Why gold is not going higher. . . for now.
derryb
Posts: 36,788 ✭✭✭✭✭
In a nutshell, because paper traders set price and "gold buyers don’t trust the counterparties selling (paper) gold."
"Thus the current spot price of gold is reflecting market uncertainty as to who has actual gold, and who has worthless paper certificates of gold." IMO this is why premiums will continue to grow to the point where we will in fact eventually have two recognized prices: one for paper and one for physical.
If you stack physical (silver or gold) consider this temporary condition a blessing since it keeps the price of the real McCoy underpriced for anyone buying. Paper metal is nothing more than a derivative. When the lid eventually blows off of the paper (and it will) your stack will be the play of the century as the true price becomes realized.
"Thus the current spot price of gold is reflecting market uncertainty as to who has actual gold, and who has worthless paper certificates of gold." IMO this is why premiums will continue to grow to the point where we will in fact eventually have two recognized prices: one for paper and one for physical.
If you stack physical (silver or gold) consider this temporary condition a blessing since it keeps the price of the real McCoy underpriced for anyone buying. Paper metal is nothing more than a derivative. When the lid eventually blows off of the paper (and it will) your stack will be the play of the century as the true price becomes realized.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
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Comments
<< <i>Very true.. however the stacker has to be willing to pay the "Actual price with premium" to add to the stack and not the "paper price". I find the "MOST STACKERS" think they can add without paying the real price because the paper price is ??? JMHO. >>
current premiums are peanuts when one realizes that the base price for physical is being determined by something with growing counterparty risk. I consider metals, with premium, to be currently on sale.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Until highly visible defaults begin to occur, such transactions should be profitable enough to keep physical and paper from totally decoupling.
My Adolph A. Weinman signature
If there’s a conspiracy, someone’s bound to talk. Since no one’s talking, my guess is, no one in any position of power has any more clue as to this drifting
in the price of gold than any arm-chair conspiracy weenie.
I guess there was no conspiracy with Enron in the energy future's markets, none with Bernie Madoff (20 yrs of deceipt), and certainly none with the CFTC and silver derivatives/futures.
How about the Libor scandal or AIG/JPM/GS & Co. and mortgage backed securities from 2004-2008? There were no leaks on any of this stuff until way down the road. Thing is, it's
quite apparent that the Wall Street crowd do keep their mouths shut very well. Since the author's orig supposition is wrong, why bother reading his conclusions? In a truly
unmanipulated market gold could never go up 12 years in a row. It's a testament to the rigging going on that it has in fact done that because it had no other choice. Gold isn't
going higher for now simply because at a minimum it still has to work off a 34 month bull run (now 17 months into it)....and at a maximum it may be trying to work off the entire move
from $252 to $1923 (10 yr bull run).
The real reason gold has meandered since August 2011 is the bottoming of the Yen in mid-2011 after a 10 (or 30) yr downtrend. The Yen has tossed a kicker into the mix that was not
present for the entire gold bull market. Other currencies and markets are having to react to it.
<< <i>Very true.. however the stacker has to be willing to pay the "Actual price with premium" to add to the stack and not the "paper price". I find the "MOST STACKERS" think they can add without paying the real price because the paper price is ??? JMHO. >>
I was at a coin show last Sunday and the bullion dealer there was paying spot on for 1oz Eagles,Maples etc. and selling them for $100 over spot- he seemed to be selling them as fast as someone brought them in.
current premiums are peanuts when one realizes that the base price for physical is being determined by something with growing counterparty risk. I consider metals, with premium, to be currently on sale.
I could be wrong, but I think you missed his point derryb. What I took from what Metalsman said is, you can't have your cake and eat it too. The negotiating angle of the buyer saying Spot is a certain price isn't going to fly anymore. It already doesn't in my book.
<< <i>Very true.. however the stacker has to be willing to pay the "Actual price with premium" to add to the stack and not the "paper price". I find the "MOST STACKERS" think they can add without paying the real price because the paper price is ??? JMHO.
current premiums are peanuts when one realizes that the base price for physical is being determined by something with growing counterparty risk. I consider metals, with premium, to be currently on sale.
I could be wrong, but I think you missed his point derryb. What I took from what Metalsman said is, you can't have your cake and eat it too. The negotiating angle of the buyer saying Spot is a certain price isn't going to fly anymore. It already doesn't in my book. >>
Yes my point is just as POM says it. Stackers have to realize and be willing to accept premiums are and will continue to be part of stacking!
I would add that I agree with you Derry.... Metals with the current premiums ARE ON SALE and will seem so in very short time and into the future.
<< <i>Very true.. however the stacker has to be willing to pay the "Actual price with premium" to add to the stack and not the "paper price". I find the "MOST STACKERS" think they can add without paying the real price because the paper price is ??? JMHO.
current premiums are peanuts when one realizes that the base price for physical is being determined by something with growing counterparty risk. I consider metals, with premium, to be currently on sale.
I could be wrong, but I think you missed his point derryb. What I took from what Metalsman said is, you can't have your cake and eat it too. The negotiating angle of the buyer saying Spot is a certain price isn't going to fly anymore. It already doesn't in my book. >>
I did miss his point, thanks for enlightening me.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Maybe expectations equal price?
I think someone wrote that increased whining among PM bulls would soon become prevalent.
Knowledge is the enemy of fear
It's probably true for coin prices. But if it's traded on Wall Street, London, or Hong Kong, you can bet it's heavily manipulated. No one here knows
the price paid behind the scenes for large quantities of physical gold (ie 5-100 tonnes at a crack). There's no way that kind of quantity is being
tranacted at NY spot prices, or anything close to it.
What is true is that paper supply = paper demand. That's how oil got to $149 in 2008 and record high prices for houses. And it's also why the "paper" stock market is
probably headed to new all time highs this year.
"In times of a flood would you rather have a certificate for a boat or a boat?". Seems that we can be pretty confident that the folk that market paper gold have a significant interest in keeping any of their investors from saying "Gimme my boat." Methinks that it is simply a waiting game, waiting until someone holding a lot of certificates for a boat asks for their boat. I'm thinking...one good boating accident and then we will see who got it and who dont.
I knew it would happen.
<< <i>Apparently, Germany doesn't trust their storage facility counterparties. >>
It remains to be seen if their concern is a bit late. Seven years for the FED to return it tells me there's a good chance they don't currently have it all or it has been leased out.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
...by the global carry trade.
Knowledge is the enemy of fear
<< <i>Until the Chinese are satisified, buying up mines in America and around the world, gold will be affordable.
Good point. That will be the day of the awakening when Central Banks decide it's time for the final rebalancing of all the world's debt. And if one hadn't already
repositioned oneself properly in PM's and other tangible wealth or assets then you'll be left far behind with no seat at the bargaining table. The currency/carry trades
are having huge short term volatility effects on gold. But in the longer term these are just temporary diversions that do nothing to change the final outcome. If anything,
the longer these currency games go on, the higher the peak price of gold that will be achieved. Germany's NY vaulted gold is apparently all leased out or sold, with or without their
knowledge. No one needs 7 yrs to get their gold back. By that time the vast majority (if not all) of the financial shake out will be over. These guys will need this gold during the
2013-2017 period.