Sinclair has always stated that silver is a not a monetary metal like gold and would not respond as aggressively during monetary "events." But up to know he always stated that it would eventually follow gold. But clearly he has always personally prefered gold. This is the first time I can recall him stating it might not perform at all being that it is just an industrial metal. I disagree as to me silver is the "people's gold." But as industrial metal, should it ever be found in tight supply...the roof could come off.
<< <i>Sinclair has always stated that silver is a not a monetary metal like gold and would not respond as aggressively during monetary "events." But up to know he always stated that it would eventually follow gold. But clearly he has always personally prefered gold. This is the first time I can recall him stating it might not perform at all being that it is just an industrial metal. I disagree as to me silver is the "people's gold." But as industrial metal, should it ever be found in tight supply...the roof could come off.
roadrunner >>
If push comes to shove something is going to have to be used to make change for gold coins. What else but silver and ultimately copper and nickel? Gold is going to be risky to deal with anyway as not only the weight but the thickness and diameter of each coin will have to be verified to protect ones self.
Sinclair rephrased his words from yesterday to indicate that silver would perform. However once past $1200 he felt it would lag gold somewhat.
Personally, I think only gold could provide a currency backing. There is no other logical choice should something be needed. With banks borrowing $437 BILL per DAY the last week, we need some sort of constraint down the road....and soon.
Saw an interesting stat today. That if the Dow were priced in gold (rather than dollars) over the past 7 years, it would have lost 75% of its value. Yikes.
“Sinclair rephrased his words from yesterday to indicate that silver would perform. However once past $1200 he felt it would lag gold somewhat.”
RR, See there my friend, everyone is reading our thread, Ha Ha
As many here know I had a Gold and Silver operation in Austin Texas in the late 70’s and early 80’s. Even though gold has gone much further in price this time, it is still lagging adjusted for inflation.
In those days when gold hit $650 per ounce many of my gold customers shifted to buying silver. and all of my poor customers were buying silver, so we will see!
Poor Jim really does put up with a great deal for a seasoned pro giving out free information. Below is a statement sent to him by one of his readers.
I wonder if this person has sent these messages to the hundreds of stock advisory websites? I noticed this person did not make mention of the fact that he had bought any gold?
As I look out at the landscape in the stock market today there are hundreds of major stocks trading at more than 50% down in this market. At least Gold has not visited $400!
Mr. Sinclair, “I hope that you are pleased with yourself for having ruined everyone who has been a trusting reader of your website for the past 5 years. Look at the XAU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! What the hell are you writing about?????????????????????? Do you have a clue???????????? NO ,you don't. Again I ask you to close down your website----you promised that you would if gold did not shine in 2008; not only hasn't it shined, there is nothing more tarnished on Wall Street other than your reputation.”
Darn right Buffet says buy America, he just took a $10 BILLION stake in Goldman and a similar sized stake in GE (of what GE capital is 50% of the income...and will probably fail). Do you think he is going to say buy Bonds or buy European or buy silver? I'm sure his $40BILL philanthropic stake in BHC has nothing to do with this either. Plus he gets $500,000,000 a year from GS while the little people holding that stock get the shaft.
GS, I'm not so sure that the JS Readers come over here though the opposite is certainly true. If someone had all their gold money in paper gold (XAU, HUI) they have been hammered. While I've taken some lumps on some gold stocks as of late, my $20's have more than compensated. Let's just hope $750 holds so we don't have to revisit another wave of selling.
A huge anomoly exists with the gold to XAU ratio (physical to miner gold). Over the past 7 years, and pretty much over the past 25 years, this ratio has peaked in the range of 5.5 consistently. A few blips to 6.5 have occurred. But a solid high of 5.5 has been the trend for years. Today that ratio stands at 9.1 following a nearly straight rise over the past few weeks. The spike to 9.1 makes no sense with any trendlines. I don't think even hedge fund deleveraging can explain it.
From Peter Schiff:
In an amazing feat of revisionist history, somehow Hoover's interventionist policies have been completely forgotten. It is taken as fundamental that his inaction led to the Depression and Roosevelt's "heroics" got us out. Unfortunately, since we have learned nothing from history, we are about to repeat the very mistakes that lead to the most dire economic circumstance of the last century.
A major difference however, is that the structure of the U.S economy today is far weaker than it was in the fall of 1929. Years of reckless consumer borrowing and spending, and enormous trade and budget deficits have resulted in a hollowed out industrial base and an unmanageable mountain of debt owed to foreign creditors. Instead of the support of a strong currency backed by gold, the public now must deal with a modern Fed, free to print as much money as politicians want. So rather than getting the benefits of falling consumer prices (as happened during the Depression), consumers today will contend with much higher consumer prices, even as the economy contracts.
Stopped by my local B&M dealer today. He had a few calls for bullion while I was there, but didnt want to say it would cost $16+ oz when the TV shows it is worth $9.50. He told them he didnt have any fearing it could cost him "regular" business down the road as he may be viewed as a crook for charging so much. He had at least 300 oz in foreign govt rounds, art bars and the like. I wonder if other dealers are saying the same?
He also said that since all other metals were down at least 50% that he expected gold to trade down near the $500 level.
Over at GIM the posters were expressing their gratitude to JS. Here is one post by AUforPM that summed it up the best. Of course there are the occasional detractors that hold JS responsible for anything bad that occurs in the "rigged" paper gold market. You can't please everyone though.
Thank you, Jim Sinclair. Because of your tireless education project my family and several others I have explained things to will not lose our life savings in this epic financial crash.
Your lessons, from TA to the derivative meltdown, to how 'daddy war-bucks' will consolidate the mines using Barrick and switch sides and uphold gold prices after holding them down so long, and on the new gold standard which Trichet ran up the flagpole this week have all been interesting and valuable. Most of your insights are available nowhere else as early as you state them.
I believe if you got left in nothing but your clothing on a streetcorner you know trading so well you would be a millionaire again in a year. To put your insight up at your own expense is very generous.
People who are mad because in the general crash with an additional burden of illegal short selling, the junior miners are beat up don't get it. Naked shorting makes money for gangsters, but in the junior miners it also is stripping them open for cheap hostile takeovers and I wish more shareholders understood how bad J P Morgan wants their gold in the ground and would correctly interpret the frantic tree shaking trying to steal their shares.
But you knew that was coming and built a royalty company in a friendly country it will be hard for them to get at. They can naked short you, but I very much doubt they can get controlling interest. So thank you for that, too. I hope your personal shares are tied up in a trust so your kids can get bountiful dividends, but not sell control out from under your other shareholders for a reasonable period if we should lose you.
lolo, your complaint about silver I don't get. Jim has said silver will outperform gold, but he considers that market too small and manipulated and prefers gold.
I started reading JM in 2002 when gold was still $320. Unlike a few knuckleheads who feel he should have "by obligation" steered everyone away from the currrent gold/silver downdraft most get "it" that not everything can be figured out in advance when working against the "unlimited" deep pockets of the US printing press and illegal shenanigans via the PPT, JPM, GS, SEC, and USTreasury. To those reading JS between the lines it was clear that he prefered physical gold to paper gold, always. If you bought paper you should have known the risks. We've seen a lot of criminal govt behavior since March, and that's only the beginning. But in the end, money is either honest or corrupt. We have a lot of the latter. To those that don't understand that we've been in a "this is it" (ie defcon 1) financial scenario since the summer of 2007 will never quite get it, until "it" gets them.
The main reason socialism NEVER works is that in a socialist society nothing is ever allowed to correct to the down side for fear that some party might be injured.
Even in the case of Rome more and more of the money supply had to be debased, and more and more of the burden was placed on the most productive members of society until everyone went bust.
This planet was designed as a place of visitation, it was never meant as a permanent home for any creature.
There are a few simple truths in life that are undisputable. One is that no one can take any of their earthly positions with them when they leave, another is that human biomechanical organisms don’t last for decades, and another is that all markets must have a down turn in order for the next group of us to be able to afford to live here in some comfort.
All systems of government have there days, and then go the way of extinct creatures. This is generally accelerated by governments who decide they can please all the people all the time.
What would Italy (Rome) be like today if their government would have been able to provide every need for every citizen and no ones investments were allowed to correct to the down side? Well for one thing real estate in Italy would now be selling for tens of millions of dollars for a one-bedroom apartment.
I suppose that each generation must go through the same disasters over and over again never learning anything from the past, and that is really too bad.
Oct 16th 2008 | WASHINGTON, DC From The Economist
“A buyer can now obtain an FHA loan with as little as 3.5% down on a house costing up to $625,000—which would include most of the homes in the country. The FHA accounted for 22% of mortgage originations in the third quarter, up from 5% in all of 2007.
The real problem is that almost a quarter of U.S. homeowners with mortgages have zero or negative equity in their homes. Householders have too much debt and must save more.”
General "C", Sir, I need to visit with you regarding the Naysayers Yes, I've been briefed. What kind of support do you need to run these mongers out of here? Well, tell you what, I'll ask the princess how she would want to deal with this situation. I'll get back to you in a week or two. Dismissed.
