Poll: What caused the bear market?
RedTiger
Posts: 5,608 ✭
Gold is in a bear market, Silver in a major bear market. By conventional definitions, a 20% decline is a bear market, 40% a major bear. Gold is down 22% for calendar 2013, silver down 34%. From the highs, the declines are 33% for gold, 58% for silver. So don't argue the premise, it is defined by price movements. Whether this short term bear turns into a long term secular bear that spans many years is an open question, but a question for another day.
The question of the day is what factors caused the price decline. The options that come to mind:
a) Fundamentals of supply and demand. Especially in Asia, where taxes on gold in India, and a slowing economy in China hurt the demand. Also the threat of Fed tapering.
b) Technical factors, in plain English what goes up, must go down. Trees don't grow to the sky. Gold had 12 straight up years, a few down years is normal price action during a long term bull market.
c) Manipulation both up and down. The prices were manipulated up and are now being manipulated down.
d) Price suppression, prices are going higher, but powerful entities are artificially suppressing the price in the short term. Please explain, why the suppression only took hold during the past year or two. For example, why it didn't hold gold under $800 on the way up, why it didn't prevent silver from going up ten-fold.
Obviously to me, most will see a combination of factors for such a major price move. So pick the number one reason in your mind, and elucidate on a combo package in a reply, if desired.
The question of the day is what factors caused the price decline. The options that come to mind:
a) Fundamentals of supply and demand. Especially in Asia, where taxes on gold in India, and a slowing economy in China hurt the demand. Also the threat of Fed tapering.
b) Technical factors, in plain English what goes up, must go down. Trees don't grow to the sky. Gold had 12 straight up years, a few down years is normal price action during a long term bull market.
c) Manipulation both up and down. The prices were manipulated up and are now being manipulated down.
d) Price suppression, prices are going higher, but powerful entities are artificially suppressing the price in the short term. Please explain, why the suppression only took hold during the past year or two. For example, why it didn't hold gold under $800 on the way up, why it didn't prevent silver from going up ten-fold.
Obviously to me, most will see a combination of factors for such a major price move. So pick the number one reason in your mind, and elucidate on a combo package in a reply, if desired.
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Comments
I believe technicals and fundamentals for metals are not currently as important to metals as are technicals and fundamentals for the alternative investments. Metal fundamentals remain unchanged. It is the changing fundamentals and technicals for equities and real estate that could become the driver for metals.
My recognition of price suppression is not a matter of placing blame for current prices. I am a realist and I participate in the metals market fully aware of manipulation.
"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
When I say "we", I mean investor/speculators who have been able to take advantage of free money courtesy of the FED. As long as there are margin calls, gold will be sold.
<< <i>While I voted for ongoing price suppression, I believe recent lower prices (as with most investments) are a result of the threat of "tapering" QE, which I believe was simply a threat to test the waters. The waters (all of them, including the "preferred" ones) have responded. There will be no tapering and if equities continue to respond lower we will likely see more QE. If the dash to cash continues, the question remains where will it be placed when it re-enters the market - metal prices are now "attractive" and equities remain overbought. Talk of tapering could be the silver lining for metals in the intermediate and long term.
I believe technicals and fundamentals for metals are not currently as important to metals as are technicals and fundamentals for the alternative investments. Metal fundamentals remain unchanged. It is the changing fundamentals and technicals for equities and real estate that could become the driver for metals.
My recognition of price suppression is not a matter of placing blame for current prices. I am a realist and I participate in the metals market fully aware of manipulation. >>
I edited the first post. Please explain why the suppression is only working now. Why didn't suppression prevent a five fold increase in the price of gold, a ten fold increase in the price of silver? What kind of suppression allows a 1000% increase in price? Not very effective, especially silver, where only a few billion dollars can manipulate the entire silver market if leverage is used. To me, the suppression theory holds very little water in isolation, it only makes sense to me, if prices were manipulated up and and are now being manipulated down.
Liberty: Parent of Science & Industry
Prices can fluctuate wildly without any change in " fundamentals". This is usually viewed as manipulation by those lacking depth of knowledge of complicated inter-market forces and investor psychology.
Fundamentals don't mean diddly if there is not proper price support . By this I mean when silver was $45 it represented about 2 hours labor for J6P. That's insane. Demand destruction was rampant. And $1800 gold is 3 months salary for the poor people of India.
I've said it 100 times....The best cure for high prices is high prices. That's your answer.
Knowledge is the enemy of fear
I think its an up and then down manipulation. Drive the price up and get people into paper metals then drive it down to rob them.
I am talking about ETF's , what is an ETF other than a derivative? Those in physical can sit out the dips but if you are a paper investor it would be much tougher.
