gold manipulation: How they do it

derryb

Paper gold is really fiat gold that can be created from nothing.

"the genius of central bankers was not to forbid gold but to morph it into another fiat currency, by adding a credit multiplier to it."

It all now makes sense: by removing the limited supply factor price can be dictated with artificial supply (more paper).

cohodk

I knew the manipulation stories were gonna kick into high gear.

Wait till you see what they try to feed when gold is in the 1300's

OperationButter

<< <i>I knew the manipulation stories were gonna kick into high gear.

Wait till you see what they try to feed when gold is in the 1300's >>




Man I hope your right, I'd really like to get me some more gold at 1300/oz

VanHalen

<< <i>...when gold is in the 1300's >>



Now THAT would the time to back up the truck!

derryb

<< <i>Wait till you see what they try to feed when gold is in the 1300's >>


didn't you claim the first 1300 was a bubble?

cohodk

No I don't believe I ever said gold was in a bubble. A f

Yes 1300 will be a good buying opportunity, it will also leave many people questioning their religion. It will also show that people can lose lots of money with a so called guaranteed sure thing. It will also show that an investment in gold can be no different than an investment in Apple.

cohodk

I do think I said silver was in a bubble which is now becoming painfully obvious to many

roadrunner

<< <i>I do think I said silver was in a bubble which is now becoming painfully obvious to many >>



Silver was in a bubble twice in the 1970's. The first one was from Nov 1971 to Feb 1974 where silver rose about 5X from $1.30 to $6.30. That 5X increase was very similar to
the 2001-2008 (5X) and 2008-2011 moves (6X). But silver had a 2nd bubble run in the 1970's from 1977 to Jan 1980 rising from $4.50 to $50 (11X). Silver's first run in the
1960's took it up 2X from $1.30 to $2.60. It's progression in the last bull market was 2X, 5X, and 11X. Those last 2 runs at least doubled the price in the last 6 months, similar to
2010-2011. Conclusion? We may have only seen the first of two silver "bubbles." The fact that gold didn't bubble up yet as it did in 1973-1974 suggests there is very likely another
bubble run out there for both gold and silver. In the 1973-1974 period gold doubled up in price in 6 months.....twice. It has done nothing like that in this current 11 yr run. If gold
was left to its own devices w/o central and bullion bank interferences it surely would have doubled up in 6 months at some point. The managed rise in metal prices this time around is
much better than they did in the 1970's.

I agree that silver got to bubble stages in the 3rd leg stage of 2011. It will likely do the same thing again when wave 5 hits. Whenever the next wage begins, figure on another 5X to
10X bubblelicious run up.

derryb

Most assets are currently in a FED induced bubble. Unfortunately the FED cannot reverse the trend without reversing the dollar and the economy. Keep stacking, the bubbles have lots of room for expansion.

cohodk

I agree with you Roadrunner. I think there is another rally in PMs, but it aint in the next year or 2 and will probably be from a price base lower than todays prices.





<< <i>Most assets are currently in a FED induced bubble. Unfortunately the FED cannot reverse the trend without reversing the dollar and the economy. Keep stacking, the bubbles have lots of room for expansion. >>



There are many assets not in a bubble. Equities and real estate are 2 of them. They may be elevated (or not), but are certainly nowhere close to a bubble.

derryb

Equities are in a bubble and the real estate bubble, while having popped, is still looking for it's price equilibrium - not there yet. The commodity, equity and bond bubbles will continue as long as the FED fuels them. Being in a bubble does not require an imminent crash. Bubbles can be prolonged as long as they are fed (pun intended).

So, at what point is an asset no longer "elevated" and now in a bubble?

Baley

Interesting question; maybe a bubble isn't apparent until after it has popped. Until then, it looks like a "bull market" and then a "consolidation" and "buying opportunity" followed by a period of "undervalued" and then "depressed prices" and then "bear market" for a while. Does it need to crash for the bubble to deflate?

KUCH

Typically it would need to crash for a bubble to deflate. Remember folks, it's a Soverign Debt Crisis. As Europe goes, so goes the USA.

cohodk

So, at what point is an asset no longer "elevated" and now in a bubble?