From Adrian at the "Cafe:" Maybe these all aren't demonstrated facts, but some of these statements deserve a thought. A summary of where we stand today in the financial crisis and what role PM's play.
1)FACT: It is confirmed from many sources and particularly the big dealers who have the right contacts that almost all gold and silver is now unavailable in any sizeable quantity at all. I know people at a dealer in Phoenix and they are getting 50 calls to buy for 2 wanting to sell. They have NO bullion left except some junk silver and numismatic gold and silver coins. The US mint has already rationed eagle coins due to "unprecedented demand".
2)FACT: Silver became in short supply many months before gold did indicating more scarcity in silver than gold.
3)FACT: Two US banks in July sold short 20% of annual silver supply and 10% of annual gold supply in less than 4 weeks.
4)FACT: After years of rejecting all evidence the CFTC finally agreed this month to investigate manipulation of the silver market and then added manipulation of the gold market afterwards. This is being investigated by the Enforcement Division. This is the first time in history such an investigation has been launched. This may well be to make sure they have an excuse when the markets explode to be able to state they were investigating.
5)FACT: Silver and gold are selling at prices that are much higher than COMEX spot price. On ebay silver sells for $18-$20/oz. I have verified this myself. Gold is selling for over $1000/oz. Dealers are offering large premiums over spot to try to attract sellers to replenish their stock. So the COMEX price does not reflect the price in the physical market anymore.
6)FACT: COMEX only has enough silver to deliver on 17% of the contracts outstanding. They have only enough gold to deliver on 10% of the outstanding contracts.
7)FACT: GATA now knows of three entities who are taking advantage of the COMEX manipulated price. They are making agreements with refiners to take the 1000ozs silver bars off COMEX and 400oz gold bars and melt them into smaller sizes for the retail market and sell at very large premiums to the artificial COMEX price. This will very quickly draw down COMEX stocks and drive up the price to reflect scarcity
8)FACT: Shippers in London and Zurich are seeing record shipping volumes from their vaults to Middle East and India. People who have been in the business for 40+ years have never seen anything like it.
9)FACT: The US FED is issuing loaned money at its discount window at the rate of $100 B$ per day which is $36 Trillion annualized. The 100 B$ daily rate is actually increasing each week. These quantities of money will never be paid back because the national debt is 10T$ which it took 95 years to accumulate. This is highly inflationary
10)FACT: Every bank account has been guaranteed to 250K$ with unlimited funds to back up FDIC insurance. This is highly inflationary.
11)FACT: The US financial system is in complete panic. Even the chief officials tell us it is on the verge of collapse and required a bail-out. The mortgage industry has been nationalized. Two investment banks have collapsed. The world’s largest insurer AIG was taken over by the FED. Stock markets around the world have responded to this clear signal that the entire "State of Denmark" is rotten.
12)FACT: While the financial markets were on the brink the US dollar has rallied! This is not logical especially as the FED fund rate has been dropped to 1.5%. However, we know that the FED has made currency swaps to sell foreign currencies and buy dollars to prop up the dollar. At the same time the dollar was making unusual levitations gold and silver made swan dives on the COMEX at 9 AM or 10AM exactly on several days. This started when gold was about to break out from $930. If during an economic and financial crisis the dollar can manage to keep appreciating this will be the first time in history. The press reports this as "forced liquidations" yet the Open Interest hardly moves and in fact often rises on the supposed days of liquidation! The volume traded also does not infer massive liquidation.
13)FACT: The major gold and silver shorts on the TOCOM have been reducing their net short positions for almost 3 years to be almost neutral in gold and net long silver. These are experienced dealers who know the market very well. They do NOT want to be short after many years of having been consistently so!
14)FACT: The Bond market initially reacted to recent stock market routs by receiving safe haven investment sending the yield plunging. The bond rates have since been rising (falling bond prices) indicating an exodus from bonds is beginning (as per my latest article). If the bond market starts a sell off the dollar will fall precipitously due to inflationary concerns. When the dollar falls metal prices go up.
15)FACT: Trichet and Sarkozy are pushing for a G8 meeting to change the world financial system. They no longer want the $ as the reserve currency. They have also mentioned returning to the discipline of Bretton Woods. This explicit reference means gold backing of currencies, which is what Bretton Woods was all about: having the dollar gold backed and linking all currencies to the dollar. Once it becomes clear that the $ will lose its privileged position then all those who hold it as reserves will start to unload it. This has the potential to be dramatic. Again gold and silver would be the beneficiaries. So contrary to the unrealistic and illogical price on COMEX gold and silver have not gone out of fashion. In fact they are sold out in the retail space and foreign governments are starting to indicate a return to some sort of currency backing a la Bretton Woods.
Fact #7 was interesting but I found #8 more interesting. So much for faith in "safe" European banks. Looks like the Asians prefer all their gold in hand now.
<< <i>7)FACT: GATA now knows of three entities who are taking advantage of the COMEX manipulated price. They are making agreements with refiners to take the 1000ozs silver bars off COMEX and 400oz gold bars and melt them into smaller sizes for the retail market and sell at very large premiums to the artificial COMEX price. This will very quickly draw down COMEX stocks and drive up the price to reflect scarcity >>
This has to happen.
This will quickly siphon off silver headed to users and quickly cause a real disconnect between paper and physical. The market can absorb vast quantities of 1000 OZ bars very very rapidly. When you consider that industry needs every single one of these plus 30% more coming back in scrap there may be the explosion in the near future.
With copper prices down so sharply there will soon be a large curtailment in the number of 1000 bars being made as well.
Refiners will go into high gear when the price lurches higher and use old US coin to fill the gap.
This is a very unique time in history. This is like a pressure cooker with no release valve with the gas on high and the kitchen already on fire and near flash over. It's gonna be interesting.
I'm not convinced of your gold chart analysis. That could just be as easily interpreted as one major move down to $739, and then higher lows since that time. The move from $1033 (as well as from $990 and $936) were well scripted and in each case moved contrary to intuition. The Bear Stearns failure drop was classic. So one could say I have severe doubts about placing great faith in "painted" charts. Forcing gold down and dollar up during each successive financial crisis strains the imagination.
What I see is a pennant formation trending for resolution. If we do indeed violate the existing $739 low that could be big problems going forward. But in each case in this gold bull pennants have eventually broken out upwards in each case. I'll hang my hat on that coupled with the fact that GS and their buds have moved to net long positions after several years of being perma-shorts. Those 15 "facts" listed above seem to support a break up from the pennant rather than down. I'm also putting faith in David Nichol's fractal analysis which has already shown that gold has built up enormous energy that needs to get expended upwards. He hasn't been wrong on up or down moves since I began tracking him in mid-2007. But there's always a first time......I'm also looking at Peter Degraaf's recent article on the gold/XAU ratio and gold/HUI ratio. He shows that 9 peaks in the gold/XAU ratio have occurred since 2001...all resulting in a good time to buy gold before it moved up. The only exception was in March 2008 when it didn't hold. In that situation I think that extraneous manipulation following the BSC mess bypassed what would have otherwise been a run higher. In any case the 11th such peak is occurring right now. And they've been 90% accurate in calling an upmove in gold. I'll take 90% if I have to bet. All 6 peaks in the gold/HUI ratio have lead to gold rises. The 7th peak is happening now.
But hey, anything is possible now that the FED has unlimited purse strings to paint the markets any color they wish. In the end though we know they'll fail, and fail big.
But in the interim we could certainly see $600 but my hat is on a break up from this flag formation....but first it appears we'll have to rebound up and down a few times more to lengthen out the channel before the bust/boom decision gets made. Let's see if MoneyLA will put his "100%" 30 year trader's track record on the line with this one. I doubt it.
Really isnt much difference in our interpretation. You use 739 as the breaking point, I use 775. In either case we both see major damage if those numbers are violated. Sometimes I jump the gun on my trades. There is a 5% difference in our prices. I would rather have the 5% in my pocket than J6P.
That uptrend line is VERY powerful. A break below it will be SIGNIFICANT. Thats why I use 775 as my acting point. In fact, I am not even sure $550 would hold. For now though gold is holding and the trade is still to be long. However, I still see people talking about inflation, which to me says the coming deflation will be greater than anyone expects. And that is precisely what the global markets are telling YOU. It really isnt hard to imagine.
Also, I given the disparity in small lots of physical silver over paper, I would expect similiar activity in gold. Damn physical manipulators
However, I still see people talking about inflation, which to me says the coming deflation will be greater than anyone expects. And that is precisely what the global markets are telling YOU. It really isnt hard to imagine.
Also, I given the disparity in small lots of physical silver over paper, I would expect similiar activity in gold. Damn physical manipulators
The people talk about what they see happening. And to them it's rising prices, loss of purchasing power....hence inflation to them. When do you ever hear any talk at the water cooler about "deflation?" Just about never...except maybe at the FED or Lehman Brothers' water cooler. I don't think J6P could differentiate inflation from deflation.
