***DECEMBER 2012 Gold and Silver Stocks/Options/Futures trading thread***

roadrunner

This is a continuation of the November monthly trading thread to discuss the trading of PM-related stocks, options, and futures.

Dollar is trying to find a bottom on this shorter term cycle. Looked like it was done at 80.02 but 79.7 was hit last night. Gold probably won't move far from here until the dollar shows
its next sustained leg. Next week has an FOMC meeting and TBond auctions next week. So gold has about 6-7 trading days left before negative influences start to bear down for much of December. Where's all that fractal energy Nichols described in his last article?

ProofCollection

The fractal energy is still there and has yet to release. We are still in a sideways holding pattern. I'm thinking the next move will be triggered by our government with an announcement regarding the so-called fiscal cliff. Interestingly, gold volatility is at what I believe is a long time low. I don't have anything going back too far, but it's the lowest it has been in 4 years. We are due for a big increase in volatility. McLellan raised some concerns (and has for a while) that gold ETF holdings are high and didn't drop during the last $100 move down.

cohodk

McClellan isn't saying that gold is over-owned now, is he?

Interesting on gold volatility. My long term momo has begun to turn higher even with the decline in the index. Other momos are neutral.

ProofCollection

<< <i>McClellan isn't saying that gold is over-owned now, is he? >>


No, he's not. He's just pointing out that a significant drop (i.e. $100) is usually accompanied by a significant drop in gold ETF holdings and that ETF holdings are at a high level.

cohodk

Saying that holdings are a high level sure sounds like over own to me

ProofCollection

<< <i>Saying that holdings are a high level sure sounds like over own to me >>


Everything is relative and there are may ways to own gold. You also can't make that determination given the information I wrote.

For example, if we are at a normal state and people sell physical gold and buy the gold ETF but there is no net change in holdings, you can't say that gold is over owned when the net gold holdings hasn't changed.

Then it depends on the perspective of the statement. If you are referring to the US population and how many people own more than a a couple of ounces of non-jewelry gold, you could easily say that it is under-owned.

Finally, the level that is considered over-owned today may be considered under-owned tomorrow without anyone buying or selling an ounce.

percyb

I think there are a number of hedge funds that are selling off their holdings that include gold positions, Apple positions, and more, and they're preparing to shut their doors, TG.

It was a lousy year for the hedge funds. Consider for example how Paulson has lost his clients money...big time....27 percent and more.
This has been a brutally tough market.

derryb

<< <i>I think there are a number of hedge funds that are selling off their holdings that include gold positions, Apple positions, and more, and they're preparing to shut their doors, TG.

It was a lousy year for the hedge funds. Consider for example how Paulson has lost his clients money...big time....27 percent and more.
This has been a brutally tough market. >>


On the other hand, a savy hedge fund or simple investor can equally make money in a brutal market by correctly using shorts and a number of new inverse products, particularly ETFs, that cover a wide range of asset classes. I still believe any major sell offs between now and the end of the year will be motivated by proposed 2013 capital gains tax increases, only to be followed by repurchases of investments at a new, higher cost basis. Many investors see the benefit of paying taxes on profits in 2012 and then buying back to create a higher cost basis for their investments that will become subject to higher tax rates in 2013.

In the case of managers like Paulson brutal markets is just another term for poor fund management.

roadrunner

One has to look carefully at the ownership of some of those metal ETF's and ETN's. They are only as good as the sponsor/custodian is solvent.
There will be some surprises down the road when some of these 2X and 3X leveraged ETF's/ETN's blow up because the sponsoring bank/broker blows up or re-allocates your account.

derryb

<< <i>One has to look carefully at the ownership of some of those metal ETF's and ETN's. They are only as good as the sponsor/custodian is solvent.
There will be some surprises down the road when some of these 2X and 3X leveraged ETF's/ETN's blow up because the sponsoring bank/broker blows up or re-allocates your account. >>


Which dictates close monitoring of the investment and the investment house.

