Typical PM bug with a conspiracy theory. It's always a well conceived scheme keeping down the prices.......blah, blah, blah.....I wonder how many suckers are on his mailing list?
That "goldbug" has had a good overall track record in the financial and gold markets over many years. Dismiss him if you like. Most anti-gold bugs have their barbarous minds made up before they read anything.
" Gold is falling on speculation that the global economy could be heading into a period of deflation, curbing demand for gold as an inflation hedge. ``There's a real concern about deflation; that's one of the reasons gold has moved,'' Martin said. UBS AG cut its 2009 forecast for gold by 15 percent to $700. ``Gold will remain under pressure in 2009 from a combination of slowing demand for jewelry from important emerging markets and disinvestment as inflation slows and the dollar continues to strengthen,'' UBS analyst John Reade wrote in a report today."
Another side of the story. No idle accusations of Gov't conspiracy......just common sense. Imagine that.
Today in Donald Coxe's conf. call, he stated that he didn't think there would be a default. His reasoning is that the IMF has more than enough gold to meet the demand and will step in if Comex gold goes into "crisis" mode.
<< <i>That "goldbug" has had a good overall track record in the financial and gold markets over many years. Dismiss him if you like. Most anti-gold bugs have their barbarous minds made up before they read anything.
roadrunner >>
Far from anti goldbug here. I'm just amazed how many "newsletters" there are that pump the yellow metal via conspiracy theory.
I agree, there is way too much in the way of conspiracies among some gold bugs. There are plenty of reasons to explain gold's rise and recent fall, without resorting to wild theories that have not been proven. (BTW, I still happen to think gold is cheap compared with what's likely coming.)
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
" Gold is falling on speculation that the global economy could be heading into a period of deflation, curbing demand for gold as an inflation hedge. ``There's a real concern about deflation; that's one of the reasons gold has moved,'' Martin said. UBS AG cut its 2009 forecast for gold by 15 percent to $700. ``Gold will remain under pressure in 2009 from a combination of slowing demand for jewelry from important emerging markets and disinvestment as inflation slows and the dollar continues to strengthen,'' UBS analyst John Reade wrote in a report today.".....this just sounds like Greenspam Fed-speak. In effect saying nothing, based on nothing.
Another side of the story. No idle accusations of Gov't conspiracy......just common sense. Imagine that.
UBS is insolvent just like GS, JPM and others. Why should we believe things coming out of the mouths of the same guys that got us here? GS has a great track record for publically posting their theoretical position only to be 180 opposite from it based on their trading desk. Why would any major firm publish their future trading positions? (ie they don't). For every UBS that has a reason to see gold down, you have a major gold player who takes the opposite play.
Today in Donald Coxe's conf. call, he stated that he didn't think there would be a default. His reasoning is that the IMF has more than enough gold to meet the demand and will step in if Comex gold goes into "crisis" mode.
You would have expected Coxe to say a default was possible even if he knew the odds were 100% it would happen? So we are to believe the same regulators (Bernanke, Pauson, Coxe, etc.) that told us that sub-prime was contained for many months yet then came before Congress with hat in hand looking for $700B? They knew from the outset they were cooked, and just let the problem simmer as they tried to get their moneys out. How many more lies do you need to see in print? I figure there must be 1000 pro-stock newsletters for every 1 that's bullish on gold. I wonder how many suckers are paying for professional brokerage advice or getting stock newsletters. One has to figure that the real sucker bet was listening to those carneys over the past 10 years. One of the biggest sucker plays in decades. And that play was cheered on by the likes of Greenspan, Bernanke, Paulson, and Coxe.
The IMF has been "threatening" to sell off "its" 400 ton trifle of gold (actually owned by the US and other nations) for several years now. That's about as reliable as the FED stating they are "inflation-fighters." Whenever a crisis occurs that hints of rapidly rising gold prices, the IMF trots out its usual line of selling off the so-called 400 tons. More than likely they have already been piece-mealing it away during the last year of crisis. I doubt they even have all 400 tons today, much like the US likely doesn't own all of its "recorded" 8100 tons any more. Whatever small amount the IMF could sell, it would be snapped up by central banks (China, Russia, Saudi, India, Brazil, etc) looking to strengthen their positions. That 400 tons would be worth a mere $8 BILL. That might cover about half of the comex open interest. I'm sure that foreign Central Banks would love to start handing over their remaining gold to help shore up the US Comex once the IMF runs out of gold, assuming most of it is not already leased away.