During the Great Depression the value of the dollar increased, prices dropped, and the dollar went further. There weren't enough dollars to spread around. That will not be the case today since TPTB just abhor lack of dollars at any time. Ironcially, the dollar has been surging for months and many commodity prices have been falling at the same time. J6P's dollar is now buying more than before. And I bet J6P still calls this inflation. The USA has never had a long term deflation since the Great Depression and I doubt we will have one now. It is always inflate or die today. I also believe that the impending global inflation will also be far greater than anyone imagines at this point. Everyone is fixated on the deleveraging of paper assets whose only role is to determine who ends up with what companies and how much money has to be printed to pay off the default swaps. Odd that for every 5-10 articles that I read on coming inflationary events, I only see 1 siding for a longer term deflation....and that is usually only from Mike Shedlock (Mish) who has tended to be very good in his predictions, though I part ways with him on his depression coming soon theory. Toss Prechter in to that same category as well....though he's been dead wrong for too many years, but like a clock will eventually get something right again, such as DOW below 6000.
And as far as MoneyLA's end to commodities/gold, I never did hear any conversation at work, on the golf course, or from the shoe shine kid that gold was something to be invested in. We never even got a sniff of that all important "mania" phase. That tells me there is still another half of this cycle to go. Then again, maybe I need to be travelling in Longacre's circle of friends to be privy to that type of discourse.
Maybe people are feeling inflation because of the loss of value in their funds and equity portfolios so it seems like things are more expensive. One thing about the commodities falling is that we perceive that prices are easing but the CPI doesn't feel that way: Sept '08 CPI Don't look for many big ticket items like cars or condos to be sold over the next little while but the CPI is an interesting scan.
It seems that we are in the state of confusion as the reordering of the world's money begins to take place. Some time after the corporate bodies are counted and the countries that are going to die financially have done so, we will have a base line from which to rebuild the worlds economy. Once again, we must acknowledge that the USD is pervasive throughout the world. The world is literally infused with buks. This USD needs to find it's place and it's not the place where it is now. It seems like we can all accept that the USD has been compromised. It reminds me of that old army saying: "Lead, follow, or get out of the way."
No one seems to have done any local accounting of how much the fed will have to provide to our urban populations over the next say 5 years though certainly they realize that with the loss of property tax income and sales tax income...there's a lot of infrastructure maintenance and welfare and services that the fed will have to cover and it's not a small number when you think of the budgets for 250K+ major cities. We're talking police forces, firemen, hospital staff, it's a big number. That number does not even seem to be on the radar, we're much more preoccupied with making the banks stay solvent or at least appear solvent than we are interested in planning for our urban populations; I'm thinking Katrinaesque type situations as a possible response. Seems like that could take a year or so, things are moving very quickly right now...almost a suicidal speed. That coupled with us looking like we are going to get our incomes "spread around" we have a frightful environment to work within but no need to fret too much; just stay fluid, feel the force, be patient.
[And as far as MoneyLA's end to commodities/gold, I never did hear any conversation at work, on the golf course, or from the shoe shine kid that gold was something to be invested in. We never even got a sniff of that all important "mania" phase. That tells me there is still another half of this cycle to go. Then again, maybe I need to be travelling in Longacre's circle of friends to be privy to that type of discourse.
roadrunner >>
My soul is still Bullish ...and my soul is often wrong As far as "mania phase " , I am concerned that paying massive premiums over spot is a "mania phase"
There are actually quite a few minus (-) signs in those table on both an unadjusted and seasonally adjusted basis. Raw material costs--those costs that will be reflected in finished goods calculations in about 3 months--are down almost 10%.
I am doing some work that I think will support my contention of deflation or at the very least minimal inflation over the coming years. When completed I will share with the forum.
For now just think about 1990 Japan vs 2008 Europe. Lets see if the Europeans--Trichet-- are smart enough to figure it out.
but it would be great to be holding a lot of physical when they fix silver at $100/oz and gold at $5000. >>
Ready and waiting.
Early retirement and a life of ease.
I think I can handle that.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Barbera does some charting going back decades and notices that the dollar is in a pattern that happens quite infrequently. And following such patterns, swift reversals or breakouts occur usually within within 3 days as a rule. He notes that we just concluded day 2 of the pattern. Similarly, the Euro, and most other major competing currencies are at the extreme oversold portions of their charts.
So what's next for the dollar? A major upswing or a major reversal?
Indian Brides Replace Traditional Gold Jewelry as Prices Rise
Oct. 22 (Bloomberg) -- Ashima Lahiri will say her wedding vows in December wearing fake earrings, necklaces and bangles that cost a tenth of the price of gold, breaking a millennia-old Indian tradition that brides wear the precious metal.
``People are not willing to be victims of high gold prices and are instead going for glittering imitations,''
Households in India have 15,000 tons locked away in family vaults, almost double the reserves held by the U.S. Federal Reserve, according to consultant McKinsey & Co. That's worth about $376 billion at current prices after gold has gained for seven straight years.
India's bullion demand was 769.2 tons of in 2007, less than the 1,000 tons estimated by the World Gold Council, as more families chose to rework their mother's or grandparent's bridal collections instead of paying for new gold.
Yes, Cohodk, many minus signs, particularly those that are energy/fuel related. As you mention, prices should be retreating in the general sense. I agree with your take on inflation, particularly in the short term because we are probably looking at a game delay for the great inflation event that everyone was predicting. We are in an interesting scenario with cube dwellers looking for that merit increase and COLA and their employers looking at shrinking income so push is gonna come to shove as in out the door.
It's almost a cruel fate to be pumped up with the giddiness of the roaring twenties...I mean the roaring oughts and then thrown to the ground by financial reality. Everyone gets a new car, hocks their no doc house for extra cash, goes on the Disney land vacation with the family, and then just like that, it's over but wait, theres more; their 401k's get trashed too. So, I guess the fed got its wish, these guys are all workin' till 70. So the answer to the argument regarding what is the reward for those that paid their bills and paid their mortgage on time and paid of their retail credit...well, you get to retire at 62 just like you planned, life is good.
Barbera does some charting going back decades and notices that the dollar is in a pattern that happens quite infrequently. And following such patterns, swift reversals or breakouts occur usually within within 3 days as a rule. He notes that we just concluded day 2 of the pattern. Similarly, the Euro, and most other major competing currencies are at the extreme oversold portions of their charts.
So what's next for the dollar? A major upswing or a major reversal?
roadrunner >>
I will agree that the dollar is short term overbought, however, being overbought is a sign of strength. In the first graph he uses---of the dollar going back to the 70s, notice that the when the dollar has been this strong, it has continued to be strong for years. In 1980 or 1981 the dollar made a huge run and was clearly overbought the rally continued until 1986. Same in 1998.
I have been trying to harp on the forum that the rest of the world, especially Europe, is in much worse financial shape than us.
Short term, yes, I would expect the dollar to give back its gains, but since there is no alternative, it will again rebound. Deflation is probably going to be around much longer than people think.
Also, the long term downtrend on the dollar from 1980 is at about 104. This would mean about 24% more upside for the dollar. Which, coincidentally--or not--the Euro is about 24% above 100. It is my belief that both currencies will trade near par in the not so distant future and continue to do so for the quite distant future.
Just noticed I wrote broken "dow" instead of broken "down". Perhaps a Freudian slip.
I will agree that the dollar is short term overbought, however, being overbought is a sign of strength
An interesting way to look at it. Every major exhaustion of any market always ends in an overbought condition, tulips included. Gold being overbought at $875 in 1980, was that a sign of impending strength as well? I ceased all my buying of anything numismatic in fall of 1979. A friend of my wife's still has some beanie babies she bought on "strength" as well.
I'd like to see that chart showing 104 as the likely top of the current dollar move. If that's the case your the first one I've seen stating that in any written format, blog, website, etc. Cohodk may go down in CU Forum lore with that call. The highest published call I'd seen was one made about 1-1/2 months ago looking for 0.92.
<< <i>I will agree that the dollar is short term overbought, however, being overbought is a sign of strength
An interesting way to look at it. Every major exhaustion of any market always ends in an overbought condition, tulips included. Gold being overbought at $875 in 1980, was that a sign of impending strength as well? I ceased all my buying of anything numismatic in fall of 1979. A friend of my wife's still has some beanie babies she bought on "strength" as well.
I'd like to see that chart showing 104 as the likely top of the current dollar move. If that's the case your the first one I've seen stating that in any written format, blog, website, etc. Cohodk may go down in CU Forum lore with that call. The highest published call I'd seen was one made about 1-1/2 months ago looking for 0.92.
roadrunner >>
You are reading much more into this than I wrote. First I said the dollar is overbought and even wrote that I hope 87 is the current high for this move. I do expect a pullback and I think I wrote as much. A rally in the dollar from 70 to 100 is only a 42% up move, it fell 46% so I really dont see a rally to 100 as impossible.
Gold was overbought at 875 in 1980, but it was also overbought at 600 in 1979 after rising from 50 just a few years earlier. That didnt keep it from going higher. Just as the dollar is now.
