IMHO - Gonna stick my neck out

COINB0Y

I look at the volume on the GLD and I see more buying due to fear than I do value.

In the long run, yes Gold will rise, but not until the Banking System recovers.

The dollar is rising because there is a "shortage". Not good for Gold.

"But Coinboy! They have injected trillions into the world banking system?"

Ahh yes, but because we live in a world with fractional reserve banking, the money being injected is just an attempt to get these banks back to a ratio of $10 Loans : $1 in capital reserve position.

When you have a bank that has a capitalization sitting out at $40 in loans to $1 in deposits, rather than closing the bank, the new funds are being injected to lower the ratio. This is still NOT enough to allow them to loan to business.

Bottom line, contracting demand because of a shortage of fiat currency is NOT good for Gold in the short run.

ProofCollection

It will take time - probably up to a year - for the new money to infiltrate the economy.

There is big time demand for physical gold due to fear. Banks and governments are ceasing their sales. The US Mint is playing games with rationing - which is curious because they sold 4x as much gold in 1999 and never had to ration bullion... yet they don't have enough this year? Many institutions are going to stop leasing gold. The supply of gold has tightened and is tightening and there is no reason for this to change in the near future unless the economy improves markedly (which I don't see happening).

I would argue that there is no shortage of dollars. The fed will print more if they run out, there is an endless supply. There is plenty of money (loans) available for the trusted and credit-worthy.

COINB0Y

There is plenty of money (loans) available for the trusted and credit-worthy

I completely disagree. Look at the LIBOR rate.

If a bank will not lend to a bank, you will not get a loan for that million bucks you need for that new building no matter how many widgets you have orders for.

ProofCollection

I said credit-worthy and trust-worthy. Banks will still lend to other banks that they trust. At the moment, most banks don't trust each other but there are a few who do.

jmski52

I dunno, Coinboy. I just don't know. It seems to me that we have a dual monetary system developing. The official one, and the real one. I think that we're in no-man's land, and we just don't know it yet.

57loaded

when the world economy is "falling off a cliff" people turn to gold, call it fear or value, either one.

here's something that i think supports your view.....lemme know because i am a dim bulb

hathaway bull market?

COINB0Y

Not a bad call, Coinboy.....

jmski52

Not a bad call, Coinboy.....

Ok, ok, ok..........decent call, Coinboy!

COINB0Y

Thanks JM.

I owe some charts. I'll try and get some up before Sunday Night.

roadrunner

Ahh yes, but because we live in a world with fractional reserve banking, the money being injected is just an attempt to get these banks back to a ratio of $10 Loans : $1 in capital reserve position.

I submit that very little to none of that money will go to bringing reserve ratio's back into alignment. Why do that when as of Oct. 1st, reserve requirements have been lowered to 0-3% (yes zero)? Most of the money will be spent to bail out a number of unhappy foreign customers that the US bankers screwed over (like the Chinese over Fannie & Freddie) or to patch over the billions in Lehman swap losses. There won't be any left for balance sheet shoring.

The PPT went back to work today on the dollar, stock, and gold markets. This is a short term paper push down. It is having less and less to do with delivered bullion prices.

Remember that GLD is not bullion, but a paper substitute. Many would like you to believe it is bullion though. The custodian of this "gold" are the same people that brought you the derivatives mess.

roadrunner

COINB0Y

Roadrunner, while we disagree with the Fractional Reserve repair that is underway, I simply stated that at that moment last week ,in observing the way GLD (and it is a mirror of the Comex pricing ) was acting, it appeared to me that there was more movement up due to fear demand then to a value demand...volume was not confirming the rise....remember. my observation was for the moment.

I totally agree with you as everything becomes un-stuck (you see the 30 Day LIBOR drop over night Thursday?) Gold would begin its rise as inflation takes hold.

My contention is that during a brief adjustment period of deflationary pricing such as Oil getting chopped in half, Gold must do the same. What happened Friday is more a liquidation due to margin calls from the stock Market collapse (and credit-crunch need for cash) than a real supply/demand driven dumping.

I think GLD will drop further in the next few weeks before the *real* buying will begin. That's my opinion on my Charting, which I will try and post by Sunday night.