Gold Posts Biggest Monthly Drop in 28 Years as Dollar Climbs
Yeah, I laughed at this as well when I saw it a few days ago on Kitco. It seems that "reporters" will uncover every rock to find a meaningless stat like that to sway their point. What they really should be focusing on is the real trend, or Dow(stocks)/gold ratio - still within easy striking distance of the 10-15 year low. Stick with Kitco for the "news." Each day the headlines change from Gold is falling to record lows, and the next day, gold is under acute demand (lol). Yeah, for the month copper dropped 37%, aluminum 16%, wheat 21%, and corn and soybeans headed for their 4th straight monthly loss. And these are things the world does not need. Who needs wheat? Did the world's population just shrink? Dow/Gold ratio was looking better at the end of the month, so reason for a beatdown to make broker's monthly statements look better (gold was down 19% for the month...11% down by the 29th).
Gold is falling on speculation that the global economy could be heading into a period of deflation, curbing demand for gold as an inflation hedge. ``There's a real concern about deflation; that's one of the reasons gold has moved,'' Martin said. UBS AG cut its 2009 forecast for gold by 15 percent to $700. ``Gold will remain under pressure in 2009 from a combination of slowing demand for jewelry from important emerging markets and disinvestment as inflation slows and the dollar continues to strengthen,'' UBS analyst John Reade wrote in a report today
Excuse me, but isn't the US operation of UBS on the list of beneficiaries for the $850 Billion Cash Giveaway Prize being offered by Dr. Jeykll Bernake and Mr. Hyde Paulson?
That's what we need - real transparency and real credibility in our marketplaces.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i> You would have expected Coxe to say a default was possible even if he knew the odds were 100% it would happen? So we are to believe the same regulators (Bernanke, Pauson, Coxe, etc.) that told us that sub-prime was contained for many months yet then came before Congress with hat in hand looking for $700B? >>
Coxe doesn't work for the govt. He's a money manager for BMO Nesbitt Burns, and commodities is his specialty.
Coinboy, that article from Jim Willie is quite revealing. I recall reading it back in January. Most of his calls are eerily correct such as the dollar possibly gaining strength during the deleveraging. He also called for the Resolution Trust to rear its ugly head once again. On top of that he said that Congress would be slow to enact any relief because the first ones to show up begging would be the bankers! He was dead on. And in the end, he states that none of this will help the situation. The FED is now essentially toothless. The entire paragraph under "Confusion Reigns" is what has exactly happened in the 2nd half of 2008. The only thing missing from his analysis the take down of the commodity sector.
Coxe doesn't work for the govt. He's a money manager for BMO Nesbitt Burns, and commodities is his specialty.
Sorry, I was confusing him with SEC Chairman Chris Coxe.
If there were a shortage, or a conspiracy, or a delivery crisis, or any other calamity it would show up in the price of gold and PMs.
You mean like the hedge fund shorts of VW shares that was so plainly obvservable that all the hedge funds should have seen the delivery crisis coming and avoided the billions of losses they are about to get stuck with? The price sure did show up in the VW shares almost instantly, this after experiencing the a classic high, retest, and then a sharp fall in the stock price. I don't see anything on the stock charts that forecasted what was going to happen.
Makes you realize that a Comex default could easily lead to a 24 hour doubling of the silver or gold price. The situations are somewhat comparable in that both were/are shorted well beyond any reasonable means to buy-back shorted shares.
It sure seems like this situation snuck up on the hedge funds and was not observed in the shares price action until it was too late. Couldn't happen to a nicer bunch of "traders."
<< <i>If there were a shortage, or a conspiracy, or a delivery crisis, or any other calamity it would show up in the price of gold and PMs.
You mean like the hedge fund shorts of VW shares that was so plainly obvservable that all the hedge funds should have seen the delivery crisis coming and avoided the billions of losses they are about to get stuck with? The price sure did show up in the VW shares almost instantly, this after experiencing the a classic high, retest, and then a sharp fall in the stock price. I don't see anything on the stock charts that forecasted what was going to happen.
Makes you realize that a Comex default could easily lead to a 24 hour doubling of the silver or gold price. The situations are somewhat comparable in that both were/are shorted well beyond any reasonable means to buy-back shorted shares.
With what has already transpired in 2008 I don't see any reason why the gold or silver markets (or both) shouldn't transition into default at some point. All it will require is people taking delivery of gold if they feel their positions are in jeopardy. The IMF is ready to step in as would be others I suspect. While the situation could be rectified by finding enough gold, it would basically kill paper futures trading of the metals and send physical prices straight up.