Second, if you look at the charts that YOU posted, notice that Barbara's indicators were over bought in 1981 and in 1996 and yet the dolalr continued higher for several years. I believe that it exactly what will happen this time around. When the dollar gets towards par, it will probably mark the end of the rally, but in the meantime I would expect the dollar to fall back some then resume its uptrend. Like it or not, the dollar and Euro will be trading at parity.
Third, I warned yesterday that gold was probably going to break down. You wanted to wait till it broke 739, well its under that now. Paper traders would have saved 5%. Or made 10% by trading the inverse gold ETF. All I can do is lead the horse to water.
Forth, you posted from your "sources" that the dollar was going to 65, then 60, then 50. When it broke its downtrend line and I said gold was dead for awhile but will be very volatile, you laughed. Then you proceeded to post predictions of the dolalr going to 77, then 80, then 82, then 85 and now I see 92. So what will it be?
Fifth, sorry to make this post somewhat personal as I really do like you. You were first to discuss the magnitude of the derivative problem and have been right on. But now, with technical analysis and economic market relationships, you are treading on my turf. So feel free to disagree, but keep in mind that I am probably right. And when gold is at 500 and down 50% from its high, I will again say that PMs are great trading vehicles but will not be the means to economic nirvana that so many have been saying the past 7 years.
This must be the strangest trading market in history the stock market is down almost 500 points in to days, and may head down in the last hour of trading to test the 10/10/08 lows again.
O.K. we are going to have the suckers sell off in this deflation period before we have super inflation. I mean that phase must come, don’t you think?
In 2007 total tax revenues for the U.S. were around 2.5 trillion. The feds have already printed 3 trillion in bailout gifts, and the crisis is not over.
Whatever is happening now under the table, all boats are being lowered?
Someone must be dumping everything to try and get liquid?
Whenever we have these weird markets I always ask, what has changed?
The oil market is down to $67.00 today from $147.00, down $80 in just a few weeks. Did everyone stop driving by half? What has changed?
Here is my take, the banks, hedge funds, and most of the big institutions are full of derivatives that are looking like they are worth 10 to 20 cents on the dollar. They are selling everything in order to try and get some liquidity back.
Pick your poison, either we are going through the greatest liquidation in all the markets histories, or the entire system is failing?
Yes we can look at charts going back to the eighties but Gold and Silver are among just a few things on the planet that have NEVER adjusted for inflation. If Gold was at $2,350 and then declined by half to $1,175 it would be dropping like the rest of the market.
Forth, you posted from your "sources" that the dollar was going to 65, then 60, then 50. When it broke its downtrend line and I said gold was dead for awhile but will be very volatile, you laughed. Then you proceeded to post predictions of the dolalr going to 77, then 80, then 82, then 85 and now I see 92. So what will it be?
Please be careful with revisionist history. As a math-engineering person by trade I'm very careful when posting numbers and especially multiple revisions to "predictions." I would say you're 100% incorrect that I posted predictions of the USDX from 77, 80, 82, 85, and 92. 5 revisions from me in that short a period? Hardly. In the same vein a couple of days ago you revised history once again when you resurrected a "quote" of mine stating real estate would correct 50% from September levels....but I let it slide. In fact what I did say was that what I expected to happen was another 15-20% down move, but with 50% certainly possible. It's annoying to have people misquote you and call it fact weeks or months later for their own gamesmanship.
The dollar is inevitably headed to those levels of 65...60...50. The mechanisms are set in stone now. Be patient. It will come sooner than you think. Yes, gold will continue to be volatile as will all the financial markets. What the deflationists don't understand that gold can be $750 one morning and then $1200 the next. That wasn't possible before March of this year. I posted the 0.92 level as one author's worst case of the current move and that was week's ago. There has been no change since then. Was gold "dead" while it spiked from $739 to $930? That no doubt woke some people up. It probably sent the PPT into a higher level of awareness.
For now, the ppog (paper price of gold) falls....$171 in the past 30 days to be exact. Heady stuff for the worst financial environment in 75 years.
Mr. Sinclair thinks the deed is done, what do you think?
Posted On: Wednesday, October 22, 2008, 1:07:00 PM EST
Insurance On Sale
Author: Jim Sinclair
Dear Friends,
Gold is a currency that you will see perform as the currency of choice. There is no doubt we are headed into a planetary Weimar experience to some degree.
Dollars are being created faster now than in any other period in history. The Fed and treasury are guaranteeing everything from money market funds to large corporate entities in one way or another.
The first valuation of worthless OTC derivatives via a public sale of these at .0875 to .02 cents shocked anyone with a brain. Now the downturn in business is hitting financial entities and shortly litigation will smoke whatever is left.
The FDIC is already yelling for additional and significant funding from congress as their capital contracts on every Friday’s bailout.
People expect things to return to normal in 2010. That is a fairy tale.
The Fed has only started creating money for bailouts. You saw what happened when they stepped away from Lehman. If you say you didn't look out the window.
All these bailouts and Federal guarantees on credit items constitute a white wash on a falling economic structure going out of control and soon.
The out of control point of major planetary dislocation is between 14 and 89 days from now.
INSURANCE ON SALE
Gold is the only viable insurance. The US dollar is not viable insurance because there is simply too much of it and that amount is growing every day. That makes the US dollar untrustworthy.
Gold is the only viable insurance. Clearly equities are not.
Gold is the only viable insurance. US Treasury bills are not because the yelling at all the rating agencies in Washington today just might get US credit downgraded.
General commodities have been viable, but by nature they are too wild and from now on will be selective until Pakistan implodes and Weimar appears
Banks cannot offer insurance as they are in the main bankrupt.
Insurance companies cannot offer you sound insurance.
Money market funds are not insurance, making gold the only viable insurance.
Retirement programs are no longer insurance.
Jobs are no longer insurance as companies are run by lawyers and accountants.
Equity in your home is not insurance because it simply does not exist.
Your family is no longer insurance because they have the same problems you do.
The assumption your kids will take care of you in your old age is not viable insurance no matter what you think.
Gold has no liability attached to it and is therefore the only viable insurance.
Gold is universally exchangeable, making it the only viable insurance.
Gold has historically performed perfectly in maintaining buying power, making it the only viable insurance.
Gold is the only viable insurance because it is Honest Money.
Since gold is the only viable insurance and because everyone needs it, gold will trade at levels of at least $1200 and $1650.
I could go on but gold is all there is that will protect you from the White Wash being applied by the Fed and Treasury on a structure that is in fact in a free fall.
I am not the least concerned about gold and believe you should not be either as long as you have no margin and understand what gold really is: a currency and an insurance policy. There is no other viable insurance in this most unusual situation.
Please review the Formula as the US Federal Budget is going ballistic as the TIC report contracts like a turtle into its shell.
Sounds like JS is still saying "this is it." He has been saying the deed is done since late 2007 to early 2008. But, he's put a time table of 14-89 days on it which is an a strange thing to do when everything is so uncertain and the FED has dozens of hats with rabbits in them. No doubt, we'll have several more eye-opening events in that period of time. 14 days gets us to the day after the election, and 89 days takes us to January 14th or before inauguration day. Could that be when GW declares himself still the president under "special financial circumstances" and maintains the reigns? Seems JS has a thing about Jan 14th as he's already picked that date in 2011 as when gold will have reached $1650....or higher.
If gold gets to $1650 as JS thinks, does it matter than it got there by going to $1000, then to $500-$750, then back up? Is that any different than if it got there from $1000 straight to $1650? If one is holding for the end result why should it matter? Someone please explain the difference. Again, the primary mission for many is to be left at least with what you started with today and arrive in 2011-2015 fully intact wrt inflation. I don't see why that is such a hard concept to comprehend. Some of us started well before 2008, it doesn't change the end goal though.
The dollar is inevitably headed to those levels of 65...60...50.
So I'll ask again, since my question of the same subject went unanswered in a previous thread.
If the dollar is valued against a basket of currencies, then for the dollar to go lower the currency basket must go up. Please tell me what currencies in that basket are going to go up? The Euro, which makes up 60% of the basket?
It ONLY matters if you would have liked to have had TWICE as much in your stash when you reached your "destination."
So, "yes," price-paid DOES matter.
And, "yes," missed selling-opportunities DO matter.
I knew this response would be forthcoming. And it only applies to very, very few good traders who make money in good times and bad. In fact, the more often J6P and 99% of the investing public trade, the worse they do. So one can either stand pat and double or triple up. Or one can fancy themselves a day trader and lose it all. The above ability to make money on all market moves assumes 100% hindsight and sheer omnipotence. Where the BSC, ML, Lehman, AIG, WaMu, Wachovia and other traders all top notch? Yeah, they all WERE top notch. The trader mentalities just can't understand the buy and hold it. In rare coins I have proven time and time again that the buy and holders (seasoned collectors and investors) do extremely well in the full length cycles...often-times far better than those churning 10% on each transaction. If one doesn't have the skills, time, or commitment to trade frequently (ie 99% of the USA) there is no crime in buying low, and selling much higher at the end the road.