Why?
Knowledge is the enemy of fear
With physical metal you can pick up your marbles and go home if you want . These ETF's are the equivalent of mortgage backed securities or CDO's for joe sixpack . When they blow up then the wall street firms that created them will front run the collapse and joe sixpack will wake up naked in a dumpster .
There won't be any marbles to pick up
<< <i>From my perspective, we are in a liquidity crisis right now and gold is being sold off to provide necessary funds.
When I say "we", I mean investor/speculators who have been able to take advantage of free money courtesy of the FED. As long as there are margin calls, gold will be sold. >>
The only liquidity crisis I see is among the dealers whom were picesofme favorites. Those that put silver back in the safe when the price dropped. They will be forced to unload shortly. If this doesn't drop the price further the it will at the least reduce the ridiculous premiums.
Knowledge is the enemy of fear
Get the people to move it for "them".
How you ask? Price manipulation higher then lower.
Manipulate the price higher and get the people to buy small quantities that add up to a large qt. Plus, the people pay for the shipping costs.
Once all "their" gold has been shipped and they sit atop a
mound of fiat currency, they swing the pendulum in the other direction and manipulate the cost lower.
This in turn causes panic selling from the people and "they" buy it all back except this time they are buying in GE.
The bonus is the people pay for shipping both ways.
<< <i> Please explain why the suppression is only working now. Why didn't suppression prevent a five fold increase in the price of gold, a ten fold increase in the price of silver? What kind of suppression allows a 1000% increase in price? Not very effective, especially silver, where only a few billion dollars can manipulate the entire silver market if leverage is used. To me, the suppression theory holds very little water in isolation, it only makes sense to me, if prices were manipulated up and and are now being manipulated down. >>
The amount of shorting by the big players over the last five years leaves little doubt of price suppression. Maybe the five fold increase in gold would have been a twenty five fold increase without the manipulation. Maybe the manipulation was about controlling the multiples of increase - keeping it from going paroblic. I submit prices were manipulated down, allowed to rise, and then manipulated down (wash, rinse, repeat) - a whole lot of money was made by those in the driver's seat. Extreme volatility (silver in particular) can be very profitable in either price direction if you are the one determining price direction, you are privy to upcoming direction, or you are lucky at guessing upcoming direction. Fortunately I have been fairly lucky with short term paper plays.
"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
Debt creation and overspending by the feds and money creation to bail out the corrupt banking system can't go on forever, although it seems so.
I knew it would happen.
You guys can complain about manipulation all you want. Truth is you are just looking for a reason on why pm's failed in their promise. People lost money. Fact is fact. Pm's are just another asset class.
Sorry for those who have been duped and will now sit for many years wondering "what if". Some people will never live long enough to realize the promise.
I
Knowledge is the enemy of fear
Whether there's manipulation or not, you can't ignore the benefits of cost-averaging, nor can you ignore the fact that gold is about 5X what it was 10 years ago and longterm - there's no reason to think that it won't hold it's value vs. the dollar which is only a prolifigate debt obligation being pumped out irresponsibly by politicians only concerned with staying in power.
I knew it would happen.
<< <i>Here's the bottom line.....did PMs provide a store of value over the last 2 years?
You guys can complain about manipulation all you want. Truth is you are just looking for a reason on why pm's failed in their promise. People lost money. Fact is fact. Pm's are just another asset class.
Sorry for those who have been duped and will now sit for many years wondering "what if". Some people will never live long enough to realize the promise. >>
two and one half years ago $1300 gold was a store of value. I submit that $1300 gold today is a store of value. Just because gold price peaked higher in between only means it is not offering the higher returns it did when it peaked. It's store of value (dollar insurance) remains intact even during episodes of temporary dollar index strength and temporary episodes of gold price weakness. The determining factor on this issue will be what turns out to be temporary.
"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
back when the economy went into the dumps, and there was all the talk about the $ being devalued, stocks selling off, real estate market crashing, high unemployment, etc , people were drilled about putting there cash into something safe like gold /silver to protect assets, many were under the impression the total us economy would collapse. Once the price started to rise while it made headlines, more people got in on it to make a buck as other investments returned little.
fast forward a little, when QE started, talk was all the money printing would create super inflation and drive the dollar even further down. Prices continued to be fueled by this speculation and above.
Now fast forward a little later when the market peaked, and had the first signs of selloff's and corrections, each and every time it happened,(it it was several times) more and more people were burned and driven away. Why put cash into something that continues to loose.