While I can't predict that such an event will occur, I don't see how we can avoid a default down the road unless new controls are placed on these markets. Most every other "dependable" financial structure or agency have followed the road to insolvency, bankruptcy, or default, so why not the Comex?
57loaded asked: "how do you explain the difference between paper and physical...just hype and gold bug talk?....honest question "
that is an honest question and here is the simple honest answer: there is NO difference between the price of paper gold and physical gold.
but with physical gold you are paying a premium for delivery NOW. that is an artificial premium. and you are crazy to pay the big premiums being charged because those artificial premiums are based on emotion and can vanish in an instant.
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
IMO, most of the demand for fabricated gold is in the form of government-issued coins, and many of the fabricators do not appear to be in a particular hurry to catch up with demand.
When the premiums do finally shrink, it may have more to do with a gold price rise than with an increase in fabricated small gold products.
<< <i>well Sinclair is now encouraging those who can buy COMEX gold to take physical delivery.
what's the minimum? i suppose this is done at every eom contract expiration? >>
I believe gold is sold in 100 oz contracts, and silver in 5,000 oz contracts....hey, theres that "crazy" 50-1 ratio again. Perhaps the current 70-1 makes silver a bit more appealing?
What happened with VW was a good example of shorting (ie gambling) which eventually catches up to you. The gold shorts have been gambling for years that the FED, Treasury, and SEC will continue to watch their backs and cover up their mistakes. Don't count on it. I feel the 2 situations are certainly comparable. Markets are far more inter-related than we think.
but with physical gold you are paying a premium for delivery NOW. that is an artificial premium. and you are crazy to pay the big premiums being charged because those artificial premiums are based on emotion and can vanish in an instant.
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
but the price of gold is the same in all markets.
To call that premium "artificial" is just your opinion. It can be quite real. And the longer it goes on, the more real it is. If we think hard enough I'm sure we can come up with examples where premiums are paid today to prevent having to pay much more tomorrow once shortages are more highly publicized (how about the last few years of heating oil deliveries? Would those have been artifical premiums in 2006 and 2007?....as heating oil prices rose significantly during both winters). Regardless of the cause, there is an extended small gold coin/bar shortage in progress. And the longer it goes on, the likelihood increases that it is based on true supply and demand forces, not gold whimsy. Technicaly we could call all premiums that exist in our world today artificial, but we still have to pay them and the majority of them never go away.
Those gold premiums are far more likely to RISE further in a follow-on crisis than to just "vanish." This is the first time to my knowledge since gold has been publically available for sale where such a protracted supply crunch has existed. And killing off the shares of the gold producers by 65% is certainly not the way to try to extract further production from the gold sector. If anything, this will exacerbate the shortages by keeping hundreds of tonnes of mined gold from reaching the markets in 2008 and 2009. So how long does it really take to make new gold blanks for the USMint? The demand for AGE's in 1998 was multiples of what it is today and there were no shortages then. The mint ramped up production quite easily. Maybe the one and only US blank machine broke down hard and they're waiting on a $50 17-4 PH nitrided spring made in China...where their spring fabrication machine also broke down.
The silver shortages and price disconnect have been with us since March. So how long does that have to go on before it is not attributed to a simple fabrication/production issue? 1 year? 2 years? The USA geared up for making warships and bombers in WW2 in less time that this. Surely we can find a spring or some gold blanks?
Let's not attribute any recent slight shrinkage in gold/silver premiums to increased production. If anything, the FED and Co. has temporarily shrunk the volatility in the markets in general and dollar "strength" from forced deleveraging has weakened the metals a tad. But this will disappear as soon as the next shoe drops after the election which it invariably will, probably on credit card defaults or another wave of CDS failures.
Note also that the total Comex gold open interest has fallen to levels that are much lower than has been seen in the past with gold at $700-$750. While Comex "interest" has been shrinking, some of those players are moving into the physical only market having tired of the manipulation of the Comex by JPM, GS and others. In essence, the gold premium will be maintained or even increase as this continues. The disconnect between paper and physical gold is still growing (ie Comex price becoming less relevant).
October 31, 2008 High & Low Finance A Clever Move by Porsche on VW’s Stock By FLOYD NORRIS On Wall Street, a corner is not just an intersection of two streets. It is also a way to extract huge profits from speculators who had the temerity to sell a stock short.
Now the question is whether Porsche has pulled off a brilliant new-fashioned corner in Volkswagen stock, using derivatives in clever ways that no one had thought of before, or whether it was too clever for its own good.