The US dollar should fall back against the Euro and Cando for starters. I don't think the EU has damaged their balance sheets as much as the US has. And they certainly won't outdo the US when it comes to injecting liquidity. We still have to buy back all the derivatives we sold around the world. China, Russia, India, Japan, Australia, and others will want their money back...or title to worthwhile assets. Our banks sold them the otc derivatives and the US will cover it (ie $700B bailout for starters) since we now own the banks. Canada has one of the least affected balance sheets.
But considering the other members of the USDX are generally seeing gold at new highs wrt to their currencies, while the dollar is crushing paper gold here, it's certainly realistic to see all 6 of the USDX basket of currencies to move against the dollar on the next wave. Those other currencies won't be printing up tens of TRILLIONs like we will be. I'm not a currency trader and don't portend to be. I bought gold in 2002 based on $100 TRILLION in derivatives over-hanging the markets. I'm still way ahead of where'd I'd be had I bought stocks, bonds, etc. Copy Jim Sinclair on your currency question as he is far more accomplished in that area than anyone else I am aware of. It seems the 2 of you have a difference of opinion on that question. I think he feels the EURO is headed back to 2.0 which doesn't mean it's going to be more valuable in 2011 than it is today, but merely more valuable wrt to the USDollar by 2011. Can we outprint the EU by a factor of 53% between now and then? Why of course. Maybe by 100-200% based on covering a near unlimited pile of derivatives requiring "covering." I have complete faith in Hanky and Panky who have probably been busy this week fronting the money to all the counter-parties who needed to pay up on the Lehman CDS's. But the word in the news will be that all the counter parties "came up with the money."
Comments
Might be a little over the top, but then again this is The UNITED STATES of AMERICA
roadrunner
<< <i>Sinclair has always stated that silver is a not a monetary metal like gold and would not respond as aggressively during monetary "events." But up to know he always stated that it would eventually follow gold. But clearly he has always personally prefered gold. This is the first time I can recall him stating it might not perform at all being that it is just an industrial metal. I disagree as to me silver is the "people's gold." But as industrial metal, should it ever be found in tight supply...the roof could come off.
roadrunner >>
If push comes to shove something is going to have to be used to make change for gold coins. What else but silver and ultimately copper and nickel? Gold is going to be risky to deal with anyway as not only the weight but the thickness and diameter of each coin will have to be verified to protect ones self.
Chance favors the prepared mind.
Now that's a lot of BEEF!
Sinclair rephrased his words from yesterday to indicate that silver would perform. However once past $1200 he felt it would lag gold somewhat.
Personally, I think only gold could provide a currency backing. There is no other logical choice should something be needed. With banks borrowing $437 BILL per DAY the last week, we need some sort of constraint down the road....and soon.
Saw an interesting stat today. That if the Dow were priced in gold (rather than dollars) over the past 7 years, it would have lost 75% of its value. Yikes.
roadrunner
“Sinclair rephrased his words from yesterday to indicate that silver would perform. However once past $1200 he felt it would lag gold somewhat.”
RR,
See there my friend, everyone is reading our thread, Ha Ha
As many here know I had a Gold and Silver operation in Austin Texas in the late 70’s and early 80’s. Even though gold has gone much further in price this time, it is still lagging adjusted for inflation.
In those days when gold hit $650 per ounce many of my gold customers shifted to buying silver. and all of my poor customers were buying silver, so we will see!
Poor Jim really does put up with a great deal for a seasoned pro giving out free information. Below is a statement sent to him by one of his readers.
I wonder if this person has sent these messages to the hundreds of stock advisory websites? I noticed this person did not make mention of the fact that he had bought any gold?
As I look out at the landscape in the stock market today there are hundreds of major stocks trading at more than 50% down in this market. At least Gold has not visited $400!
Mr. Sinclair,
“I hope that you are pleased with yourself for having ruined everyone who has been a trusting reader of your website for the past 5 years. Look at the XAU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! What the hell are you writing about?????????????????????? Do you have a clue???????????? NO ,you don't. Again I ask you to close down your website----you promised that you would if gold did not shine in 2008; not only hasn't it shined, there is nothing more tarnished on Wall Street other than your reputation.”
Ren
GS, I'm not so sure that the JS Readers come over here though the opposite is certainly true. If someone had all their gold money in paper gold (XAU, HUI) they have been hammered. While I've taken some lumps on some gold stocks as of late, my $20's have more than compensated. Let's just hope $750 holds so we don't have to revisit another wave of selling.
A huge anomoly exists with the gold to XAU ratio (physical to miner gold). Over the past 7 years, and pretty much over the past 25 years, this ratio has peaked in the range of 5.5 consistently. A few blips to 6.5 have occurred. But a solid high of 5.5 has been the trend for years. Today that ratio stands at 9.1 following a nearly straight rise over the past few weeks. The spike to 9.1 makes no sense with any trendlines. I don't think even hedge fund deleveraging can explain it.
From Peter Schiff:
In an amazing feat of revisionist history, somehow Hoover's interventionist policies have been completely forgotten. It is taken as fundamental that his inaction led to the Depression and Roosevelt's "heroics" got us out. Unfortunately, since we have learned nothing from history, we are about to repeat the very mistakes that lead to the most dire economic circumstance of the last century.
A major difference however, is that the structure of the U.S economy today is far weaker than it was in the fall of 1929. Years of reckless consumer borrowing and spending, and enormous trade and budget deficits have resulted in a hollowed out industrial base and an unmanageable mountain of debt owed to foreign creditors. Instead of the support of a strong currency backed by gold, the public now must deal with a modern Fed, free to print as much money as politicians want. So rather than getting the benefits of falling consumer prices (as happened during the Depression), consumers today will contend with much higher consumer prices, even as the economy contracts.
roadrunner
even believe what Buffet says.
Camelot
He also said that since all other metals were down at least 50% that he expected gold to trade down near the $500 level.
Knowledge is the enemy of fear
Thank you, Jim Sinclair. Because of your tireless education project my family and several others I have explained things to will not lose our life savings in this epic financial crash.
Your lessons, from TA to the derivative meltdown, to how 'daddy war-bucks' will consolidate the mines using Barrick and switch sides and uphold gold prices after holding them down so long, and on the new gold standard which Trichet ran up the flagpole this week have all been interesting and valuable. Most of your insights are available nowhere else as early as you state them.
I believe if you got left in nothing but your clothing on a streetcorner you know trading so well you would be a millionaire again in a year. To put your insight up at your own expense is very generous.
People who are mad because in the general crash with an additional burden of illegal short selling, the junior miners are beat up don't get it. Naked shorting makes money for gangsters, but in the junior miners it also is stripping them open for cheap hostile takeovers and I wish more shareholders understood how bad J P Morgan wants their gold in the ground and would correctly interpret the frantic tree shaking trying to steal their shares.
But you knew that was coming and built a royalty company in a friendly country it will be hard for them to get at. They can naked short you, but I very much doubt they can get controlling interest. So thank you for that, too. I hope your personal shares are tied up in a trust so your kids can get bountiful dividends, but not sell control out from under your other shareholders for a reasonable period if we should lose you.
lolo, your complaint about silver I don't get. Jim has said silver will outperform gold, but he considers that market too small and manipulated and prefers gold.
I started reading JM in 2002 when gold was still $320. Unlike a few knuckleheads who feel he should have "by obligation" steered everyone away from the currrent gold/silver downdraft most get "it" that not everything can be figured out in advance when working against the "unlimited" deep pockets of the US printing press and illegal shenanigans via the PPT, JPM, GS, SEC, and USTreasury. To those reading JS between the lines it was clear that he prefered physical gold to paper gold, always. If you bought paper you should have known the risks. We've seen a lot of criminal govt behavior since March, and that's only the beginning. But in the end, money is either honest or corrupt. We have a lot of the latter. To those that don't understand that we've been in a "this is it" (ie defcon 1) financial scenario since the summer of 2007 will never quite get it, until "it" gets them.
roadrunner
The main reason socialism NEVER works is that in a socialist society nothing is ever allowed to correct to the down side for fear that some party might be injured.
Even in the case of Rome more and more of the money supply had to be debased, and more and more of the burden was placed on the most productive members of society until
everyone went bust.
This planet was designed as a place of visitation, it was never meant as a permanent home for any creature.
There are a few simple truths in life that are undisputable. One is that no one can take any of their earthly positions with them when they leave, another is that human biomechanical organisms don’t last for decades, and another is that all markets must have a down turn in order for the next group of us to be able to afford to live here in some comfort.
All systems of government have there days, and then go the way of extinct creatures.
This is generally accelerated by governments who decide they can please all the people all the time.
What would Italy (Rome) be like today if their government would have been able to provide every need for every citizen and no ones investments were allowed to correct to the down side? Well for one thing real estate in Italy would now be selling for tens of millions of dollars for a one-bedroom apartment.
I suppose that each generation must go through the same disasters over and over again never learning anything from the past, and that is really too bad.
Oct 16th 2008 | WASHINGTON, DC
From The Economist
“A buyer can now obtain an FHA loan with as little as 3.5% down on a house costing up to $625,000—which would include most of the homes in the country. The FHA accounted for 22% of mortgage originations in the third quarter, up from 5% in all of 2007.
