Why Gold Is Dropping When It Shouldn't
- and what it all means
Why is gold dropping right now when anyone in their sane mind would expect it to rise? The simple answer to this question is, [b]"because Comex-gold isn't gold" - and because it deceptively pretends to be 'the' price-setter for real gold.
Gold is gold, paper is paper, and "Comex gold" is nothing but paper masquerading as gold while simultaneously pretending to be the price-setting medium for actual gold in the world. Now, finally, Comex-gold is in the process of being unmasked.
The real supply and demand determinants for Comex gold are not actual gold investors but fund managers. Fund managers are inextricably intertwined with the world of contract-based credit instruments. They use bet on Comex gold contracts to hedge their other (currently horrendously losing) bets with something they all, in their in-bred belief in paper markets, believe will 'go up' in value while everything else is going down.
However, these very same fund managers and their paper-bound investment psychology are the exclusive reason why Comex gold is dropping in these times when everyone (including fund managers) expects gold to rise. As already stated, though, and as they now finally realize to their own dismay, Comex-gold just isn't gold - and that causes even further selling.
Two Losing Bets, Compounded
Fund managers' other bets are losing money fast, now, so they need to raise cash to keep up the overall value of their respective funds, so they can earn their management bonuses and avoid getting booted for lack of relative performance. Guess what they cash in on? The very same Comex paper-gold they mistakenly bought as a 'hedge', of course.
Meanwhile, real investors in real gold are enjoying their shopping spree - except that the spree turned into a treasure hunt as the shelves and display cases of gold dealers look more and more like the supermarket shelves in the old Soviet Union - bare.
This is the only 'bare-market' in real gold the world will see for a long, long time to come.
With this split, this disconnect, between Comex illusion and gold reality, one thing or the other will have to give, and it won't be physical gold that gives.
The system built up around the reputation of Comex-gold as being a price-setting mechanism for real gold plays right into the hands of the financial establishment. The establishment depends for its (now increasingly meager) existence on the illusion that gold "isn't living up to its promise" as a real inflation and disaster hedge. The implication, of course, is that investors might as well stay in the computer blip and paper world.
As the Comex gold price illusion drops, many retail investors are still persuaded to keep their money circulating in the paper world, and that ultimately feeds the system. Of course, by now that 'feeding' mechanism looks more like life-support, but try and unhook someone who is on life-support. The results are dramatic, inevitable, immediate - and final.
Yet, even on life-support, the system is deteriorating at a catastrophic pace. It would be hilarious to watch if it wasn't for the fact that we are all depending on this phony system for our real-life support. Without credit freely circulating through the commercial paper universe, for example, grocery stores won't have food on their shelves, there won't be gas a the gas station, and your bank will be shut. Cash doesn't transfer very well without the bank settlement process.
That's the problem.
Centralized Mayhem
Our economy has become too centralized. Everything has to travel over long distances, so face to face cash-transactions will not be able to keep the system alive. There is much to be said for localized, decentralized distribution systems, which in essence involve many different and varied local economies rather than one large and uniform one. For arms-length cash transactions to be able to sustain an economy, economic activity needs to be localized, i.e., decentralized.
The same thing goes for politics, of course. That's why the framers of the Constitution gave us a de-centralized federal system with little power at the center and much of it spread out to the states. That system can develop its own evils, as we have seen during the days of slavery, but we are now seeing that centralizing and controlling everything from the federal level is not really the answer, and rather magnifies evil on an aggregate level.
And now, in the face of all this abundant evil, the G7 crackpots have the audacity to suggest that we need to centralize power even more and come up with 'global solutions.' Yet, globalization was the very reason our profligate lending and spending habits here in the US spread around the globe so fast. True to their form therefore, politicians and so-called leaders are now using the bad situation that they created as an excuse for persuading us to give them the added power they need to make it even worse!
Silvio Berlusconi, the Italian prime minister and former EU president, let the cat out of the bag last Thursday when he blurted out (God bless his soul for being such a loose cannon!) that the G7 want to shut down the markets this coming week while they figure out how to deal with the crisis. That cat was very quickly stuffed back down his throat as he was forced, only an hour later, to retract his statement by saying he just repeated what he had "heard on the radio."
Right.