In a corner, a buyer or group of buyers buys a lot of stock. As the price goes up, short-sellers appear. They borrow stock — perhaps from the very same group — and sell it, hoping to make a profit when the price declines.
Then comes the squeeze. The group, which now owns more shares than exist, demands the return of the borrowed stock. The only way the short-sellers can comply with that request is to purchase shares, and the only one who has shares to sell is the corner group. The group can set its own price, and make a fortune.
One reason you don’t see many corners these days is that they are illegal in most countries. But another is that almost everybody involved tends to lose in the end, with the exception of lucky investors who happened to own the stock before the fun started and can sell into the big run-up in prices.
Those who execute corners usually make lots of money from the short-sellers. But they end up owning a company for which they paid too much. The stock is delisted from the stock exchange, since there no longer are enough public shareholders, so there is no ready market for the stock. If the group that executed the corner used borrowed money, they may be in big trouble.
In the 1920s, the most famous corner in the United States was in stock in Piggly Wiggly, a grocery store chain. The corner was successful, but the man who executed it eventually went broke.
But there have been successful corners. Cornelius Vanderbilt once pulled one off, with members of the New York City Council as the victims. They had tried to profit by shorting a railroad company Vanderbilt controlled, and then revoking the company’s principal asset, a license to operate a street railway. Vanderbilt bought shares, and kept the price from falling. Owning more shares than there were outstanding, he offered to let the council members cover their short positions with only small losses, if they reinstated the license. They did.
The big loser in that corner was a legendary speculator, Daniel Drew, who had proposed the idea to the council members. He was forced to purchase shares at very high prices.
It is Drew who is credited with the saying “He who sells what isn’t his’n, must buy it back or go to pris’n.”
For the cornerer, there is also the risk that rules will change when powerful people get in trouble. That was one of the things that broke the Hunt brothers’ attempted corner in silver back in 1980. The authorities made it almost impossible to bet on silver prices rising, and the Hunts went broke.
Now, from Germany we have a new version of the corner, using derivatives in a way that may have removed much of the risk for the people planning the corner.
Briefly, here are the relevant facts: Porsche, for some reason, wants to control Volkswagen, and has been building up its stake, thereby driving up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short.
Then last weekend, Porsche revealed that it owned 42.6 percent of the stock, and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent.
The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about 200 euros to a high of over 1,000 euros. VW became the world’s most valuable company, if you believed that market price.
It appears that Porsche put one over on whoever wrote that option, or options. The options are said to be cash-settled, although we do not know much more about them than that. That means Porsche does not have to buy the shares — which it might have a lot of trouble paying for. Instead, at settlement it merely has to accept the cash difference between the market price and the price it has agreed to pay. The result could be tens of billions of euros in profits, without the headache of owning shares no one else wants to buy.
There has been a lot of speculation about who is on the hook for those options. Of course, those people may have used other derivatives to lay off some of their risk on who-knows-who-else. That is one result of having opaque markets, which Wall Street used to love because it made for higher profit margins. Now it may be one more loss for some already reeling bank or banks.
After all this is done, the VW share price will fall to some more reasonable level. And there are rumors that Porsche has purchased put options, presumably with later exercise dates, to profit from that fall.
By Tuesday night, the establishment was fighting back. Germany’s premier stock index, the DAX, was changed to cut VW’s proportion in it. That allowed index funds to sell stock, adding to the supply of shares, and VW’s shares are back to about 500 euros.
In the United States, there are numerous laws and regulations to stop corners. But Porsche insists it broke no German laws, adding that “allegations of price manipulation by Porsche are therefore without any foundation whatsoever.” It placed the blame on — you guessed it — “speculative short sellers.”
If this works, Porsche will have made billions from a car company at a time when cars are not selling very well. It will not have done that by selling cars, but a profit is a profit.
Of course, rules can be changed, as Nelson Bunker Hunt and William Herbert Hunt learned. The brothers angrily protested that it was unfair to change the rules in the middle of the game, but the rules were changed and the brothers went from billionaires to bankrupts.
If it comes to a question of whether regulators step in, Porsche has the advantage of facing off against short-selling hedge funds. There may not be a less popular group of investors, and their losses would provoke little sympathy.
But banks now have friends in high places. If Porsche’s option coup threatens a major bank, the bank might ask for help. Will governments step in to protect their investments? Stay tuned.