The real problem is that almost a quarter of U.S. homeowners with mortgages have zero or negative equity in their homes. Householders have too much debt and must save more.”
GOLDBUG
A person sitting next to me on the airplane was reading it. I remember BO reading it last Spring.
Shhh....are those bells and whistles going off. Nah, it must in my head.
Ren
General "C", Sir, I need to visit with you regarding the Naysayers
Yes, I've been briefed. What kind of support do you need to run these mongers out of here? Well, tell you what, I'll ask the princess how she would want to deal with this situation. I'll get back to you in a week or two. Dismissed.
1)FACT: It is confirmed from many sources and particularly the big dealers who have the right contacts that almost all gold and silver is now unavailable in any sizeable quantity at all. I know people at a dealer in Phoenix and they are getting 50 calls to buy for 2 wanting to sell. They have NO bullion left except some junk silver and numismatic gold and silver coins. The US mint has already rationed eagle coins due to "unprecedented demand".
2)FACT: Silver became in short supply many months before gold did indicating more scarcity in silver than gold.
3)FACT: Two US banks in July sold short 20% of annual silver supply and 10% of annual gold supply in less than 4 weeks.
4)FACT: After years of rejecting all evidence the CFTC finally agreed this month to investigate manipulation of the silver market and then added manipulation of the gold market afterwards. This is being investigated by the Enforcement Division. This is the first time in history such an investigation has been launched. This may well be to make sure they have an excuse when the markets explode to be able to state they were investigating.
5)FACT: Silver and gold are selling at prices that are much higher than COMEX spot price. On ebay silver sells for $18-$20/oz. I have verified this myself. Gold is selling for over $1000/oz. Dealers are offering large premiums over spot to try to attract sellers to replenish their stock. So the COMEX price does not reflect the price in the physical market anymore.
6)FACT: COMEX only has enough silver to deliver on 17% of the contracts outstanding. They have only enough gold to deliver on 10% of the outstanding contracts.
7)FACT: GATA now knows of three entities who are taking advantage of the COMEX manipulated price. They are making agreements with refiners to take the 1000ozs silver bars off COMEX and 400oz gold bars and melt them into smaller sizes for the retail market and sell at very large premiums to the artificial COMEX price. This will very quickly draw down COMEX stocks and drive up the price to reflect scarcity
8)FACT: Shippers in London and Zurich are seeing record shipping volumes from their vaults to Middle East and India. People who have been in the business for 40+ years have never seen anything like it.
9)FACT: The US FED is issuing loaned money at its discount window at the rate of $100 B$ per day which is $36 Trillion annualized. The 100 B$ daily rate is actually increasing each week. These quantities of money will never be paid back because the national debt is 10T$ which it took 95 years to accumulate. This is highly inflationary
10)FACT: Every bank account has been guaranteed to 250K$ with unlimited funds to back up FDIC insurance. This is highly inflationary.
11)FACT: The US financial system is in complete panic. Even the chief officials tell us it is on the verge of collapse and required a bail-out. The mortgage industry has been nationalized. Two investment banks have collapsed. The world’s largest insurer AIG was taken over by the FED. Stock markets around the world have responded to this clear signal that the entire "State of Denmark" is rotten.
12)FACT: While the financial markets were on the brink the US dollar has rallied! This is not logical especially as the FED fund rate has been dropped to 1.5%. However, we know that the FED has made currency swaps to sell foreign currencies and buy dollars to prop up the dollar. At the same time the dollar was making unusual levitations gold and silver made swan dives on the COMEX at 9 AM or 10AM exactly on several days. This started when gold was about to break out from $930. If during an economic and financial crisis the dollar can manage to keep appreciating this will be the first time in history. The press reports this as "forced liquidations" yet the Open Interest hardly moves and in fact often rises on the supposed days of liquidation! The volume traded also does not infer massive liquidation.
13)FACT: The major gold and silver shorts on the TOCOM have been reducing their net short positions for almost 3 years to be almost neutral in gold and net long silver. These are experienced dealers who know the market very well. They do NOT want to be short after many years of having been consistently so!
14)FACT: The Bond market initially reacted to recent stock market routs by receiving safe haven investment sending the yield plunging. The bond rates have since been rising (falling bond prices) indicating an exodus from bonds is beginning (as per my latest article). If the bond market starts a sell off the dollar will fall precipitously due to inflationary concerns. When the dollar falls metal prices go up.
15)FACT: Trichet and Sarkozy are pushing for a G8 meeting to change the world financial system. They no longer want the $ as the reserve currency. They have also mentioned returning to the discipline of Bretton Woods. This explicit reference means gold backing of currencies, which is what Bretton Woods was all about: having the dollar gold backed and linking all currencies to the dollar. Once it becomes clear that the $ will lose its privileged position then all those who hold it as reserves will start to unload it. This has the potential to be dramatic. Again gold and silver would be the beneficiaries. So contrary to the unrealistic and illogical price on COMEX gold and silver have not gone out of fashion. In fact they are sold out in the retail space and foreign governments are starting to indicate a return to some sort of currency backing a la Bretton Woods.
Fact #7 was interesting but I found #8 more interesting. So much for faith in "safe" European banks. Looks like the Asians prefer all their gold in hand now.
roadrunner
but it would be great to be holding a lot of physical when they fix silver at $100/oz and gold at $5000.
<< <i>7)FACT: GATA now knows of three entities who are taking advantage of the COMEX manipulated price. They are making agreements with refiners to take the 1000ozs silver bars off COMEX and 400oz gold bars and melt them into smaller sizes for the retail market and sell at very large premiums to the artificial COMEX price. This will very quickly draw down COMEX stocks and drive up the price to reflect scarcity >>
This has to happen.
This will quickly siphon off silver headed to users and quickly cause
a real disconnect between paper and physical. The market can absorb
vast quantities of 1000 OZ bars very very rapidly. When you consider
that industry needs every single one of these plus 30% more coming back
in scrap there may be the explosion in the near future.
With copper prices down so sharply there will soon be a large curtailment
in the number of 1000 bars being made as well.
Refiners will go into high gear when the price lurches higher and use old US
coin to fill the gap.
This is a very unique time in history. This is like a pressure cooker with no
release valve with the gas on high and the kitchen already on fire and near
flash over. It's gonna be interesting.
Knowledge is the enemy of fear
What I see is a pennant formation trending for resolution. If we do indeed violate the existing $739 low that could be big problems going forward. But in each case in this gold bull pennants have eventually broken out upwards in each case. I'll hang my hat on that coupled with the fact that GS and their buds have moved to net long positions after several years of being perma-shorts. Those 15 "facts" listed above seem to support a break up from the pennant rather than down. I'm also putting faith in David Nichol's fractal analysis which has already shown that gold has built up enormous energy that needs to get expended upwards. He hasn't been wrong on up or down moves since I began tracking him in mid-2007. But there's always a first time......I'm also looking at Peter Degraaf's recent article on the gold/XAU ratio and gold/HUI ratio. He shows that 9 peaks in the gold/XAU ratio have occurred since 2001...all resulting in a good time to buy gold before it moved up. The only exception was in March 2008 when it didn't hold. In that situation I think that extraneous manipulation following the BSC mess bypassed what would have otherwise been a run higher. In any case the 11th such peak is occurring right now. And they've been 90% accurate in calling an upmove in gold. I'll take 90% if I have to bet. All 6 peaks in the gold/HUI ratio have lead to gold rises. The 7th peak is happening now.
But hey, anything is possible now that the FED has unlimited purse strings to paint the markets any color they wish. In the end though we know they'll fail, and fail big.
But in the interim we could certainly see $600 but my hat is on a break up from this flag formation....but first it appears we'll have to rebound up and down a few times more to lengthen out the channel before the bust/boom decision gets made. Let's see if MoneyLA will put his "100%" 30 year trader's track record on the line with this one. I doubt it.
roadrunner
That uptrend line is VERY powerful. A break below it will be SIGNIFICANT. Thats why I use 775 as my acting point. In fact, I am not even sure $550 would hold. For now though gold is holding and the trade is still to be long. However, I still see people talking about inflation, which to me says the coming deflation will be greater than anyone expects. And that is precisely what the global markets are telling YOU. It really isnt hard to imagine.
Also, I given the disparity in small lots of physical silver over paper, I would expect similiar activity in gold. Damn physical manipulators
Knowledge is the enemy of fear
Also, I given the disparity in small lots of physical silver over paper, I would expect similiar activity in gold. Damn physical manipulators
The people talk about what they see happening. And to them it's rising prices, loss of purchasing power....hence inflation to them. When do you ever hear any talk at the water cooler about "deflation?" Just about never...except maybe at the FED or Lehman Brothers' water cooler. I don't think J6P could differentiate inflation from deflation.
