7 x 12 = 5.88 months, usually called a "6 month widow or margin of error." (1 May 2014 thur 1 May 2015) We are not yet within that error bracket, so I still I see no need to change my prediction and never have although initially it was more vague and implied the trouble would start after end of 2015.

    GWB's needless and expensive wars, his restrant of the SEC, his tax relieve for the all ready rich, so US debt would climb more rapidly, even his "corn to alcohol" foolishness etc. et. al. gave me the confidence (or foolishness) to go public in post with the idea the dollar was doomed. About 5 years ago, I realized that even if it was not, China could and would kill it when that was to their great economic advantage. As I concluded post 118:
    "I continue to think China, when ready to see dollar crash, if it has not already done so under the weight of annual debt growing by a trillion dollars per year, will back its bonds with gold (at least for central banks and the IMF) with interest rates higher than US can afford to pay. Then, almost over night, the RMB is the preferred reserve currency and China, no longer the US, can pay for its imports with printed paper. The imports will cost much less when US and EU are busted - not able to buy much in competition with Asians. (Lower demand means lower prices for still growing China.)

    The dollar crash will hurt China too (value of its dollar reserves drops) but they have been reducing the dollar fraction of their reserve for at least four years - buying up oil, raw materials and food companies for nearly a decade with paid-up-front, long-term (up to 30 years) delivery contracts in addition to being world's largest buyer of both "above" and "still in the ground" gold. That "economic pain" for China is a "one-time" event - the benefits are every month and will continue for decades."

    * Back then, the SS administration was saying they would not need to tap the SS reserve fund until 2035, but I knew better. It has been an ever increasing drain on the Treasury for three years now. I.e. the SS tax collected is less than the SS pay outs. Even the Fed, may become a drain on the treasury, if it is forced to mark to market the "Toxic Trash" mortgages it is buying to make Fanny & Freddy May solvent. (Ben Bernanke knew this. - Why he ceased with the nonsense talk about selling assets to clear the Fed's excessive assets base and began to say: "We will just hold them to maturity - no need to sell at a lose.")
     
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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Pete Seeger, an American hero, imo, dead at 94. His song, If I had a hammer / If I had bell reminds me that now, with the internet, I have a hammer, I have a bell, so for seven years I have been: Hammering out warning; hammering out danger / Ringing out warning; ringing out danger, all over internet land. Post 122 is 1 of many examples.
     
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  7. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    You ain't seen nothing yet, but its a start:
    Perhaps the flow will slow some - I.e. Some of the newly acquired Asian gold may stay in NYC, now that China owns the largest US private gold vault there (See photo in post 119 . of the big office building recently owned by JP Morgan with the vault in the basement.)

    Now that most of the gold JPM owned has gone to China JP had little need for the vault. The biggest one-day shipment in US history, 10 metric tonnes, left that vault about a week ago. There are some reports that a second shipment, also of 10 tonnes left a few days later, but I have not been able to confirm that yet.*

    I think when China has backed its bonds with gold (at least for central banks and the IMF) they will find having a big vault in NYC is useful as many international settlements will still take place in London and NYC, for years, in well established Channels, but China owns the economic future, not the US.

    See also this article for clear understanding of how short seller (of gold they did not have) drove the price of gold down, but no longer can - we are seeing now that the tide is going out (gold flow to china) who has been "swimming naked" and boy will they pay big for their needed bathing suits. (to buy back the gold they sold, but did not have.)
    http://rinf.com/alt-news/breaking-news/federal-reserve-tapering-gold-market/

    * By Edit on 3 February2014: Consider that second shipment of 10 tonnes again confirmed. Here is second link from a very reliable source telling that:
    http://seekingalpha.com/article/198...uary-withdrawals-the-largest-since-april-2013
    Also of interest last week's 111.6 claims on each ounce of real gold has been lower to "only" 85.5 by large transfer of 64,761 Oz from the eligible to registered class, by JP Morgan, mainly. I expect they were well paid to help reduce the obviously very unstable leverage. I.e. they had to get at least the premium being paid in Asia where they have sent in only two days 20 tonnes. I.e. they made gold they (or their clients?) own availble for any of the 85.5 holders of a long maturing contracts to take in physical form, not cash. Still a very unstable leverage level.

    Also I think JP Morgan is one of the largest, if not the largest who have been selling paper gold "naked" - I.e. more sold than they own. This (with others doing the same) did in 2013 drive the price of gold down** despite the upward surge in demand for physical gold, already well above global production, if China's production (~400 tonnes/year) is not counted as none of it is available to meet the growing demand. (China only buys, never sells, and is now world's largest buyer.) Thus if JP Morgan is net short, and the run on physical gold at Comex were triggered by that 111.6 leverage, they would be exposed to great loses as "The tide went out and all could see who was swimming naked" - Make no mistake about it: the tide (flow of gold into the never to emerge again sink of Chinese ownership), is going out and at an ever accelerating rate. JP Moran was acting in its own self interest to add some physical gold to the register supply at Comex - buying some time to get a bathing suit on before being exposed.