You Can't Argue with Abysmal Failure
Judging from the success rate of elected and appointed leaders in politics and economics so far, whatever they will come up with over this weekend and the succeeding week will undoubtedly be an unmitigated catastrophe. Just picture a time line from Bear-Stearns in mid-March to IndyMac in May, Freddie and Fannie,in July, Lehmann, AIG, WaMu, and Wachovia in September, the bailout package fiasco a couple of weeks ago, and then last week's post-bailout market-action, and you'll see a direct, negative correlation between official action and market performance.
They more they try to 'help', the worse things get - and now they want to act on a global scale and they want our support?? I don't think so.
A very legitimate question arises whether things would have even gotten this bad if they had done nothing. I can tell you one thing for sure: if they had never had the power to do what they did, things would have never gotten to the point where they would have been called upon to exercise it to save us. By 'they', I am referring to the political and financial thieving class, of course. A prime example for how badly they have screwed things up is what has been sold to us as 'deregulation.'
Deregulation? Sorry. Not for You!
Under the Republican mantra of "deregulation", the only things that were really deregulated were the banks' ability to sell investment products and deal in derivatives, and the largest corporations like Enron and WorldCom. You, the living, breathing individual on the other hand, are now more regulated than ever. What does that tell you?
Here is some advice: whatever 'they' tell you to do - do the opposite! Why not? After all, they routinely do the opposite of what they say, so why can't you?
This is not to say that under a Democrat regime of over-regulation things would be any better. You, the individual, would still end up being as regulated as you are now, or worse, and the additional concentration of power at the government level would certainly not make the economy any better, either.
So, this November 4th, when they are asking for your vote, tell them what you think. Vote to un-elect every single politician who is asking you to reelect him or her, from local dogcatcher to city hall member, from state-rep to federal congressman and senator. It won't even matter whom you vote for, as long as you vote the incumbents out. Then, rinse and repeat, from now on until you die. It's the only power you have left.
gold jewery on shop channel is sinking in price..to meet consumer demand for cheaper prices on gold jewery ..gold for jewery comprises usually half of all sales, globably .....unless gold "out prices it self" in the jewery industry..Gold out priced itself several yearsback in average consumer markets..
What I find ludicrous to the extreme, is WHY Fed puppets pretend a paper dollar is as good as gold and people still believe them. The legal Tender, which is a piece of linen-Cotton, a Note of Debt, has no worth save for what it can buy on a rigged as ever was Market. A piece of a negative promise to pay, which has shrunk in Purchasing power to a nickel or LESS, if one is to get technical it is actually a NEGATIVE value to positive conserved worth and IS used as means to export criminal influence, for Private profit and gain. (WHAT would be the stock market price for say--cocaine and heroin along side GM and Micro-soft?)
Where is the WTF guy!
The simple truth is gold and silver are better forms of money, but ONLY when the People have a vested share in the system itself. The solution has always been staring people in the face, but of course the Syndicate is always taking your attention elsewhere. Having royally F'ed up the system at large, by madness gone wild, perhaps people will now notice what might have been apparent all along. The "money" has left reality AND needs to return back to reality. Does destitution need to be the "reality" before this money transformation happens? Then a depression we will have to do just that.... and when people are hurting so bad that the lies no longer seem so green, maybe then they will be ready to listen to what the truth is after all.
The simple truth is gold and silver are better forms of money, but ONLY when the People have a vested share in the system itself. The solution has always been staring people in the face, but of course the Syndicate is always taking your attention elsewhere. Having royally F'ed up the system at large, by madness gone wild, perhaps people will now notice what might have been apparent all along. The "money" has left reality AND needs to return back to reality. Does destitution need to be the "reality" before this money transformation happens? Then a depression we will have to do just that.... and when people are hurting so bad that the lies no longer seem so green, maybe then they will be ready to listen to what the truth is after all.
Quoting: Ghost Avatar 520310
Thanks for posting... I totally agree!
Bud Burrell has extensive experience working with major brokerage firms on the trading desk and arbitrage desk with almost 30 years experience -- Industry authority, expert, Wall Street veteran.