ProofCollection

Markets are quiet ahead of the fed announcement. The general concensus seems to be an expansion of the fed's balance sheet which should send gold upward. If so, it should launch the next big move for gold. The move will be confirmed by a decisive move above $1750.

roadrunner

FED said everything that people wanted to hear. Gold spiked up........then all the way back. At least silver and miners held on to much of their gains.
Week long gold bear flag still in play. Where's the fractal energy when you need it? How much of it was used up today whip-sawing from $1719 to $1707,
then to $1723, then back down to $1711? $1707, $1711, $1717 still remain the key levels as of late. Gold sold on the news. Now has to prove itself again.

roadrunner

That was a fun day with silver playing catch up. GSr looks to be targeting the gap at 53 and upper 20 day BB.
Not a good start as we head into a very rough 2 weeks for PMs (next week is another auction week along with miners OE).
Next Friday is the Mayan EOTWAWKI, Thelma and Louise accelerating to the fiscal cliff, along with stock market options expiration. Should be a fun end of next week.

Cohodk, considering the constant strengthening of the Yen over the past 10 yrs seemed to be an aid to the gold bull market, what does it mean now
that the Yen appears to have started a new trend where it weakens against the dollar?

cohodk

1300/20

cohodk

<< <i>That was a fun day with silver playing catch up. GSr looks to be targeting the gap at 53 and upper 20 day BB.
Not a good start as we head into a very rough 2 weeks for PMs (next week is another auction week along with miners OE).
Next Friday is the Mayan EOTWAWKI, Thelma and Louise accelerating to the fiscal cliff, along with stock market options expiration. Should be a fun end of next week.

Cohodk, considering the constant strengthening of the Yen over the past 10 yrs seemed to be an aid to the gold bull market, what does it mean now
that the Yen appears to have started a new trend where it weakens against the dollar? >>





Roadrunner, plot a chart of the YEN vs the US 10yr interest rate over the last 20 years.

cohodk

<< <i>

<< <i>Saying that holdings are a high level sure sounds like over own to me >>


Everything is relative and there are may ways to own gold. You also can't make that determination given the information I wrote.

For example, if we are at a normal state and people sell physical gold and buy the gold ETF but there is no net change in holdings, you can't say that gold is over owned when the net gold holdings hasn't changed.

Then it depends on the perspective of the statement. If you are referring to the US population and how many people own more than a a couple of ounces of non-jewelry gold, you could easily say that it is under-owned.

Finally, the level that is considered over-owned today may be considered under-owned tomorrow without anyone buying or selling an ounce. >>




You need to think this through more. What is " normal state"? Overowned does not mean everyone owns it. Maybe think about the Phoenix real estate market from 2000 to today. Don't think about the bubble, but of supply / demand and psychology.

roadrunner

I'll take the OVER on the $1300/$20 wager. Where do I sign up?

ProofCollection

One would think that with all that the fed is doing that gold should be blasting off. But I'm seeing lots of contradictory indicators that say that gold may actually be in trouble. I've read comments that the gold market needs "new participants" to drive the price higher because everyone else has already bought pretty much all they are going to buy and that the last fed announcement was no surprise. McLellan's prediction indicators look pretty bearish for gold unless gold reverses course soon and in a big way. Gold ETF holdings are still very high. Overall something seems really amiss to me, and I'm not sure what that means for the near term. I suppose a lot of it could be related to the bogus fiscal cliff discussions. I don't see any plausible fiscal-cliff announcements being too positive for investments overall. The stock market seems to be topped out - can't tell if it's going sidways or down soon but that usually doesn't help gold. I'm not expecting 2013 to be great for stocks.

McLellan is looking for a relative high in gold on Dec 18.