During the Great Depression the value of the dollar increased, prices dropped, and the dollar went further. There weren't enough dollars to spread around. That will not be the case today since TPTB just abhor lack of dollars at any time. Ironcially, the dollar has been surging for months and many commodity prices have been falling at the same time. J6P's dollar is now buying more than before. And I bet J6P still calls this inflation. The USA has never had a long term deflation since the Great Depression and I doubt we will have one now. It is always inflate or die today. I also believe that the impending global inflation will also be far greater than anyone imagines at this point. Everyone is fixated on the deleveraging of paper assets whose only role is to determine who ends up with what companies and how much money has to be printed to pay off the default swaps. Odd that for every 5-10 articles that I read on coming inflationary events, I only see 1 siding for a longer term deflation....and that is usually only from Mike Shedlock (Mish) who has tended to be very good in his predictions, though I part ways with him on his depression coming soon theory. Toss Prechter in to that same category as well....though he's been dead wrong for too many years, but like a clock will eventually get something right again, such as DOW below 6000.
And as far as MoneyLA's end to commodities/gold, I never did hear any conversation at work, on the golf course, or from the shoe shine kid that gold was something to be invested in. We never even got a sniff of that all important "mania" phase. That tells me there is still another half of this cycle to go. Then again, maybe I need to be travelling in Longacre's circle of friends to be privy to that type of discourse.
roadrunner
Deflation and Inflation terms:
Maybe people are feeling inflation because of the loss of value in their funds and equity portfolios so it seems like things are more expensive. One thing about the commodities falling is that we perceive that prices are easing but the CPI doesn't feel that way: Sept '08 CPI Don't look for many big ticket items like cars or condos to be sold over the next little while but the CPI is an interesting scan.
It seems that we are in the state of confusion as the reordering of the world's money begins to take place. Some time after the corporate bodies are counted and the countries that are going to die financially have done so, we will have a base line from which to rebuild the worlds economy. Once again, we must acknowledge that the USD is pervasive throughout the world. The world is literally infused with buks. This USD needs to find it's place and it's not the place where it is now. It seems like we can all accept that the USD has been compromised. It reminds me of that old army saying: "Lead, follow, or get out of the way."
No one seems to have done any local accounting of how much the fed will have to provide to our urban populations over the next say 5 years though certainly they realize that with the loss of property tax income and sales tax income...there's a lot of infrastructure maintenance and welfare and services that the fed will have to cover and it's not a small number when you think of the budgets for 250K+ major cities. We're talking police forces, firemen, hospital staff, it's a big number. That number does not even seem to be on the radar, we're much more preoccupied with making the banks stay solvent or at least appear solvent than we are interested in planning for our urban populations; I'm thinking Katrinaesque type situations as a possible response. Seems like that could take a year or so, things are moving very quickly right now...almost a suicidal speed. That coupled with us looking like we are going to get our incomes "spread around" we have a frightful environment to work within but no need to fret too much; just stay fluid, feel the force, be patient.
roadrunner >>
My soul is still Bullish ...and my soul is often wrong
As far as "mania phase " , I am concerned that paying massive premiums over spot is a "mania phase"
There are actually quite a few minus (-) signs in those table on both an unadjusted and seasonally adjusted basis. Raw material costs--those costs that will be reflected in finished goods calculations in about 3 months--are down almost 10%.
I am doing some work that I think will support my contention of deflation or at the very least minimal inflation over the coming years. When completed I will share with the forum.
For now just think about 1990 Japan vs 2008 Europe. Lets see if the Europeans--Trichet-- are smart enough to figure it out.
Knowledge is the enemy of fear
<< <i>Fiction ,
but it would be great to be holding a lot of physical when they fix silver at $100/oz and gold at $5000. >>
Ready and waiting.
Early retirement and a life of ease.
I think I can handle that.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Barbera does some charting going back decades and notices that the dollar is in a pattern that happens quite infrequently. And following such patterns, swift reversals or breakouts occur usually within within 3 days as a rule. He notes that we just concluded day 2 of the pattern. Similarly, the Euro, and most other major competing currencies are at the extreme oversold portions of their charts.
So what's next for the dollar? A major upswing or a major reversal?
roadrunner
Indian Brides Replace Traditional Gold Jewelry as Prices Rise
Oct. 22 (Bloomberg) -- Ashima Lahiri will say her wedding vows in December wearing fake earrings, necklaces and bangles that cost a tenth of the price of gold, breaking a millennia-old Indian tradition that brides wear the precious metal.
``People are not willing to be victims of high gold prices and are instead going for glittering imitations,''
Households in India have 15,000 tons locked away in family vaults, almost double the reserves held by the U.S. Federal Reserve, according to consultant McKinsey & Co. That's worth about $376 billion at current prices after gold has gained for seven straight years.
India's bullion demand was 769.2 tons of in 2007, less than the 1,000 tons estimated by the World Gold Council, as more families chose to rework their mother's or grandparent's bridal collections instead of paying for new gold.
Bump for next page
It's almost a cruel fate to be pumped up with the giddiness of the roaring twenties...I mean the roaring oughts and then thrown to the ground by financial reality. Everyone gets a new car, hocks their no doc house for extra cash, goes on the Disney land vacation with the family, and then just like that, it's over but wait, theres more; their 401k's get trashed too. So, I guess the fed got its wish, these guys are all workin' till 70. So the answer to the argument regarding what is the reward for those that paid their bills and paid their mortgage on time and paid of their retail credit...well, you get to retire at 62 just like you planned, life is good.
Onward
<< <i>Frank Barbera on coming dollar inflection point
Barbera does some charting going back decades and notices that the dollar is in a pattern that happens quite infrequently. And following such patterns, swift reversals or breakouts occur usually within within 3 days as a rule. He notes that we just concluded day 2 of the pattern. Similarly, the Euro, and most other major competing currencies are at the extreme oversold portions of their charts.
So what's next for the dollar? A major upswing or a major reversal?
roadrunner >>
I will agree that the dollar is short term overbought, however, being overbought is a sign of strength. In the first graph he uses---of the dollar going back to the 70s, notice that the when the dollar has been this strong, it has continued to be strong for years. In 1980 or 1981 the dollar made a huge run and was clearly overbought the rally continued until 1986. Same in 1998.
I have been trying to harp on the forum that the rest of the world, especially Europe, is in much worse financial shape than us.
Short term, yes, I would expect the dollar to give back its gains, but since there is no alternative, it will again rebound. Deflation is probably going to be around much longer than people think.
Knowledge is the enemy of fear
Just noticed I wrote broken "dow" instead of broken "down". Perhaps a Freudian slip.
Knowledge is the enemy of fear
love yellow metal, though
An interesting way to look at it. Every major exhaustion of any market always ends in an overbought condition, tulips included. Gold being overbought at $875 in 1980, was that a sign of impending strength as well? I ceased all my buying of anything numismatic in fall of 1979. A friend of my wife's still has some beanie babies she bought on "strength" as well.
I'd like to see that chart showing 104 as the likely top of the current dollar move. If that's the case your the first one I've seen stating that in any written format, blog, website, etc. Cohodk may go down in CU Forum lore with that call. The highest published call I'd seen was one made about 1-1/2 months ago looking for 0.92.
roadrunner
It won't be the first time nor hopefully the last time he has made an outstanding call in this forum.
<< <i>I will agree that the dollar is short term overbought, however, being overbought is a sign of strength
An interesting way to look at it. Every major exhaustion of any market always ends in an overbought condition, tulips included. Gold being overbought at $875 in 1980, was that a sign of impending strength as well? I ceased all my buying of anything numismatic in fall of 1979. A friend of my wife's still has some beanie babies she bought on "strength" as well.
I'd like to see that chart showing 104 as the likely top of the current dollar move. If that's the case your the first one I've seen stating that in any written format, blog, website, etc. Cohodk may go down in CU Forum lore with that call. The highest published call I'd seen was one made about 1-1/2 months ago looking for 0.92.
roadrunner >>
You are reading much more into this than I wrote. First I said the dollar is overbought and even wrote that I hope 87 is the current high for this move. I do expect a pullback and I think I wrote as much. A rally in the dollar from 70 to 100 is only a 42% up move, it fell 46% so I really dont see a rally to 100 as impossible.
Gold was overbought at 875 in 1980, but it was also overbought at 600 in 1979 after rising from 50 just a few years earlier. That didnt keep it from going higher. Just as the dollar is now.
Second, if you look at the charts that YOU posted, notice that Barbara's indicators were over bought in 1981 and in 1996 and yet the dolalr continued higher for several years. I believe that it exactly what will happen this time around. When the dollar gets towards par, it will probably mark the end of the rally, but in the meantime I would expect the dollar to fall back some then resume its uptrend. Like it or not, the dollar and Euro will be trading at parity.
Third, I warned yesterday that gold was probably going to break down. You wanted to wait till it broke 739, well its under that now. Paper traders would have saved 5%. Or made 10% by trading the inverse gold ETF. All I can do is lead the horse to water.
Forth, you posted from your "sources" that the dollar was going to 65, then 60, then 50. When it broke its downtrend line and I said gold was dead for awhile but will be very volatile, you laughed. Then you proceeded to post predictions of the dolalr going to 77, then 80, then 82, then 85 and now I see 92. So what will it be?