Here is a one hour interview and IMO worth listening to
It all comes down to the drug dealing Federal Reserve pushing those fiat fractional notes known as dollars, the US Government issuing notes, iou's and otherwise essentially using the visa card to pay the mastercard bill for the last 40 odd years thus negating any 'faith' in the US Government. Throw in the criminally unregulated banking industry (with derivative market 'exposure' in the 700 TRILLION Dollar range-how could ANYBODY EVER pay that off??)and the illegal repackaging of mortgage 'products'(even bankers admitted the 'laws were too cumbersome'), the multi billions in bonuses even in such badly losing years and you have a recipe for global implosion.
Gold is being suppressed in order to help 'prop up' the dollar and thus the markets for just a little while longer and to let a few more of the big fish cash out and secure their money in hard metals at a reasonable price before the implosion. It won't spike to 2-3,000 but may go to 12-1600 for a while then settle back down around 800, depending on what real hard solutions are finally agreed upon in the 'post FED' era.
Anonymous Coward User ID: 495109 10/13/2008 6:29 PM
Lindsey Williams said thursday on GCN network ...that they NWO the central banks and fed would dump us world reserve currency on market(US dollars)
reserve currency is in Us Dollars if they needed cash to baillout banks and financial systems... markets would dump dollars on markets to prop up their systems....
and this would collapse dollar and us economy soon after...
over weekend they g8 decided to have baillout world wide
now they need to dump dollars on markets (World reserve currency)
Central banks will flood the world with cash_US Dollars will fall soon
this is fucking real......
breaking 1 hour ago...
Fed Releases Flood of Dollars, Market Rates Fall (Update4)
By John Fraher and Simon Kennedy
Oct. 13 (Bloomberg) -- The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates.
The European Central Bank, the Bank of England and the Swiss National Bank will offer European banks unlimited dollar funds with maturities of seven, 28 and 84 days at fixed interest rates against ``appropriate collateral,'' the Washington-based Fed said today. Previously, the Fed had capped at $380 billion the currency it would swap with the three central banks.
Global economic leaders have redoubled efforts to unfreeze credit markets and avert the worst worldwide recession in 30 years after last week's 20 percent slide in the MSCI World Index. Policy makers from the Group of Seven nations are committed to taking ``all necessary steps'' to stem a market panic, and European and U.S. governments today outlined plans to avoid bank failures.
``Like high waves that have gathered tremendous pace, global policy initiatives are coming to crash on the markets' shores,'' said Alex Patelis, chief international economist at Merrill Lynch & Co. in London. ``A turning point could be reached.''
The cost of borrowing in dollars for three months today fell to 4.75 percent from 4.82 percent, the highest this year. The rate for euros over the same timeframe declined to 5.32 percent from 5.38 percent.
`Funding Stresses'
On foreign exchange markets, the euro rose 1.3 percent against the dollar. Equities rallied worldwide, with the Dow Jones Industrial Average gaining the most points ever. Morgan Stanley soared 85 percent, while Bank of America Corp. and Citigroup Inc. jumped more than 9 percent.
``Taken together, the latest moves increase the chances that we will begin to see some relaxation of the intense funding stresses,'' Dominic Wilson and other economists at Goldman Sachs Group Inc. wrote in a note today. ``This is because bank solvency risk should decline as the government offers protection.''
As well as slashing interest rates in concert last week, global central banks are expanding their toolkits to push down money-market rates. The Fed on Oct. 7 said it will create a special fund to buy U.S. commercial paper and the ECB last week said it would offer financial firms unlimited euro funds. The Bank of England is scheduled to revamp its own money-market operations later this week.
Until now, central banks and governments have failed to gain traction in markets, with investors criticizing them for adopting a scattershot and uncoordinated approach.
`Work Together'
The ECB, the BOE and the Swiss National Bank ``can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009, the Fed said today. The Bank of Japan may introduce ``similar measures.''
The aim is to keep the financial system flowing with the world's reserve currency. Banks are hoarding cash for fear they will lose the money if it's loaned or held elsewhere, or because they need it for their own funding needs.
``Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets,'' the Fed's statement said.
What began last December as a $24 billion arrangement between the Fed, the ECB and Swiss central bank was boosted over the past year to $620 billion and broadened to additional countries. The Fed didn't announce changes to the $240 billion of swap lines with six other central banks, including those in Japan, Canada, Denmark, Norway, Sweden and Australia.