    ** See my next post for clear example of one way how the price of gold was driven down - huge selling of paper gold in first minutes the market was open as noted in the graph and text I will post soon.
     
    Last edited by a moderator: Feb 3, 2014
  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    The other way price of gold was artificially driven down is via the London gold "fix." *
    * Another way to falsely lower or fix the price of gold used for years, but now not very effective was via the London fix procedure. Only five big banks were called on the phone twice daily and asked how ounces they wanted to buy or sell at $ P1/oz. All five, by secrete prior arrangement say:

    We would sell X1 thru X5 ounce at P1, so they are called again with second question: How many ounces would you buy or sell at P2 which is less than P1. Perhaps one, #3, says: We would buy X3 oz and the others are all sellers still with X1+X2+X4+X5 >>> X3. So all are called again. Eventually perhaps at P6, much lower than P1, but not too ridiculously lower to create too much suspicion, the sum of the Xs of the buyers is nearly the same a the sum of the Xs of the seller and that P6 is the London price fix (and when I say "fixed" I mean it both ways.)

    If you are going to "swim naked" (sell gold you don't own) it is nice to be swimming with other big banks doing the same, but now that law of supply and demand, not Comex paper gold traders, is starting to set the price of gold, even swimming naked with other big banks is getting to be very risky.
     
    Last edited by a moderator: Feb 3, 2014
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I want to explain this sentence, now made bold in the quote of post 125, as it may seem strange to many.

    "Driving down the price of gold assists the Fed in its efforts to support the dollar..."

    A rising price for Gold scares the Fed because it wants to hold the cost of borrowing at historic low (essentially zero interest rates).

    Buying Treasury bonds by others, especially foreigners, would be greatly reduced if gold seemed to be a much better investment than bonds as its price was rising. Thus, for the Fed to be able to stimulate with low interest rate, the price of gold must be falling. The QEs would have no benefit if the Fed were the only buyer of bonds and even the Fed knows that would be an indication that no one wanted to buy bonds as dollar was collapsing in value.

    So Fed had to help the naked short sellers - perhaps has told the too big to fail banks to "swim naked" (sell tonnes of gold at Comex they don't have) and when the tide goes out, exposing them to great losses the Fed will "bail them out" again as they are "too big to fail." - They are much bigger now than when they were in danger of failing and Fed bailed them out in 2008 as some smaller financial organizations did fail and are now owned by the now even bigger banks.

    Kicking the can down the road is the way US economy works now - but the end of the road is now in sight.
     
  10. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    5 of Germany's 1500 Fed held tonnes delivered one year after request for return.
    This rapid & at market open dumping is shown in graph of post 125. Watch him tell this and more on 20Jan 2014 at: https://www.youtube.com/watch?v=p0rGaWcRiNo
     
  11. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Thursday February 6, 2014: Many now are buying gold via GLD, like I did at ~$60/ oz lower than current price (and told details in post when making my largest ever single buy > $57,000, as I was so confident gold was going higher soon.)
    * If you want to buy something and own it for some times, say a building lot, you would prefer to pay slightly more for it under an option to buy / pay for / in six months rather pay now. I.e. you could pay more later if that "more" is less than interest you could earn on the money during the six months. When "backwardation" exists, reversing this simple economic logic, people are desperate to take position NOW.

    In the case of gold, you could buy same amount of "Paper Gold" for less than buying the physical gold, even paying the backwadation premium, so what this also indicates, as I have been predicting, many now think that Paper gold may become, just that I.e. paper when comex can't deliver as has run out of "register gold" in their vault. More than 80% of the registered gold in the comex vault at start of 2013 was gone by end of 2013 and potential claim on each ounce there got as high as 111.6 claims on each ounce.

    Comex has wisely arranged (no doubt at considerable cost) to get some owner of the "eligible gold" in the vault to give up their ownership of their gold so it could be legally moved to the registered class. (I.e. it met the delivery standards, so was "eligible" for such transfer) What this clearly implies is that Comex is will to pay extra to avoid any coming delivery default, now instead of later when buying gold will be much more expensive but need to avoid the default.

    All these gold buyers now buying physically back units of GLD now agree with my more than year old prediction that gold will climb rapidly in price now that the law of supply and demand is taking over from the "paper gold traders" the task of determining the correct price of gold.
     
    Last edited by a moderator: Feb 6, 2014
  12. Anew Life isn't a question. Banned

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    maybe gold is really a valuable stock. it's classic.
     