Fifth, sorry to make this post somewhat personal as I really do like you. You were first to discuss the magnitude of the derivative problem and have been right on. But now, with technical analysis and economic market relationships, you are treading on my turf. So feel free to disagree, but keep in mind that I am probably right. And when gold is at 500 and down 50% from its high, I will again say that PMs are great trading vehicles but will not be the means to economic nirvana that so many have been saying the past 7 years.
Rant over.
Knowledge is the enemy of fear
This must be the strangest trading market in history the stock market is down almost 500 points in to days, and may head down in the last hour of trading to test the 10/10/08 lows again.
O.K. we are going to have the suckers sell off in this deflation period before we have super inflation. I mean that phase must come, don’t you think?
In 2007 total tax revenues for the U.S. were around 2.5 trillion. The feds have already printed 3 trillion in bailout gifts, and the crisis is not over.
Whatever is happening now under the table, all boats are being lowered?
Someone must be dumping everything to try and get liquid?
Whenever we have these weird markets I always ask, what has changed?
The oil market is down to $67.00 today from $147.00, down $80 in just a few weeks. Did everyone stop driving by half? What has changed?
Here is my take, the banks, hedge funds, and most of the big institutions are full of derivatives that are looking like they are worth 10 to 20 cents on the dollar. They are selling everything in order to try and get some liquidity back.
Pick your poison, either we are going through the greatest liquidation in all the markets histories, or the entire system is failing?
Yes we can look at charts going back to the eighties but Gold and Silver are among just a few things on the planet that have NEVER adjusted for inflation. If Gold was at $2,350 and then declined by half to $1,175 it would be dropping like the rest of the market.
Please be careful with revisionist history. As a math-engineering person by trade I'm very careful when posting numbers and especially multiple revisions to "predictions." I would say you're 100% incorrect that I posted predictions of the USDX from 77, 80, 82, 85, and 92. 5 revisions from me in that short a period? Hardly. In the same vein a couple of days ago you revised history once again when you resurrected a "quote" of mine stating real estate would correct 50% from September levels....but I let it slide. In fact what I did say was that what I expected to happen was another 15-20% down move, but with 50% certainly possible. It's annoying to have people misquote you and call it fact weeks or months later for their own gamesmanship.
The dollar is inevitably headed to those levels of 65...60...50. The mechanisms are set in stone now. Be patient. It will come sooner than you think. Yes, gold will continue to be volatile as will all the financial markets. What the deflationists don't understand that gold can be $750 one morning and then $1200 the next. That wasn't possible before March of this year. I posted the 0.92 level as one author's worst case of the current move and that was week's ago. There has been no change since then. Was gold "dead" while it spiked from $739 to $930? That no doubt woke some people up. It probably sent the PPT into a higher level of awareness.
For now, the ppog (paper price of gold) falls....$171 in the past 30 days to be exact. Heady stuff for the worst financial environment in 75 years.
roadrunner
Mr. Sinclair thinks the deed is done, what do you think?
Posted On: Wednesday, October 22, 2008, 1:07:00 PM EST
Insurance On Sale
Author: Jim Sinclair
Dear Friends,
Gold is a currency that you will see perform as the currency of choice. There is no doubt we are headed into a planetary Weimar experience to some degree.
Dollars are being created faster now than in any other period in history. The Fed and treasury are guaranteeing everything from money market funds to large corporate entities in one way or another.
The first valuation of worthless OTC derivatives via a public sale of these at .0875 to .02 cents shocked anyone with a brain. Now the downturn in business is hitting financial entities and shortly litigation will smoke whatever is left.
The FDIC is already yelling for additional and significant funding from congress as their capital contracts on every Friday’s bailout.
People expect things to return to normal in 2010. That is a fairy tale.
The Fed has only started creating money for bailouts. You saw what happened when they stepped away from Lehman. If you say you didn't look out the window.
All these bailouts and Federal guarantees on credit items constitute a white wash on a falling economic structure going out of control and soon.
The out of control point of major planetary dislocation is between 14 and 89 days from now.
INSURANCE ON SALE
Gold is the only viable insurance. The US dollar is not viable insurance because there is simply too much of it and that amount is growing every day. That makes the US dollar untrustworthy.
Gold is the only viable insurance. Clearly equities are not.
Gold is the only viable insurance. US Treasury bills are not because the yelling at all the rating agencies in Washington today just might get US credit downgraded.
General commodities have been viable, but by nature they are too wild and from now on will be selective until Pakistan implodes and Weimar appears
Banks cannot offer insurance as they are in the main bankrupt.
Insurance companies cannot offer you sound insurance.
Money market funds are not insurance, making gold the only viable insurance.
Retirement programs are no longer insurance.
Jobs are no longer insurance as companies are run by lawyers and accountants.
Equity in your home is not insurance because it simply does not exist.
Your family is no longer insurance because they have the same problems you do.
The assumption your kids will take care of you in your old age is not viable insurance no matter what you think.
Gold has no liability attached to it and is therefore the only viable insurance.
Gold is universally exchangeable, making it the only viable insurance.
Gold has historically performed perfectly in maintaining buying power, making it the only viable insurance.
Gold is the only viable insurance because it is Honest Money.
Since gold is the only viable insurance and because everyone needs it, gold will trade at levels of at least $1200 and $1650.
I could go on but gold is all there is that will protect you from the White Wash being applied by the Fed and Treasury on a structure that is in fact in a free fall.
I am not the least concerned about gold and believe you should not be either as long as you have no margin and understand what gold really is: a currency and an insurance policy. There is no other viable insurance in this most unusual situation.
Please review the Formula as the US Federal Budget is going ballistic as the TIC report contracts like a turtle into its shell.
If gold gets to $1650 as JS thinks, does it matter than it got there by going to $1000, then to $500-$750, then back up? Is that any different than if it got there from $1000 straight to $1650? If one is holding for the end result why should it matter? Someone please explain the difference. Again, the primary mission for many is to be left at least with what you started with today and arrive in 2011-2015 fully intact wrt inflation. I don't see why that is such a hard concept to comprehend. Some of us started well before 2008, it doesn't change the end goal though.
roadrunner
Exactly. So if you are going to be the goose then I'll be the gander.
Knowledge is the enemy of fear
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It ONLY matters if you would have liked to have had TWICE as
much in your stash when you reached your "destination."
So, "yes," price-paid DOES matter.
And, "yes," missed selling-opportunities DO matter.
So I'll ask again, since my question of the same subject went unanswered in a previous thread.
If the dollar is valued against a basket of currencies, then for the dollar to go lower the currency basket must go up. Please tell me what currencies in that basket are going to go up? The Euro, which makes up 60% of the basket?
Knowledge is the enemy of fear
The answer depends upon the individual's money management strategy.
much in your stash when you reached your "destination."
So, "yes," price-paid DOES matter.
And, "yes," missed selling-opportunities DO matter.
I knew this response would be forthcoming. And it only applies to very, very few good traders who make money in good times and bad. In fact, the more often J6P and 99% of the investing public trade, the worse they do. So one can either stand pat and double or triple up. Or one can fancy themselves a day trader and lose it all.
The above ability to make money on all market moves assumes 100% hindsight and sheer omnipotence. Where the BSC, ML, Lehman, AIG, WaMu, Wachovia and other traders all top notch? Yeah, they all WERE top notch. The trader mentalities just can't understand the buy and hold it. In rare coins I have proven time and time again that the buy and holders (seasoned collectors and investors) do extremely well in the full length cycles...often-times far better than those churning 10% on each transaction. If one doesn't have the skills, time, or commitment to trade frequently (ie 99% of the USA) there is no crime in buying low, and selling much higher at the end the road.
The US dollar should fall back against the Euro and Cando for starters. I don't think the EU has damaged their balance sheets as much as the US has. And they certainly won't outdo the US when it comes to injecting liquidity. We still have to buy back all the derivatives we sold around the world. China, Russia, India, Japan, Australia, and others will want their money back...or title to worthwhile assets. Our banks sold them the otc derivatives and the US will cover it (ie $700B bailout for starters) since we now own the banks. Canada has one of the least affected balance sheets.
But considering the other members of the USDX are generally seeing gold at new highs wrt to their currencies, while the dollar is crushing paper gold here, it's certainly realistic to see all 6 of the USDX basket of currencies to move against the dollar on the next wave. Those other currencies won't be printing up tens of TRILLIONs like we will be. I'm not a currency trader and don't portend to be. I bought gold in 2002 based on $100 TRILLION in derivatives over-hanging the markets. I'm still way ahead of where'd I'd be had I bought stocks, bonds, etc. Copy Jim Sinclair on your currency question as he is far more accomplished in that area than anyone else I am aware of. It seems the 2 of you have a difference of opinion on that question. I think he feels the EURO is headed back to 2.0 which doesn't mean it's going to be more valuable in 2011 than it is today, but merely more valuable wrt to the USDollar by 2011. Can we outprint the EU by a factor of 53% between now and then? Why of course. Maybe by 100-200% based on covering a near unlimited pile of derivatives requiring "covering." I have complete faith in Hanky and Panky who have probably been busy this week fronting the money to all the counter-parties who needed to pay up on the Lehman CDS's. But the word in the news will be that all the counter parties "came up with the money."
roadrunner
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Sadly, they will be.