Now to present day, the last two big corrections april and recently, more and more people are shying away from PM's because they no longer feel the need to find other places to put their money especially when its continuing to loose or at best do nothing. Additionally, now that the stock market is doing well, real estate is coming back and economy is starting to improve why PM's. Even more so with the realing in of QE, which I think is literally just a matter of time, it may cause a little panic selling in the stock market, but as fundamentals continue to improve, the market will gain back any losses from QE withdrawl.
There are several PM buyers who have stacked for quite a while as an insurance against the unknown and some of the things mentioned above, but I feel there is no way enough demand from just those folks to keep prices up where they are or anywhere near as this year winds down, and into 2014.
I was calling for 1200 gold and 20 silver by years end, but I am now thinking more like 1000 and 17 by years end
<< <i>My thought is:
back when the economy went into the dumps, and there was all the talk about the $ being devalued, stocks selling off, real estate market crashing, high unemployment, etc , people were drilled about putting there cash into something safe like gold /silver to protect assets, many were under the impression the total us economy would collapse. Once the price started to rise while it made headlines, more people got in on it to make a buck as other investments returned little.
fast forward a little, when QE started, talk was all the money printing would create super inflation and drive the dollar even further down. Prices continued to be fueled by this speculation and above.
Now fast forward a little later when the market peaked, and had the first signs of selloff's and corrections, each and every time it happened,(it it was several times) more and more people were burned and driven away. Why put cash into something that continues to loose.
Now to present day, the last two big corrections april and recently, more and more people are shying away from PM's because they no longer feel the need to find other places to put their money especially when its continuing to loose or at best do nothing. Additionally, now that the stock market is doing well, real estate is coming back and economy is starting to improve why PM's. Even more so with the realing in of QE, which I think is literally just a matter of time, it may cause a little panic selling in the stock market, but as fundamentals continue to improve, the market will gain back any losses from QE withdrawl.
There are several PM buyers who have stacked for quite a while as an insurance against the unknown and some of the things mentioned above, but I feel there is no way enough demand from just those folks to keep prices up where they are or anywhere near as this year winds down, and into 2014.
I was calling for 1200 gold and 20 silver by years end, but I am now thinking more like 1000 and 17 by years end >>
Why do you feel like the economy is improving? I'm in the building trade and its awful here in the north east. Housing is wretched
If anything the fraud in the banking system is worse than it was in 2008 . Unemployment numbers are being fudged by the government. We run massive budget deficits with no end in sight .
Meanwhile the Fed is blowing 4 or 5 bubbles as fast as it can , all my reasons for stacking are still intact.
To say that havent lost money while your investment falls ignores the fact that you have lost money. And you have lost time. You may get your money back, but never the time.
Knowledge is the enemy of fear
I am still waiting to see even ONE piece of evidence that shows JPM, for their own account, took a short position in gold or silver. And this is position was for speculation only and not to hedge a position against or for a client. Seems pretty silly to suggest that all the while silver was going higher that JPM was shorting it and presumably losing 100's of millions if not billions of dollars.
Seems kind of strange that the big players would be consistently so wrong about the direction of gold or silver. And how could they have done such a lousy job of suppressing it if it went from 8 to 50?
Knowledge is the enemy of fear
I've been hearing this for 5 years now.
Knowledge is the enemy of fear
To say that you should always know which way the markets are going to move, and then to say that you always act in the right direction and at the right time - is a canard that I don't engage in, nor do I suggest that anyone else should.
These markets are ripe for a whipsaw that may leave a large number of savers without any options for the rest of their lives. My money is where my mouth is, and I have no complaints about my track record. I've played the markets on margin, and I've played the markets with a hair-trigger technical view before. Been there, done that - and my opinion is that it is an approach which has only marginal utility at best, especially now that you are fighting uphill against HFT manipulation on every trade.
The fact is, the markets are not just manipulated, but corrupt. The financial accounting rules were thrown out, and the crooked dealings being done since 2008 make Michael Milken and Jeff Skilling look like saints. Bernie Madoff was only the tip of the iceberg, and I'm sure that you realize that. The enforcement is quite selective - they came down hard on Peregrine Financial's CEO, but jerks like John Corzine walk around free, with impunity. I know that it's always been that way to a certain degree, but it's worse now than it ever has been.
I'm staying as far from the system as I possibly can. It ain't capitalism or anything like it. You can do what you want and support the charade, if you really think that the system works for you. Have at it, knock yourself out. I'll pass.
I knew it would happen.
<< <i>What make it dump in 2008? >>
financial crisis - dash to cash. Wash, rinse, repeat.