  13. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Chinese are still at their rural homes for first week of the Year of the Horse but on Monday, when they get back the cities, I bet the peak at Comex open goes even higher. BY EDIT LATER: I REALLY NAILED THAT ONE. Too bad I had no money down on that bet.
    If so, I know the name of that horse with golden wings. I'm thinking it is Pegasus (in Chinese of course) as only he can fly to the sky.

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    . . . . . . . . . . . . . . . . . . .

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    tooo.... da.......mooooon now Pegasus!

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    Good start . Don't stop.
     
    Last edited by a moderator: Feb 16, 2014
  14. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    this
    The surge of GLD buyers last week alone forced GLD to add 0.8% more gold to their London vault.
    Also as I predicted and can be seen in graph below, there was a sharp step up in price when the Chinese buyers returned from rural homes to the jobs today (Monday, 10 Feb14.) Hope this graph does not automatically update, as the one of prior pot does. In it now see price of gold (green curve) is about $10/oz higher than the prior Friday trading range, and pushing against $1275 /oz. - Not a prediction as in four days anything can happen, but bet gold's pushing above $1300/oz by close of this week,14 Feb.

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    As I told in post 109 as I was very sure I was correct: "I bought 500sh more of GLD at 115.11 for ~$57,565" On last trading day of 2013 as tax loss selling I knew would have it low as after April 2013 the big banks, for reasons I have explained, were large "naked sellers" driving price of gold way down.
     
    Last edited by a moderator: Feb 10, 2014
  15. river

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    What I don't understand

    Since the Chinese are buying alot of physical gold why nobody is blocking this buying by the Chinese ?
     
  16. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    How would you block Chinese buying when gold is available from so many sources? They sure are buying a lot, especially for being the world's larges producer too (30% more than #2):
    Not so much noticed, and I only occasionally see it, but think they may be buying many times more "still in the ground" gold. Mines in Canada, Africa, etc.

    I'm very hard pressed and have thought a lot about why. All I can really come up with is same old idea I posted several years ago. I.e. when it is to China's economic advantage to see the Dollar collapse, they can make that happen almost over night by backing their RMB bonds, just for central banks and then IMF that pay higher interest rate than US can afford, with gold. If anyone can think of another reason, please tell it.

    Here is a concise summary from 3 year ago of what I has been predicting for more than 5 years years:
    I note two items China also gains that are not mentioned in the concise version above:

    (1) With US and EU in at least deep recession (after dollar collapse) if not full depression, they will not be major competitors for what China needs to import - Lower demand means lower cost for China's imports - An "every year" gain much greater than the "one-time" loss on dollar assets still held when dollar falls.

    (2) Central banks don't want to hold zero interest gold. They do little of that now. They will prefer gold backed, interest paying, RMB bonds. At worst they will test China's "gold backing" briefly. I.e. China already has more gold than needed to initially issue Gold Backed RMB bonds to central banks and IMF.

    I also note that in addition to constraining inflation via a more valuable Yuan, Chinese are now encouraged to own gold. 3 or 4 years ago that was illegal. Now major banks offer "gold accounts." Deposit Y yuan and get credited with G grams of gold. They can not take the gold out but whenever they want, they get Y' yuan to take home. Y' > Y if price of gold has risen. A nearly cost free way to invest in gold; but there is still risk - Government may confiscate their gold with bank failure, so many still prefer the traditional deposit place. - Under the roses, etc. in their back yard.

    Before RMB bonds are gold back three things must happen:
    (1) China needs to grow it internal market wrt exports, and is working on that by: (A) Double digit annual salary increases & (B) Cutting out of pocket medical costs in half ~3 year ago. (Now state pays 2/3 & user only 1/3 of cost, not the reverse as it was.) Thus, need of urbanites to save ~50% of disposable income for sickness / old age is gone.

    (2) Switch exports to countries it imports from that do not need loans to buy with as they are earning Yuan. China is rapidly doing this too. US now is buyer of only ~12% of China's exports not 42% as five year ago, yet Chinese exports still growing. For example, China/ Brazil trade has been more than Brazil/ US trade for several years now.

    (3) Further reduce financial assets held in dollars to lessen the one-time loss with drastic fall in dollar value. Doing this mainly by buying with paid up front long-term delivery contract for energy, raw materials, and food (both farm land in other countries and major food companies, like Smithfield. World's largest vertically-integrated "pig to product sale" company.) For a small example, about 4 years ago, China lent PetroBras 10 billion dollars that will be repaid in oil. (200,000 barrels / day average rate for 20 years.)
     
