Gold: up or down? by SIGNYM

REAL WORLD EVENT DISCUSSIONS

Gold: up or down?

POSTED BY: SIGNYM
UPDATED: Monday, December 15, 2014 11:21
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Sunday, December 14, 2014 12:01 PM

I believe in solving problems, not sharing them.

Quote:
With little fanfare or notice, the CME Group has notified the CFTC that they plan to institute trading collars for Comex precious metals trading. At present, these collars are planned to go into effect on Monday, December 22.

http://www.tfmetalsreport.com/blog/6443/comex-institutes-trading-colla
rs-precious-metals

This means that the CME expects to see large moves on gold which they would prefer to tamp down by limiting size of valuation changes from day to day, or hour to hour. (BTW, there are already collars on many other markets, due to the fact that so many trades are now made by high-frequency algorithms which can induce "flash crashes" in many markets, as computers try to out-pace each other in trades.)

Anyway, Zerohedge - my go-to source for doomsaying - is convinced that this means apocalyptic action in gold and silver. They did bring up an interesting point: Some think there was a algo test in November

Quote:
as a liquidity testing algo goes absolutely insane in the pre-open period

http://www.zerohedge.com/news/2014-11-25/something-appears-be-going-go
ld

which revealed ZERO liquidity in the gold exchange, and TPTB (CME) decided to limit the damage.

The one thing that is being actively speculated is whether the CME thinks the gold price will shoot up ... or drop like a stone.

There is interesting evidence in both directions.

On the "gold going up" side, there is the general realization that there are far more dollars circulating in the financial system ("printed" by the banks in the form of loans ... 300$T to be approximate) than can POSSIBLY be supported by any single economy, and not even the economy of the entire world. Sooner or later, the thinking goes, various governments and central banks will realize that the dollars and Treasuries that they hold as their reserve currency are worthless - or worth less in any case - and when that realization occurs there will be a massive dump of dollars and a huge devaluation.

On the "gold going down" side, there is the thought that large banks (Morgan Stanley, JP Morgan, Goldman etc) own and control far too many commodities, and that as both the buyer and the seller they're able to manipulate the market to their advantage.
http://www.wealthdaily.com/articles/profiting-from-wall-street-commodi
ty-regulations/4508
For example, most recently, it was discovered that large banks were hoarding aluminum to drive prices up.
http://www.wealthdaily.com/articles/profiting-from-wall-street-commodi
ty-regulations/4508
The thinking goes that banks will be forced to divest themselves of their commodities, which will lead to a flood of gold on the street. In addition, since Russia, China, and India hold large amounts of physical gold in reserve, dropping the price of gold would knock one more leg out from under the Russian economy (after sanctions and oil prices) and hopefully lead to the destabilization of Putin's office.

Or, this is just the CME catching up with the notion that other markets have collars on them, why not gold and silver?

What say you?

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Sunday, December 14, 2014 3:08 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.

All in all, I expect gold to drop on the international market in the short term - either because banks sell gold or because Russia is under pressure and sells gold. But in comparison to the USD I expect it to hold its own. In fact, banks will sell gold BECAUSE the USD drops.

It's completely possible for gold and currencies to move either in the same or the opposite direction on the international market, depending on national events.

U.S. dollar (USD), the euro (EUR), the pound sterling (GBP), the Japanese yen and the Swiss franc (CHF) vs gold

SAGAN: We are releasing vast quantities of carbon dioxide, increasing the greenhouse effect. It may not take much to destabilize the Earth's climate, to convert this heaven, our only home in the cosmos, into a kind of hell.

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Sunday, December 14, 2014 3:50 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.

bump

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Sunday, December 14, 2014 4:39 PM

JEWELSTAITEFAN

Well, if destabilizing Putin is the goal, then doing it while oil is under $50 per barrel is the time. But Putin does own all of Russia by now, so how long must this be sustained before it has real impact on Putin?
Are you suggesting this is a facet of the Ukraine strategy?

If Putin sells gold, it won't be the US buying, will it?

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Sunday, December 14, 2014 8:56 PM

SIGNYM

I believe in solving problems, not sharing them.

I guess there's another set of people who might sell gold: If the stock market takes a panic dive, then some investors will have to sell gold in order to cover their market positions.

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You can't build a nation with bombs. You can't create a society with guns.

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Sunday, December 14, 2014 10:27 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.

The market and gold used to move in tandem - when one went up the other went up, and vice versa. That's b/c fund managers would take their winnings and buy gold as a hedge putting up pressure on gold, or cover their losses by selling gold putting down pressure on gold. But I haven't seen that pattern for a long time. I think they were too impatient to play it safe, and would much rather have taken the Fed's money and bet it all on the market.

While the Fed shut off the tap for real (Oct 2014), it's still holding interest rates near zero. I think the next month or two will see how that develops. If the market continues to move up I will definitely wonder where the betting money is coming from.

In any case, I did look into gold holdings and I didn't find any of the large investment banks had substantial reserves left. I could be wrong on that, it wasn't a deep search. I just don't see the market tied to gold the way it used to be, and, as I said, it looks like the banks have reduced their gold holdings.

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Monday, December 15, 2014 11:21 AM

SIGNYM

I believe in solving problems, not sharing them.

One of the interesting things is that the friends and allies of the USA government seem to have taken a clue from the Fed policy: they have little gold in reserve. The Swiss just voted against a gold-backed currency. The Saudis have almost no gold in foreing reserves. Even the Bundesbank ended its abortive attempt to physically repatriate its gold. The nations with large gold holdings are the BRICS, and other nations that we would consider "improvident" like Spain, Portugal, and Venezuela.

It seems to me that the world is dividing up into two blocs, one of which is committed to the USD as the reserve wealth, and others which anticipate the ending of the USD reserve status, and are willing to work in another system.

Thanks for noodling on this with me. What I'm getting out of this is: In a highly financialized system, where wealth is gained and traded using funny money instead of actual production and sale of goods, the value of gold relative to other currencies is all political and military. There is not a jot of actual value in either currencies OR gold.

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You can't build a nation with bombs. You can't create a society with guns.

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