When prices are not absurd after running appreciably higher in a relatively short amount of time.

The Nasdaq going from 300 to 5000 in 9 years was a bubble.
Oil going from 15 to 150 in 7 years was a bubble.
The Russian stock market going from 200 to 2500 in 6 years was a bubble.
Florida home prices going up 6 fold in 6 years was a bubble.
Silver going from 5 to 50 in 7 years was a bubble.


The SP-500 has doubled in 4 years and back to where it was 5 years ago----NOT a bubble.
Florida real estate back to 2003 prices----NOT a bubble.

I "might" argue that certain debt instruments are currently in a bubble, but im not sensing the same psychology surrounding their current prices as I did with the above mentioned bubbles.


In each of the above bubbles, prices corrected 50-80%. Time and price destruction cures bubbles. ALWAYS.

derryb

<< <i>So, at what point is an asset no longer "elevated" and now in a bubble?


When prices are not absurd after running appreciably higher in a relatively short amount of time.

The Nasdaq going from 300 to 5000 in 9 years was a bubble.
Oil going from 15 to 150 in 7 years was a bubble.
The Russian stock market going from 200 to 2500 in 6 years was a bubble.
Florida home prices going up 6 fold in 6 years was a bubble.
Silver going from 5 to 50 in 7 years was a bubble.


The SP-500 has doubled in 4 years and back to where it was 5 years ago----NOT a bubble.
Florida real estate back to 2003 prices----NOT a bubble.

I "might" argue that certain debt instruments are currently in a bubble, but im not sensing the same psychology surrounding their current prices as I did with the above mentioned bubbles.


In each of the above bubbles, prices corrected 50-80%. Time and price destruction cures bubbles. ALWAYS. >>


Sure sounds like calling something a bubble is quite subjective and in the eyes of the beholder. Looks like the only way to know it was a "bubble" (depending on one's subjective definition of a bubble) is after the fact when a correction occurs. Even then a correction may not be due to overinflated prices. Appears "bubble" is just another word for a change in cash allocation. Maybe there are no bubbles, only market tops. And once a new market top occurs, I guess the last top in that asset can no longer be viewed as a bubble - let's call those burps.

VanHalen

Bubble is subjective. There is no quantitative definition.

Regarding the current level of the U.S. equity markets, 55 straight months of 0% interest rates coupled with several trillion USD has pushed them beyond where they would be. Plug in a 4% interest rate and see where the equity markets go. There is little question The Fed's policies have the U.S. equity markets 20% to 30% higher than where they would (should) be.

The Fed and the U.S. Gov't have little choice other than propping up the equity markets with money creation, debt and 0% interest rates. Our economy depends on it, 401Ks depend on it, pension funds depend on it, everything in the U.S. revolves around it, and the hole was so big there is no end in sight.

I liken it to a Black Hole with gravity so powerful that nothing can escape it, not even light. The Black Hole in the U.S. was (is) so big that trillions of USD of been absorbed thus far and we are still teetering. Trillions more in debt and money creation and years more of 0% interest rates lie ahead.

The Fed use to crack open the valve and add a few drops to the economy. For 55 straight months the value has been wide open gushing aid into a crippled system.

derryb

<< <i>The Fed and the U.S. Gov't have little choice other than propping up the equity markets with money creation, debt and 0% interest rates. Our economy depends on it, 401Ks depend on it, pension funds depend on it, everything in the U.S. revolves around it, and the hole was so big there is no end in sight.

I liken it to a Black Hole with gravity so powerful that nothing can escape it, not even light. The Black Hole in the U.S. was (is) so big that trillions of USD of been absorbed thus far and we are still teetering. Trillions more in debt and money creation and years more of 0% interest rates lie ahead.

The Fed use to crack open the valve and add a few drops to the economy. For 55 straight months the value has been wide open gushing aid into a crippled system. >>


Have you considered the possibility that maybe the Fed and the US Gov't are the ones who crippled and continue to cripple the system? Depending on them to fix a problem they created is not the solution.