BTW... I predict that congress will abolish the debt ceiling...

roadrunner

Silver stocks

Silver stocks trying to break out of triangles or away from lower trend lines. Looks like SSRI and SVM have broken out. FSM and MVG show slight breakdowns.
One concern is all the lower gaps that still sit lower (SIL, SLV, SLW, etc.). In the golds, it is mostly all breakdowns or miners sitting right on key trend lines. Out of
the several dozen largest golds only SA, PPP, NGD, and GSS might be deemed to have broken out higher. It does look like they could literally fall off the cliff here in one
final consolidation by end of December. GDX's weekly indicators are already at levels routinely seen during 5-6 month lows. Metals could sure use some of that monthly
fractal energy that's all stored up.

cohodk

comments that the gold market needs "new participants" to drive the price higher because everyone else has already bought pretty much all they are going to buy


i.e. over-owned.

roadrunner

Some of the entities that haven't bought gold to their fill are the central banks, the biggest buyer being China. The extent of this buying does not show up in WGC demand since many of
these buyers aren't reporting. It probably has no effect on the paper price because the buying is done outside the paper markets in cash/TBonds for physical. China hasn't reported any
buying for years since their last update at 1050 tonnes......guess they haven't been buying.

The silver issue is even more precarious since it's been used up faster than it can be mined. The behind the scenes scrambling for large quantities of physical gold and silver is quite
different than what we see at coin shops or in the future's market. Yeah, the "paper" gold and silver markets need more participants to drive the Comex reported price higher. As far
as what large quantities of gold trade for between knowledgeable parties, that's not being reported. The Comex is offering premiums to the paper price behind the scene to prevent
having to follow through on deliveries. It's cleaner to offer fat premiums than to try and go out and find the gold. After all, the govt and FED can key stroke as much fiat as they need
and shuffle it along to the banks to help offer those fat paper premiums. So I'll agree that unallocated paper gold is over-owned. The price to purchase a ton of the real stuff is kept
tightly under wraps.

The world's financial plan

derryb

Current holders of gold will continue to buy when they have the funds and they like the price. I know I will.

ProofCollection

Just read about a banking regulation change that takes effect Jan 1.

Banks will be able to use the full market value of gold as collateral (as cash equivalent) starting Jan 1. Currently they can only use 50% of the value.

roadrunner

<< <i>Just read about a banking regulation change that takes effect Jan 1.

Banks will be able to use the full market value of gold as collateral (as cash equivalent) starting Jan 1. Currently they can only use 50% of the value. >>




The BIS put that word out months ago. Gold becomes a tier 1 asset. So it's possible that a lot of that influence is already priced in. Don't really know, only speculating.
Just another reason why gold became a little more like money.

ProofCollection

The short term frctal energy is lining up for a move here Tues or Wed. With news this morning about progress regarding the bogus cliff, perhaps we are near a deal that will trigger a move. Still, I don't have any good feelings toward which way it will break.

cohodk

Well they be a moving
.

cohodk

<< <i>Current holders of gold will continue to buy when they have the funds and they like the price. I know I will. >>



What if the price continues higher will you still be buying?

And that brings us to--- the best cure for high prices is high prices

derryb

<< <i>

<< <i>Current holders of gold will continue to buy when they have the funds and they like the price. I know I will. >>



What if the price continues higher will you still be buying?

And that brings us to--- the best cure for high prices is high prices >>


Been hearing that wive's tale since $600 gold. I've been buying since $600 gold. $600 was high then, is it high now? Will $1700 be considered high in years to come? Those that think not will continue to buy. It really boils down to how one thinks current price will compare to future price, not to past price - unless you let price history charts make your decisions for you. I prefer to look at what should make gold continue to climb (or fall), not how high it has climbed.

At most price levels since $600 there were those that said "bubble, too high, get out." Eventually they will be correct. While metals will continute to take hits, I don't think it will be anytime soon.

The dollar has lost value since 1913. In the last 99 years has anyone claimed "the bottom is in?" Why does there have to be a top in gold as long as this dollar trend continues. I'm referring to dollar purchasing power not a comparison to weaker currencies as is done with the dollar index. Gold is the anti-dollar. Until dollar policy does a 180, gold will continue its long term path.