`More Important'
Today's ``action is unprecedented,'' said Neil Mackinnon, chief economist at ECU Plc in London and a former U.K Treasury official. Andrew Milligan, who helps oversee about $260 billion as head of global strategy at Standard Life, said it's a ``much more important'' move than the coordinated rate cut.
G-7 finance chiefs pledged Oct. 10 to take ``urgent and exceptional action'' after stocks plunged and as a global recession looms.
France, Germany and Spain today committed 960 billion euros ($1.3 trillion) to guarantee lending between banks and take stakes in them. That followed a summit of European leaders in Paris yesterday focused on achieving a more united front to battle the crisis.
Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group will get an unprecedented 37 billion-pound ($64 billion) bailout from the U.K. government. The U.K. stole a march on its counterparts by saying last week it would guarantee lending between banks and invest in lenders.
In a New York Times column published today before the announcement that he had won the Nobel Prize in economics, Paul Krugman said the U.K.'s ``combination of clarity and decisiveness hasn't been matched by any Western government.''
U.S. Proposal
The U.S. Treasury today fleshed out its new proposal to buy stakes in financial firms. The program will be optional and aimed at ``healthy firms,'' Treasury Assistant Secretary Neel Kashkari, who oversees the $700 billion rescue package, said in a speech in Washington. U.S. Treasury Secretary Henry Paulson has identified purchasing stocks as his top priority.
The U.S. may now have to match Europe in guaranteeing interbank loans, said Win Thin, an economist at Brown Brothers Harriman & Co. in New York. ``It would appear that it has no choice but to follow suit,'' he said.
The collapse of New York-based Lehman Brothers Holdings Inc. precipitated the latest chapter of the 14-month crisis, causing banks to stop lending to each other out of concern they may not get their money back. The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market slumped.
Today's move by central banks is ``another welcome measure,'' said Ross Walker, an economist at Royal Bank of Scotland in London. ``We'll have to see what comes out of it. We all expect more rate cuts, whether they're coordinated or not is another matter.''
It all comes down to the drug dealing Federal Reserve pushing those fiat fractional notes known as dollars, the US Government issuing notes, iou's and otherwise essentially using the visa card to pay the mastercard bill for the last 40 odd years thus negating any 'faith' in the US Government. Throw in the criminally unregulated banking industry (with derivative market 'exposure' in the 700 TRILLION Dollar range-how could ANYBODY EVER pay that off??)and the illegal repackaging of mortgage 'products'(even bankers admitted the 'laws were too cumbersome'), the multi billions in bonuses even in such badly losing years and you have a recipe for global implosion.
Gold is being suppressed in order to help 'prop up' the dollar and thus the markets for just a little while longer and to let a few more of the big fish cash out and secure their money in hard metals at a reasonable price before the implosion. It won't spike to 2-3,000 but may go to 12-1600 for a while then settle back down around 800, depending on what real hard solutions are finally agreed upon in the 'post FED' era.
Quoting: Anonymous Coward 283256
Excellent point!
quote from above article:
The more they try to do, the less it works. The law of diminishing returns is spitting them right in the face. The more they try what doesn't work, the more people will lose respect for them, the less people will look to them for solutions. Accordingly, the harder they try, the weaker they get. All you and I have to do is sit there, watch them on our television screens, chuckle to ourselves - and wait.
Me114 aka ladynada User ID: 323570 10/13/2008 9:18 PM
It all comes down to the drug dealing Federal Reserve pushing those fiat fractional notes known as dollars, the US Government issuing notes, iou's and otherwise essentially using the visa card to pay the mastercard bill for the last 40 odd years thus negating any 'faith' in the US Government. Throw in the criminally unregulated banking industry (with derivative market 'exposure' in the 700 TRILLION Dollar range-how could ANYBODY EVER pay that off??)and the illegal repackaging of mortgage 'products'(even bankers admitted the 'laws were too cumbersome'), the multi billions in bonuses even in such badly losing years and you have a recipe for global implosion.
Gold is being suppressed in order to help 'prop up' the dollar and thus the markets for just a little while longer and to let a few more of the big fish cash out and secure their money in hard metals at a reasonable price before the implosion. It won't spike to 2-3,000 but may go to 12-1600 for a while then settle back down around 800, depending on what real hard solutions are finally agreed upon in the 'post FED' era.