Floyd Norris’s blog on finance and economics is at nytimes.com/
<< <i>well Sinclair is now encouraging those who can buy COMEX gold to take physical delivery.
what's the minimum? i suppose this is done at every eom contract expiration? >>
I believe gold is sold in 100 oz contracts, and silver in 5,000 oz contracts....hey, theres that "crazy" 50-1 ratio again. Perhaps the current 70-1 makes silver a bit more appealing? >>
so it takes about $80k to buy one contract of gold....wow, aren't their gold pools like kitco (which i do not trust) that offer one to buy fractional contracts w/o too steep a fee?
Hey wait a minute. That sounds like a conspiracy to me? But then again....there are no conspiracies allowed in the gold market. You mean the "little people" are holding on to their gold and refusing to play Fed Paper-Poker? Goldbully for them!
ttown
Posts: 4,472 ✭✭✭
Comments
what's the minimum? i suppose this is done at every eom contract expiration?
roadrunner
Another side of the story. No idle accusations of Gov't conspiracy......just common sense. Imagine that.
would be a default. His reasoning is that the IMF has more than enough
gold to meet the demand and will step in if Comex gold goes into
"crisis" mode.
Don't shoot the messenger, just FWIW.
<< <i>That "goldbug" has had a good overall track record in the financial and gold markets over many years. Dismiss him if you like. Most anti-gold bugs have their barbarous minds made up before they read anything.
roadrunner >>
Far from anti goldbug here. I'm just amazed how many "newsletters" there are that pump the yellow metal via conspiracy theory.
<< <i>just common sense. Imagine that >>
<< <i>
I'm just amazed how many "newsletters" there are that pump the yellow metal via conspiracy theory. >>
They all need an angle to sell what they are shoveling, lol.
Gold Posts Biggest Monthly Drop in 28 Years as Dollar Climbs
Bloomberg link
Another side of the story. No idle accusations of Gov't conspiracy......just common sense. Imagine that.
UBS is insolvent just like GS, JPM and others. Why should we believe things coming out of the mouths of the same guys that got us here? GS has a great track record for publically posting their theoretical position only to be 180 opposite from it based on their trading desk. Why would any major firm publish their future trading positions? (ie they don't). For every UBS that has a reason to see gold down, you have a major gold player who takes the opposite play.
Today in Donald Coxe's conf. call, he stated that he didn't think there would be a default. His reasoning is that the IMF has more than enough gold to meet the demand and will step in if Comex gold goes into "crisis" mode.
You would have expected Coxe to say a default was possible even if he knew the odds were 100% it would happen? So we are to believe the same regulators (Bernanke, Pauson, Coxe, etc.) that told us that sub-prime was contained for many months yet then came before Congress with hat in hand looking for $700B? They knew from the outset they were cooked, and just let the problem simmer as they tried to get their moneys out. How many more lies do you need to see in print? I figure there must be 1000 pro-stock newsletters for every 1 that's bullish on gold. I wonder how many suckers are paying for professional brokerage advice or getting stock newsletters. One has to figure that the real sucker bet was listening to those carneys over the past 10 years. One of the biggest sucker plays in decades. And that play was cheered on by the likes of Greenspan, Bernanke, Paulson, and Coxe.
The IMF has been "threatening" to sell off "its" 400 ton trifle of gold (actually owned by the US and other nations) for several years now. That's about as reliable as the FED stating they are "inflation-fighters." Whenever a crisis occurs that hints of rapidly rising gold prices, the IMF trots out its usual line of selling off the so-called 400 tons. More than likely they have already been piece-mealing it away during the last year of crisis. I doubt they even have all 400 tons today, much like the US likely doesn't own all of its "recorded" 8100 tons any more. Whatever small amount the IMF could sell, it would be snapped up by central banks (China, Russia, Saudi, India, Brazil, etc) looking to strengthen their positions. That 400 tons would be worth a mere $8 BILL. That might cover about half of the comex open interest. I'm sure that foreign Central Banks would love to start handing over their remaining gold to help shore up the US Comex once the IMF runs out of gold, assuming most of it is not already leased away.