Here's a chart for you chartists:

ProofCollection

More downside in store for gold in the near future... Things not looking good. 1626 is my immediate target.

cohodk

$600 wasn't high. That was only a double. But $1800 is 3x $600. So now it gets interesting. The general public, and this includes 1.5 billions Indians, are now priced out.

Bur you didn't answer my question. Are YOU going to buy at 2000, 2400, 2800, extra?

My contention is that gold is overowned. Its secret is out.

derryb

<< <i>$600 wasn't high. That was only a double. But $1800 is 3x $600. So now it gets interesting. The general public, and this includes 1.5 billions Indians, are now priced out.

Bur you didn't answer my question. Are YOU going to buy at 2000, 2400, 2800, extra?

My contention is that gold is overowned. Its secret is out. >>


I will continue to buy dips as it continues to climb. When the causes of its climb are remedied, I will cease buying. At the moment I'm 50-50 physical/cash and 100% ultra inverse paper silver with the Roths, looking for a temporary bottom which I don't expect before mid Jan. Had a very good year with AGE collector coins (mostly 2011 and 2012 W uncircs.). Had one buyer who resells to the little ole ladies on cable TV make a $87k purchase. Sitting on a lot of buying cash at the moment, will go for a few ASE boxes when I think the time is right and will look at mint's 2013 gold offerings.

As I have stated in other threads I believe a selling rush to lock in on lower capital gains taxes in 2012 is causing a lot of investors to move to cash and affected my decision to liquidate gold collector coins at nice profits. The move to cash should affect most asset classes, including metals.

ProofCollection

<< <i>$600 wasn't high. That was only a double. But $1800 is 3x $600. So now it gets interesting. The general public, and this includes 1.5 billions Indians, are now priced out. >>


No they're not. They just buy less of it.

roadrunner

The tripling of the DOW into the early 1990's didn't stop anyone from buying. It took a 10X-12X move from 1980-1982 all the way to 2000 to get people to stop buying.
If one looks at where the gold price should have been from 1965-1971 before the gold window was closed, it probably appreciated 10X to 12X as well.
Same thing for oil's big run up.

I agree with PC that the $1626 area looks like a good target. That will fill the GLD gap at $157.5, SLV's gaps at $28/$29 (GSR to 56) and form a perfect parallel
down channel for gold from the early October high. That channel ties in well with the deep low on Sept 12th at $1718. Divergence on gold's monthly macd is of concern.

jmski52

I'm priced out of Apple and Berkshire Hathaway.

derryb

Interesting editorial from a former Treasury official:

The Fiscal Cliff Is A Diversion: The Derivatives Tsunami and the Dollar Bubble

". . according to the Office of the Comptroller of the Currency's fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank and Goldman Sachs. The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the US dollar and bond market of the Federal Reserve's commitment to save four US banks."

coinsarefun

Sorry...stressed from my mother being ill and put it in the wrong place............Please excuse

gsa1fan

What is driving the lower price trend?

cohodk

<< <i>

<< <i>$600 wasn't high. That was only a double. But $1800 is 3x $600. So now it gets interesting. The general public, and this includes 1.5 billions Indians, are now priced out. >>


No they're not. They just buy less of it. >>



I think they call that demand destruction No?

ProofCollection

<< <i>

<< <i>

<< <i>$600 wasn't high. That was only a double. But $1800 is 3x $600. So now it gets interesting. The general public, and this includes 1.5 billions Indians, are now priced out. >>


No they're not. They just buy less of it. >>



I think they call that demand destruction No? >>



Gold is only up about 10% in the last year and 17% in the last 2 years in USD. Although not insignificant, I doubt this will have a medium or long term effect of "destroyed demand" or having "priced anyone out," especialy in these emerging markets where incomes are on the rise. It's instilled deep in the Asian cultures, particularly the Indians, to store and display wealth in gold & gold jewelry. I highly doubt a 10% increase has had the effect of changing tradition in the last year. China managed to increase demand by a projected 3% (in ounce terms) and Indian demand didn't fall that much all things considered (in dollar terms), and is projected to increase for 2013.

gsa1fan

"The New York Stock Exchange is being sold to a rival exchange for about $8 billion, ending more than two centuries of independence for the iconic Big Board."