Part of the current meltdown is China's central bank telling its banks that they will be on their own in handling any liquidity crisis. In other words no QE from the PBOC. Something the FED should have done in 2008. The great pain that would have resulted would more than likely now be a thing of the past.
"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
Successful BST deals with mustangt and jesbroken. Now EVERYTHING is for sale.
It is no more controlled today than in 2007, 1997 or 1937.
To say that you should always know which way the markets are going to move, and then to say that you always act in the right direction and at the right time
I dont think I have ever said or claimed to have said any such thing. I really dont know where this comes from.
All I have been trying to show over the past several years is that investor psychology is much more important than fundamentals and that this psychology can be tracked and patterned to predict future price movements. I have also tried to show the value of relativity in constructing one's investment portfolio. I apologize for being a poor communicator if this has fallen on deaf ears. Perhaps I should have been more vocal.
Knowledge is the enemy of fear
I read this to say that if you haven't been trading the market actively, you've been a fool who lost money and wasted time, since the only way that you would not have lost money is to have been actively trading, having timed everything correctly and in the right direction. And more importantly, it dismisses the value of dollar cost-averaging when the price is dropping, which I believe is a mistake if you fail to follow the strategy. Maybe I'm overreacting.
All I have been trying to show over the past several years is that investor psychology is much more important than fundamentals and that this psychology can be tracked and patterned to predict future price movements. I have also tried to show the value of relativity in constructing one's investment portfolio. I apologize for being a poor communicator if this has fallen on deaf ears. Perhaps I should have been more vocal.
I would agree 100% that investor psychology is important, and I acknowledge that the nominal value of a metals holding has gone down. I understand that. However when you say that fundamentals haven't done well, you'll have a tough road convincing me that building a position by dollar cost averaging over the past 15 years has done anyone a disservice. Further, given the current fundamentals I see no reason that that same exact strategy isn't a wise path to follow right now. The Point is that a strategy isn't a strategy if you don't follow it.
Note - I wouldn't be dollar-cost-averaging into precious metals if the fundamentals didn't support it. But they have supported this strategy for 15 years, and they still do.
And yes - a portfolio of precious metals holdings will fluctuate. I've seen my portfolio take wild swings in both directions over the years. But it works, and the only way I'd do something different is when I see some organic changes in the financial & political systems.
Lastly, if I thought that trading wouldn't get me into trouble, I'd be doing it. I think that trading for most folks is a dangerous route, and the odds are against you on every single trade. Vegas would give you as good a deal, and it would probably be more entertaining.
I knew it would happen.
<< <i>I voted "other", believing it's simple rotation out of the asset class, in the aggregate, due to discontent with returns, following large inflows due to fear, uncertainty, hype, and greed that fueled the bull >>
Agree with this analysis.
cohodk - I told you so. How long until you recoup, if ever? Due to QE bubble-burst....
Everyone else - a buying opportunity, keep on stacking, cause is rotation into stocks, back-up the truck, I knew it was going to drop....
PM's go up:
cohodk - no basis for rise, QE bubble...
Everyone else - $2,000 soon, fueled by massive debt, QE, debt ceiling, I knew it was going to pop...
air out of the balloon by jawboning 'tapering'.
The govt budget cannot handle 4% treasuries for long.
The govt has backed itself into a fiscal corner. Either print money or confiscate assets or both.
The free chit army needs it's food stamps, all 47 MILLION of them.
The govt has backed itself into a fiscal corner. Either print money or confiscate assets or both.
The free chit army needs it's food stamps, all 47 MILLION of them.
It's a tough situation, when you think about it. Problem is, many people don't.
I knew it would happen.
......perhaps hoarding dollar bills? I think I said that to you directly many times.
I certainly dont expect everyone to trade. In fact I dont want it. I, myself, am barely a decent trader. But what I have tried to express to the forum is that "fundamentals", conspiracy theories, manipulation scheme, funny cartoons, are all psychological mechanisms that can and usually do prevent an investor from seeing what is really happening.
Look, I expect all these so called fundamentals to come home to roost and I think gold will benefit, but the time to buy it was not after a 10 or 11 or 12 year run when everyone said they cant lose. Little old ladies were pushed into gold as well as 20 somethings. These people cant afford to lose 1/2 or more of their money, yet thats what happened. I saw the same psychological behavior with stocks in the 1999, real estate in 2006 and PMs in 2012. All have resulted in massive losses.
I believe we are in the despair stage if the bubble. After all I see people placing blame on many different events, situations, ect. This is what despair is all about. If we are lucky, we get the panic stage--maybe even beginning tonight--and get this bloodbath over with. Problem is that silver will be capped at $26 for quite awhile. It probably needs to test that area at least 2 times and probably 3. This will be a 2-3 year process. So, it is very possible that people who bought silver after 2011, will not see a positive return until 2015/16. And even those that bought in 2010 will have a return after 5 years very similar to the return they would have gotten had they just bought 5 years treasury notes.