Gold Posts Biggest Monthly Drop in 28 Years as Dollar Climbs
Yeah, I laughed at this as well when I saw it a few days ago on Kitco. It seems that "reporters" will uncover every rock to find a meaningless stat like that to sway their point. What they really should be focusing on is the real trend, or Dow(stocks)/gold ratio - still within easy striking distance of the 10-15 year low. Stick with Kitco for the "news." Each day the headlines change from Gold is falling to record lows, and the next day, gold is under acute demand (lol). Yeah, for the month copper dropped 37%, aluminum 16%, wheat 21%, and corn and soybeans headed for their 4th straight monthly loss. And these are things the world does not need. Who needs wheat? Did the world's population just shrink? Dow/Gold ratio was looking better at the end of the month, so reason for a beatdown to make broker's monthly statements look better (gold was down 19% for the month...11% down by the 29th).
roadrunner
Excuse me, but isn't the US operation of UBS on the list of beneficiaries for the $850 Billion Cash Giveaway Prize being offered by Dr. Jeykll Bernake and Mr. Hyde Paulson?
That's what we need - real transparency and real credibility in our marketplaces.
I knew it would happen.
<< <i>
You would have expected Coxe to say a default was possible even if he knew the odds were 100% it would happen? So we are to believe the same regulators (Bernanke, Pauson, Coxe, etc.) that told us that sub-prime was contained for many months yet then came before Congress with hat in hand looking for $700B?
>>
Coxe doesn't work for the govt. He's a money manager for BMO Nesbitt Burns, and commodities is his specialty.
He is almost like an Oracle in the call !
This guy really called it back in January 2008, so the Default Call might not be off!
Coxe doesn't work for the govt. He's a money manager for BMO Nesbitt Burns, and commodities is his specialty.
Sorry, I was confusing him with SEC Chairman Chris Coxe.
roadrunner
<< <i>I looked in the archives and came across a well written article that really called the Banking crash.
He is almost like an Oracle in the call !
This guy really called it back in January 2008, so the Default Call might not be off! >>
we share the same name..but you seem hella smarter than me....
A crisis (even a conspiracy) does not sneak up on you. There are signs that come at you far in advance.
If there were a shortage, or a conspiracy, or a delivery crisis, or any other calamity it would show up in the price of gold and PMs.
but PM prices are going down, and have been.
the prices are telling you something. they are telling you there is no looming crisis, there is no looming shortage, there is no....
www.AlanBestBuys.com
www.VegasBestBuys.com
<< <i>I've posted this several times before and I will say it again.
A crisis (even a conspiracy) does not sneak up on you. There are signs that come at you far in advance.
If there were a shortage, or a conspiracy, or a delivery crisis, or any other calamity it would show up in the price of gold and PMs.
but PM prices are going down, and have been.
the prices are telling you something. they are telling you there is no looming crisis, there is no looming shortage, there is no.... >>
how do you explain the difference between paper and physical...just hype and gold bug talk?....honest question
You mean like the hedge fund shorts of VW shares that was so plainly obvservable that all the hedge funds should have seen the delivery crisis coming and avoided the billions of losses they are about to get stuck with? The price sure did show up in the VW shares almost instantly, this after experiencing the a classic high, retest, and then a sharp fall in the stock price. I don't see anything on the stock charts that forecasted what was going to happen.
Makes you realize that a Comex default could easily lead to a 24 hour doubling of the silver or gold price. The situations are somewhat comparable in that both were/are shorted well beyond any reasonable means to buy-back shorted shares.
It sure seems like this situation snuck up on the hedge funds and was not observed in the shares price action until it was too late. Couldn't happen to a nicer bunch of "traders."
roadrunner
<< <i>If there were a shortage, or a conspiracy, or a delivery crisis, or any other calamity it would show up in the price of gold and PMs.
You mean like the hedge fund shorts of VW shares that was so plainly obvservable that all the hedge funds should have seen the delivery crisis coming and avoided the billions of losses they are about to get stuck with? The price sure did show up in the VW shares almost instantly, this after experiencing the a classic high, retest, and then a sharp fall in the stock price. I don't see anything on the stock charts that forecasted what was going to happen.
Makes you realize that a Comex default could easily lead to a 24 hour doubling of the silver or gold price. The situations are somewhat comparable in that both were/are shorted well beyond any reasonable means to buy-back shorted shares.
roadrunner >>
RR......are you predicting a default?
While I can't predict that such an event will occur, I don't see how we can avoid a default down the road unless new controls are placed on these markets. Most every other "dependable" financial structure or agency have followed the road to insolvency, bankruptcy, or default, so why not the Comex?
roadrunner
that is an honest question and here is the simple honest answer: there is NO difference between the price of paper gold and physical gold.
but with physical gold you are paying a premium for delivery NOW. that is an artificial premium. and you are crazy to pay the big premiums being charged because those artificial premiums are based on emotion and can vanish in an instant.