What I find ludicrous to the extreme, is WHY Fed puppets pretend a paper dollar is as good as gold and people still believe them. The legal Tender, which is a piece of linen-Cotton, a Note of Debt, has no worth save for what it can buy on a rigged as ever was Market. A piece of a negative promise to pay, which has shrunk in Purchasing power to a nickel or LESS, if one is to get technical it is actually a NEGATIVE value to positive conserved worth and IS used as means to export criminal influence, for Private profit and gain. (WHAT would be the stock market price for say--cocaine and heroin along side GM and Micro-soft?)
Where is the WTF guy!
The simple truth is gold and silver are better forms of money, but ONLY when the People have a vested share in the system itself. The solution has always been staring people in the face, but of course the Syndicate is always taking your attention elsewhere. Having royally F'ed up the system at large, by madness gone wild, perhaps people will now notice what might have been apparent all along. The "money" has left reality AND needs to return back to reality. Does destitution need to be the "reality" before this money transformation happens? Then a depression we will have to do just that.... and when people are hurting so bad that the lies no longer seem so green, maybe then they will be ready to listen to what the truth is after all.
Quoting: Ghost Avatar 520310
Hi, I am here (The WTF Guy)
Gold / silver have been depressed for so long for Big Banks playing billions of short selling positions (options , futures ,etc) but always playing the short side position meaning they bet prices will go down .
First , you must begin to believe they are the Market Masters , their goal ?? making you believe your paper money is valuable and real and gold/silver are just commodities like corn , meat or else and you would desist to buy/hold them.
And they will sell off all short positions needed to plunge the price in order to probe you its a bad investment .
Who are they ? well, the key players are :
JPMorgan
Gold Contracts: $85.2 billion
Other PM Contracts: $10.9 billion
HSBC
Gold Contracts: $27.5 billion
Other PM Contracts: $6.9 billion
Citibank
Gold Contracts: $0.5 billion
Other PM Contracts: $3.0 billion
Do they have gold / silver ? No, They don't have enough gold /silver to cover their positions (naked players) but that is not a impediment to play with, they lease gold at 0% interest rate , so its kind of cheap to play the short selling game forever !!
But, but ...at one point and when physical demand overrun paper demand they will have to run to cover and game over :
default and price will skyrocket .
The golden question : when will the default occur ??
Hard to said , considering the fact they have been playing the short game very good for 20 years o more years but i would said it may occur SOON , any time from now to 36 months !!
What I find ludicrous to the extreme, is WHY Fed puppets pretend a paper dollar is as good as gold and people still believe them. The legal Tender, which is a piece of linen-Cotton, a Note of Debt, has no worth save for what it can buy on a rigged as ever was Market. A piece of a negative promise to pay, which has shrunk in Purchasing power to a nickel or LESS, if one is to get technical it is actually a NEGATIVE value to positive conserved worth and IS used as means to export criminal influence, for Private profit and gain. (WHAT would be the stock market price for say--cocaine and heroin along side GM and Micro-soft?)
Quoting: Ghost Avatar 520310
Agreed, but you know, even more so when you think about it is the fact that oh....I dunno....95% of my financial transactions don't even involve linen-cotton. Instead, most involve bits and bytes - 0's and 1's - and that's it.
Seriously. Think about that for a second. I will accept any rules that you feel necessary to your freedom. I am free, no matter what rules surround me. If I find them tolerable, I tolerate them; if I find them too obnoxious, I break them. I am free because I know that I alone am morally responsible for everything I do. ~ Robert Heinlein
Anonymous Coward User ID: 525845 10/14/2008 9:01 AM
Bullion Shortage and Spot Prices Tell Two Different Gold Stories
by: The Prudent Investor
October 13, 2008
about stocks: GLD
Address : < [link to seekingalpha.com]
Anonymous Coward User ID: 524349 (OP) 10/14/2008 3:42 PM
Has anyone had a chance to listen to Bud Burrell? This interview was done on Oct 11th and explains things pretty well IMO.... would love to hear others thoughts
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The more they try what doesn't work, the more people will lose respect for them, the less people will look to them for solutions. Accordingly, the harder they try, the weaker they get. All you and I have to do is sit there, watch them on our television screens, chuckle to ourselves - and wait.