I agree with gold being a "store of value", I think many assets are, but the problem most people have is with the concept of VALUE. If you dont know how to value, then you will lose with anything.
FWIW--I am now beginning to see value in PMs.
Knowledge is the enemy of fear
I bet you hate GB and love the dines letter. Just a little goofy banter at midnight, hows the new area? you liken it?
As for price suppression, again, no one has told me why "they" let silver go from $4 to $45 when two monkeys and an algo (algorithmic financial trader) with a billion or two to burn could likely have kept silver at $8 for another ten years. Big boys have access to tremendous leverage, think 200x margin, not 200%, two hundred times. Much more likely, if long term manipulation is going on, is that the silver bulls were played on the upside and now are being played on the downside, and getting rolled both times. Bull side manipulation brings in the small fish, which makes for a bigger meal for the big fish. There were 10,000 small fish in line in China buying gold on the dip, and as predicted they have become bag holders. Short selling doesn't bring in anyone, it scares away small fish, because they don't understand it.
The metals markets are looking ugly. A modest bounce is always possible. However, averaging down during a major bear market is the road to the poor house. I am not selling my physical, but my position is relatively modest. As for paper metals, I rather wait for a bottom and a retest, hopefully with support from the mining stocks before trying to call a turn. I'll let a thousand heroes go before me, trying to call the bottom, because that many have already lost big time trying to call a turn. Another huge positive would be some of the perma bulls throwing in the towel and actually selling. It didn't happen in 2008, because that was more of an event driven short term dip caused by a liquidity crunch. This feels much more like bear market action, especially in silver, and bear markets need and want capitulation before the bull can walk the street again. Rallies in a bear market are sharp and short. They keep hope alive, but lower lows, and lower highs are what tend to dominate the price action.
I was caught off guard by the drop off the cliff, so will refrain from price predictions. Again, averaging down into a major bear market can be the road to the poor house. Especially because we have not even had one down calendar year for gold yet. Normal would be three to six down years after 12 straight up years. If the bear is in charge now, 12 down years would not be unusual. All markets go in cycles.
Liberty: Parent of Science & Industry
<< <i>Maybe everyone's stacks were high enough. Once you have "enough" of something, do you keep buying? When is too much "too much"? >>
It's never too much, ask the guy down in blackjack, roulette, craps...
keep doublin down til you win it all back and get to even, or go bust... Only 2 scenarios...
That expected inflation caused investors and speculators to buy more gold. Gold approached
$2000 by late Summer 2011.
The expected inflation never materialized. Gold had to decline. The bear market.
Now, the Fed is essentially out of the market and interest rates are still falling,
the best indicator of low expected future inflation. It is likelier the World's economy is
in a mild deflation. The yield on the US Treasury 30 year bond is the lowest it has been
at any time in the last 50 years.
The recent sharp decline in the prices of oil and copper are further evidence of these
deflationary tendencies.
<< <i>Oh and what caused bear market?... Simply, sellers, a bunch of em... >>
Can't be....you left out the conspiracy factor.
"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
Menomonee Falls Wisconsin USA
http://www.pcgs.com/SetRegistr...dset.aspx?s=68269&ac=1">Musky 1861 Mint Set
<< <i>Apparent now that deflation is the culprit. It's gonna get worse. Question is, will PMs find a new role as the weapon of choice. I suspect they will not. Note that PMs were early to fall in 2008 but early to regain. >>
I thought gold was supposed to protect us from all the worlds ills? For years thats all I heard on this board.
Knowledge is the enemy of fear
<< <i>
<< <i>Apparent now that deflation is the culprit. It's gonna get worse. Question is, will PMs find a new role as the weapon of choice. I suspect they will not. Note that PMs were early to fall in 2008 but early to regain. >>
I thought gold was supposed to protect us from all the worlds ills? For years thats all I heard on this board. >>
What you heard was gold protects from the world's currency ills. It continues to do so.
"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
There had to be something that was a better "hedge" against the "worthless" dollar?
Knowledge is the enemy of fear
<< <i>You picked the most fantastic chart in 3 years and its still down.
There had to be something that was a better "hedge" against the "worthless" dollar? >>
I picked a chart that demonstrates gold's insurance power when it comes to a faltering currency. Do you deny the ability of gold to offer such protection? Sure, there are other assets that offer protection but they all carry more risk - better hedges only become known after the fact and after taking that risk.
"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