WHaa Tee Freek is this all about I did not think this was possible!

cohodk

<< <i>What is driving the lower price trend? >>




You really want the truth? OK. The Yen. Not conspiracy. Not profit-taking. Not the lack of the end of the world. Its the Japanese Yen.

derryb

<< <i>What is driving the lower price trend? >>


Remember, spot prices are determined by instaneous paper trades, not by time consuming physical exchanges. IMO investors are locking in capital gains on their paper holdings with the push of a button with plans to repurchase at a higher cost basis and a hopefully lower price. This year is unique as the threat of higher capital gains taxes in 2013 is real. No different than pro atheletes trying to lock in pre-2013 contracts to avoid higher taxes.

cohodk

<< <i>

<< <i>What is driving the lower price trend? >>


Remember, spot prices are determined by instaneous paper trades, not by time consuming physical exchanges. IMO investors are locking in capital gains on their paper holdings with the push of a button with plans to repurchase at a higher cost basis and a hopefully lower price. This year is unique as the threat of higher capital gains taxes in 2013 is real. No different than pro atheletes trying to lock in pre-2013 contracts to avoid higher taxes. >>



So people are selling now so they can pay taxes. Then they will buy back establish a higher cost basis and hopefully sell it again and pay more taxes. Stupid. But so I most investor so you're probably right. Just like the media want you to believe that Apple is down because of profit taking. Lemmings.

The global gold trade has been heavily finance via the yen. The yen has broken a multi year up trend. The correlation between the yen and gold will continue until equilibrium is achieved. The choice of believing the newsletter writers or the markets is yours.

ProofCollection

<< <i>The global gold trade has been heavily finance via the yen. The yen has broken a multi year up trend. The correlation between the yen and gold will continue until equilibrium is achieved. The choice of believing the newsletter writers or the markets is yours. >>


Agree. But don't you expect Japan will act to counter this move?

Nice apocolypse.

derryb

<< <i>

<< <i>

<< <i>What is driving the lower price trend? >>


Remember, spot prices are determined by instaneous paper trades, not by time consuming physical exchanges. IMO investors are locking in capital gains on their paper holdings with the push of a button with plans to repurchase at a higher cost basis and a hopefully lower price. This year is unique as the threat of higher capital gains taxes in 2013 is real. No different than pro atheletes trying to lock in pre-2013 contracts to avoid higher taxes. >>



So people are selling now so they can pay taxes. Then they will buy back establish a higher cost basis and hopefully sell it again and pay more taxes. Stupid. But so I most investor so you're probably right. Just like the media want you to believe that Apple is down because of profit taking. Lemmings.

The global gold trade has been heavily finance via the yen. The yen has broken a multi year up trend. The correlation between the yen and gold will continue until equilibrium is achieved. The choice of believing the newsletter writers or the markets is yours. >>


Taxes are paid once on all profits. Your tax rate determines how much. If you don't understand the advantage of paying a lower tax rate on the profits gained to date and then raising your basis with a repurchase for when you do pay higher taxes on the next amount of profit then there's nothing anyone here can do to enlighten you.

jmski52

This year is unique as the threat of higher capital gains taxes in 2013 is real.

The threat of higher capital gains taxes is more severe for stocks & bonds at 15% than it is for precious metals which are already taxed at 28%.

Taxes are paid once on all profits. Your tax rate determines how much. If you don't understand the advantage of paying a lower tax rate on the profits gained to date and then raising your basis with a repurchase for when you do pay higher taxes on the next amount of profit then there's nothing anyone here can do to enlighten you.

It's not that simple. You start with 1 ounce and pay this year's tax on it, say 28% on a sale @$2,000. Your after tax net is $1,440. You can't buy that ounce back for $1,440. You can only by back 72% of that original ounce. So buying it back at a higher cost basis only gets you less metal, which may still be appreciating faster than the net tax increase. 1.00 ounces will appreciate faster than 0.72 ounces.