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
but the price of gold is the same in all markets.
www.AlanBestBuys.com
www.VegasBestBuys.com
www.AlanBestBuys.com
www.VegasBestBuys.com
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
IMO, most of the demand for fabricated gold is in the form of government-issued coins, and many of the fabricators do not appear to be in a particular hurry to catch up with demand.
When the premiums do finally shrink, it may have more to do with a gold price rise than with an increase in fabricated small gold products.
My Adolph A. Weinman signature
<< <i>well Sinclair is now encouraging those who can buy COMEX gold to take physical delivery.
what's the minimum? i suppose this is done at every eom contract expiration? >>
I believe gold is sold in 100 oz contracts, and silver in 5,000 oz contracts....hey, theres that "crazy" 50-1 ratio again. Perhaps the current 70-1 makes silver a bit more appealing?
but with physical gold you are paying a premium for delivery NOW. that is an artificial premium. and you are crazy to pay the big premiums being charged because those artificial premiums are based on emotion and can vanish in an instant.
and as soon as the fabricators can catch up with demand, and fabricate more of the small gold products, those premiums will shrink.
but the price of gold is the same in all markets.
To call that premium "artificial" is just your opinion. It can be quite real. And the longer it goes on, the more real it is. If we think hard enough I'm sure we can come up with examples where premiums are paid today to prevent having to pay much more tomorrow once shortages are more highly publicized (how about the last few years of heating oil deliveries? Would those have been artifical premiums in 2006 and 2007?....as heating oil prices rose significantly during both winters). Regardless of the cause, there is an extended small gold coin/bar shortage in progress. And the longer it goes on, the likelihood increases that it is based on true supply and demand forces, not gold whimsy. Technicaly we could call all premiums that exist in our world today artificial, but we still have to pay them and the majority of them never go away.
Those gold premiums are far more likely to RISE further in a follow-on crisis than to just "vanish." This is the first time to my knowledge since gold has been publically available for sale where such a protracted supply crunch has existed. And killing off the shares of the gold producers by 65% is certainly not the way to try to extract further production from the gold sector. If anything, this will exacerbate the shortages by keeping hundreds of tonnes of mined gold from reaching the markets in 2008 and 2009. So how long does it really take to make new gold blanks for the USMint? The demand for AGE's in 1998 was multiples of what it is today and there were no shortages then. The mint ramped up production quite easily. Maybe the one and only US blank machine broke down hard and they're waiting on a $50 17-4 PH nitrided spring made in China...where their spring fabrication machine also broke down.
The silver shortages and price disconnect have been with us since March. So how long does that have to go on before it is not attributed to a simple fabrication/production issue? 1 year? 2 years? The USA geared up for making warships and bombers in WW2 in less time that this. Surely we can find a spring or some gold blanks?
Let's not attribute any recent slight shrinkage in gold/silver premiums to increased production. If anything, the FED and Co. has temporarily shrunk the volatility in the markets in general and dollar "strength" from forced deleveraging has weakened the metals a tad. But this will disappear as soon as the next shoe drops after the election which it invariably will, probably on credit card defaults or another wave of CDS failures.
Note also that the total Comex gold open interest has fallen to levels that are much lower than has been seen in the past with gold at $700-$750. While Comex "interest" has been shrinking, some of those players are moving into the physical only market having tired of the manipulation of the Comex by JPM, GS and others. In essence, the gold premium will be maintained or even increase as this continues. The disconnect between paper and physical gold is still growing (ie Comex price becoming less relevant).
roadrunner
High & Low Finance
A Clever Move by Porsche on VW’s Stock
By FLOYD NORRIS
On Wall Street, a corner is not just an intersection of two streets. It is also a way to extract huge profits from speculators who had the temerity to sell a stock short.
Now the question is whether Porsche has pulled off a brilliant new-fashioned corner in Volkswagen stock, using derivatives in clever ways that no one had thought of before, or whether it was too clever for its own good.
In a corner, a buyer or group of buyers buys a lot of stock. As the price goes up, short-sellers appear. They borrow stock — perhaps from the very same group — and sell it, hoping to make a profit when the price declines.
Then comes the squeeze. The group, which now owns more shares than exist, demands the return of the borrowed stock. The only way the short-sellers can comply with that request is to purchase shares, and the only one who has shares to sell is the corner group. The group can set its own price, and make a fortune.
One reason you don’t see many corners these days is that they are illegal in most countries. But another is that almost everybody involved tends to lose in the end, with the exception of lucky investors who happened to own the stock before the fun started and can sell into the big run-up in prices.