Paul Volker showed us how the system can fix itself under the right leadership.

VanHalen

<< <i> Have you considered the possibility that maybe the Fed and the US Gov't are the ones who crippled and continue to cripple the system? Depending on them to fix a problem they created is not the solution.

Paul Volker showed us how the system can fix itself under the right leadership. >>



No doubt about it. We have created the monster and now have to (ahem) feed it. It is one hungry monster - insatiable in fact. The more we feed it, the hungrier (greedier) it gets.

Getting out of the way and letting nature take it's course IS the best option for the long term health of our country. That would mean a depression and rebuilding and the American public and their elected officials won't accept that.

s4ny

The velocity of money is very low so there is little inflation at the present time. When the economy improves, as
I think likely, the Fed will shrink its balance sheet. This will not be so difficult as much of what they own is
mortgage backed and will amortize over time.

Whatever you think, you can make investments that benefit if your expectations are correct.
Stocks for an improving economy and some inflation protection, bonds for a deflation, gold and silver
for protection from government debasement, oil, copper and nickel for a combination of worldwide economic
growth and inflation.

Residential real estate should continue to recover as the economy improves and the population grows.

cohodk

Hardly subjective. If its up in price more than 5 fold in 5 years then it most likely is a bubble. Add the psychology of a mania and you definately have a bubble.

jmski52

Good comments here. I would add that bubbles aren't subjective, but relative. For the most part, we are looking at disparities that are being caused because of a "managed" or "controlled" economy.

Consider the following:

<<Equities are in a bubble and the real estate bubble, while having popped, is still looking for it's price equilibrium - not there yet. The commodity, equity and bond bubbles will continue as long as the FED fuels them.>>

These markets are relative to each other. When one of them is artificially inflated - relative to the others - it's most likely a bubble. Real estate and the bond market are the two elephants in the room. We've seen what happened to real estate when the underlying asset was allowed to be inflated with derivative-style leverage. You haven't seen anything yet, considering the trends in the US Treasury Bond markets.

Stocks are only along for the ride, and they are being propped up with $85 billion/month in new thin-air money creation, as part of the political objective. Too much pain in retirement accounts would be the end of numerous political careers, but the real game is in US Treasuries. That's how "everything" is financed, and in my opinion US Treasuries are the mother of all bubbles. Works ok when everyone is in awe of your infrastructure and military.

The problem remains one of sustainability. Our debt load is unsustainable, and just about every other country who used to buy Treasuries has figured it out. So, if our economy can't start recovering the debt load will cause a collapse. We get to deal with all of the BS from what the gov't and banks will try to spoon feed us when that happens.

RGJohn

<< <i>.......... so there is little inflation at the present time. .... . >>



Huh? What planet are you writing from?
Inflation is rampant and no end in sight here in Colorado, USA.
Food, fuel,clothing, all up, up, up. And frequently significantly up in short periods of time. That's the obvious inflation. Then there is stealth inflation....smaller packages, poorer quality (horsemeat for beef anyone?), watered budweisers, and doubtless other things we haven't yet discovered because the advertising media derives their income from those who are, like themselves, benefitting at our expense.

roadrunner

The velocity of money is slow on Main Street USA. But it is not slow when the dark pools of money are factored in. The massive debt-money slushing back and forth between the big
banks, treasury, FED, and other central banks never makes it down to J6P. The liquidity pools are made up of otc derivs, currency swaps, gold leases, bond buying and who
knows what other types of hidden QE yet to be defined. Who cares about $85 BILL on Main Street when the big boyz can move a few $TRILLION in cyberspace whenever they
want to? It's these money flows that are contributing to asset price inflation in various segments of the economy and financial sector.

ksammut

Monetary inflation versus price inflation

roadrunner

<< <i>Monetary inflation versus price inflation >>



Good article. It's hard to have widespread price deflation when for 15 yrs straight M2 is up 8-10% yoy. Interesting that TMS shows a more subdued rise.
The bankers and hedge funds decide where that liquidity flows to...not necessarily the economy's supply and demand....though that is a partial player.