    Last edited by a moderator: Feb 11, 2014
  17. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    To keep my last post from being too long, here from yesterday's ChinaDaily I note China is making rapid progress on achieving the three things they must before it is to their advantage to see the dollar collapse:
    Trade with "emerging markets" is increasing and with US & EU is growing less important. This is in part because as China's labor cost rise, China imports and pays in Yuan, for many components used in products it then exports. I.e. these supplier earn RMB and unlike US & EU don't need loans with which to buy. Soon, this trend will let China tell US & EU:

    If you want our products, especially the high tech ones, like cell phones, cameras, computers, etc. then pay in Yuan like out other buyers do (or in gold). We no longer will finance your purchases and deficits. Our growing domestic demand plus emerging market sales keeps our factories running at capacity and we have already have a shortage of labor so can not expand them more.
     
  18. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    note tiny sharp spike down - the lowest point on the graph. That is the afternoon of the last trading day of 2013 - when my long standing "good til cancelled" buy 500sh at $115.11 got touched off / filled. I normally have some easy to remember buy price limit like this one or $12.34/ per share etc

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    Sure happy I paid no attention to Joepistole.
     
  19. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Second paragraph is why Demand from China, already greater than supply will continue to grow. Eventually, at much higher price (near double the current one) which permits economic mining of lower grade ores (less than 0.7 ounce / ton) the demand will stabilize and equal the supply. The now dying "paper gold price" will be an interesting footnote to gold's history, when law of supply and demand was violated. Again, I predict that in 2015, they will not even bother to make the London gold fix, which was "fixed" to make gold artificially cheap for big banks to buy.
     
  20. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    The sheep got sheared:
    881 tonnes, owned at only GLD, were scared away by naked short sellers and false London gold fix, but law of physical supply (not "paper gold") and demand rules again. (Blue text above is a Billy T insert.)
    Watch very fact filled review of 2013 by World Gold Council* at : http://www.gold.org/investment/research/regular_reports/gold_demand_trends/

    Not only is the west's gold going to Asia, but free trade zones now exist there so not necessary to actually move the gold when sold - just change the ownership of it. Watch "squak box" interview of CEO of the new very large one, (Capacity of it plus others in Asia can now store about all the gold that exist above ground!) at: http://www.gold.org/investment/research/regular_reports/gold_demand_trends/
    The importance of London and NYC vaults is declining as they empty. (Largest private one in US, JP Morgan's, is now Chinese owned too.) A gold back RMB (for central banks and IMF) is coming (as I predicted years ago) to a planet near you. Those RMB bonds will pay higher interest than US can afford - So almost over night, become the preferred reserve currency and dollar crashes. When that happens, don't say "No one warned me."

    * Here is their summary (of main facts in the video) from: http://www.gold.org/investment/research/regular_reports/gold_demand_trends/ which has a link to full 2MB report.
    Global Gold Market: Full year 2013 review summary:
    Jewellery: 2013 saw the largest volume increase in jewellery demand for 16 years as consumers across the globe reacted to lower gold prices. Full year demand was 2,209.5t, 17% above 2012 and the highest level since the onset of the 2008 financial crisis.
    Investment: 2013 was a year of contrast between the different elements of gold investment. Demand for bars and coins surged to an all-time high of 1,654.1t as individual investors took advantage of lower prices, while large-scale selling of more tactical ETF positions by western investors generated outflows of 880.8t.
    Technology: Annual demand for gold used in technology stabilised at 404.8t, from 407.5t in 2012. The lower price environment and improved global economic outlook was supportive for gold used in a range of applications in the sector.
    Central Banks: Net purchases by central banks increased global official gold reserves by 368.6t. 2013 was the fourth consecutive year of net purchases, albeit at a slightly reduced pace due to the environment of heightened gold volatility and slower foreign reserve accumulation.
    Supply: In 2013 the supply of gold declined 2% to 4,339.9t as a drop in recycling activity (in response to lower gold prices) more than offset growth in mine production.
     
    Last edited by a moderator: Feb 20, 2014
  21. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    SGE = Shanghai Gold Exchange

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    There is a reason, I have often told, why China is draining the west of its gold. (Gold backed RMB bonds for central banks and IMF paying higher interest than world's greatest ever in history debtor can pay makes almost over night the Yuan /RMB the preferred reserve currency, so China, no longer the US, pays for imports with printed paper. Why China is world's largest gold importer.)
    Or graphically, without words:

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    China: world's largest gold producer - 35% more than #2.
     
  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    In last 60 days (with price not changing on week-ends) PoG went up $2.27 per oz day.

    This graph will probably up-date automatically so here is low to high data: $1192.75 to $1329.20/ oz. Up 11.4% in 60 days !
     
  23. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Here video telling what I said weeks ago:http://www.bloomberg.com/video/are-...ipulated-by-banks-o~O0nW0NS_uxLJzWjVl7sg.html
     

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