Those who execute corners usually make lots of money from the short-sellers. But they end up owning a company for which they paid too much. The stock is delisted from the stock exchange, since there no longer are enough public shareholders, so there is no ready market for the stock. If the group that executed the corner used borrowed money, they may be in big trouble.
In the 1920s, the most famous corner in the United States was in stock in Piggly Wiggly, a grocery store chain. The corner was successful, but the man who executed it eventually went broke.
But there have been successful corners. Cornelius Vanderbilt once pulled one off, with members of the New York City Council as the victims. They had tried to profit by shorting a railroad company Vanderbilt controlled, and then revoking the company’s principal asset, a license to operate a street railway. Vanderbilt bought shares, and kept the price from falling. Owning more shares than there were outstanding, he offered to let the council members cover their short positions with only small losses, if they reinstated the license. They did.
The big loser in that corner was a legendary speculator, Daniel Drew, who had proposed the idea to the council members. He was forced to purchase shares at very high prices.
It is Drew who is credited with the saying “He who sells what isn’t his’n, must buy it back or go to pris’n.”
For the cornerer, there is also the risk that rules will change when powerful people get in trouble. That was one of the things that broke the Hunt brothers’ attempted corner in silver back in 1980. The authorities made it almost impossible to bet on silver prices rising, and the Hunts went broke.
Now, from Germany we have a new version of the corner, using derivatives in a way that may have removed much of the risk for the people planning the corner.
Briefly, here are the relevant facts: Porsche, for some reason, wants to control Volkswagen, and has been building up its stake, thereby driving up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short.
Then last weekend, Porsche revealed that it owned 42.6 percent of the stock, and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent.
The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about 200 euros to a high of over 1,000 euros. VW became the world’s most valuable company, if you believed that market price.
It appears that Porsche put one over on whoever wrote that option, or options. The options are said to be cash-settled, although we do not know much more about them than that. That means Porsche does not have to buy the shares — which it might have a lot of trouble paying for. Instead, at settlement it merely has to accept the cash difference between the market price and the price it has agreed to pay. The result could be tens of billions of euros in profits, without the headache of owning shares no one else wants to buy.
There has been a lot of speculation about who is on the hook for those options. Of course, those people may have used other derivatives to lay off some of their risk on who-knows-who-else. That is one result of having opaque markets, which Wall Street used to love because it made for higher profit margins. Now it may be one more loss for some already reeling bank or banks.
After all this is done, the VW share price will fall to some more reasonable level. And there are rumors that Porsche has purchased put options, presumably with later exercise dates, to profit from that fall.
By Tuesday night, the establishment was fighting back. Germany’s premier stock index, the DAX, was changed to cut VW’s proportion in it. That allowed index funds to sell stock, adding to the supply of shares, and VW’s shares are back to about 500 euros.
In the United States, there are numerous laws and regulations to stop corners. But Porsche insists it broke no German laws, adding that “allegations of price manipulation by Porsche are therefore without any foundation whatsoever.” It placed the blame on — you guessed it — “speculative short sellers.”
If this works, Porsche will have made billions from a car company at a time when cars are not selling very well. It will not have done that by selling cars, but a profit is a profit.
Of course, rules can be changed, as Nelson Bunker Hunt and William Herbert Hunt learned. The brothers angrily protested that it was unfair to change the rules in the middle of the game, but the rules were changed and the brothers went from billionaires to bankrupts.
If it comes to a question of whether regulators step in, Porsche has the advantage of facing off against short-selling hedge funds. There may not be a less popular group of investors, and their losses would provoke little sympathy.
But banks now have friends in high places. If Porsche’s option coup threatens a major bank, the bank might ask for help. Will governments step in to protect their investments? Stay tuned.
Floyd Norris’s blog on finance
and economics is at nytimes.com/
roadrunner
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<< <i>well Sinclair is now encouraging those who can buy COMEX gold to take physical delivery.
what's the minimum? i suppose this is done at every eom contract expiration? >>
I believe gold is sold in 100 oz contracts, and silver in 5,000 oz contracts....hey, theres that "crazy" 50-1 ratio again. Perhaps the current 70-1 makes silver a bit more appealing?
so it takes about $80k to buy one contract of gold....wow, aren't their gold pools like kitco (which i do not trust) that offer one to buy fractional contracts w/o too steep a fee?
Hey wait a minute. That sounds like a conspiracy to me? But then again....there are no conspiracies allowed in the gold market.
You mean the "little people" are holding on to their gold and refusing to play Fed Paper-Poker? Goldbully for them!
roadrunner