It's a judgement call.

ProofCollection

The only case where you'd pay 28% on all proceeds from a sale at $2000 would be if you got the gold for free.

But let's run an example assuming a purchase price of $560 and a sale price of $2000 (must be some gold with a premium of some sort).

If you had 10oz in that example, you have a net profit of $14,400 of which you'd pay $4032 tax on at 28% our of your net proceeds of $20k, leaving you with about $16k to re-buy gold with, or about 8oz if you're able to buy back at roughly the same price you sold at. If the price goes up to $3000 in the next 2 years and taxes go up to 40%, you are looking at net proceeds on 8oz of $24,000 minus taxes of $3200 (on $8k profits) = $20800. In the scenario where you keep you gold, you have $30k total proceeds but pay $9760 in taxes for net proceeds of $20,240.

It's pretty much a wash in this scenario with those numbers but if you feel you can play a short term drop in prices or you're looking for an option to move some money out of gold or into different forms of gold, now is the time to do it.

ProofCollection

Breakdown...

jmski52

I defer to PC, good explanation of my intended point.

derryb

<< <i>This year is unique as the threat of higher capital gains taxes in 2013 is real.

The threat of higher capital gains taxes is more severe for stocks & bonds at 15% than it is for precious metals which are already taxed at 28%.

Taxes are paid once on all profits. Your tax rate determines how much. If you don't understand the advantage of paying a lower tax rate on the profits gained to date and then raising your basis with a repurchase for when you do pay higher taxes on the next amount of profit then there's nothing anyone here can do to enlighten you.

It's not that simple. You start with 1 ounce and pay this year's tax on it, say 28% on a sale @$2,000. Your after tax net is $1,440. You can't buy that ounce back for $1,440. You can only by back 72% of that original ounce. So buying it back at a higher cost basis only gets you less metal, which may still be appreciating faster than the net tax increase. 1.00 ounces will appreciate faster than 0.72 ounces.

It's a judgement call. >>


you don't pay 28% on the sale of $2000. You pay tax only on the profit. For those who will see capital gains tax rate increases, taking current profit at the lower rate makes sense. Buy it back at a new cost (higher basis) and start your next profit calculation using the new, higher purchase price. All you are doing is prepaying a portion of the taxes (at a lower 2012 rate) that you would end up paying at a higher rate if you continue to hold and then see a later profit that is ALL subject to a higher rate. Don't forget, by buying back at a higher cost basis you are starting the profit "clock" with a new, higher cost. This will result in less profit later, because you took some of it now and paid a lower tax rate on it.

Instead of waiting until after 2012 to make your sale, consider it splitting your sale (and profit) into two parts - the part taxed at 2012 rates and the part taxed at higher rates. You can do this by selling now and buying it back. You don't even have to wait until 2013 to buy it back. Dec. 31 is a deadline only for making the sale.

As far as "less metal" does it really matter how many oz. I have as long as I end up with the same dollar amount of metal?

Also, effective 2013 a new 3.8% tax on investment income for higher earners thanks to new health care law.

ProofCollection

<< <i>Instead of waiting until after 2012 to make your sale, consider it splitting your sale (and profit) into two parts - the part taxed at 2012 rates and the part taxed at higher rates. You can do this by selling now and buying it back. You don't even have to wait until 2013 to buy it back. Dec. 31 is a deadline only for making the sale.

As far as "less metal" does it really matter how many oz. I have as long as I end up with the same dollar amount of metal?

Also, effective 2013 a new 3.8% tax on investment income for higher earners thanks to new health care law. >>


I wonder if some dealers would do a sell & buyback for you for a small fee or even for free if you were a good customer. It's just paperwork for them.

But as far as less metal, no, it doesn't matter but you have to factor in the fact that you have to give back a portion of your profits to pay the taxes so you don't end up with the same dollar amount or same ounces of material. This is the basic principal behind a 401k. Since your taxes are deferred you don't keep taking hits on the principal to pay taxes so you can multiply your balance at a higher rate.