GOLD

[thegeneral]

What's the general consensus, is every one buying a few ounces tonight?

Definitely, i think we are approaching the time for my first Rocket!

[wren]

What's the general consensus, is every one buying a few ounces tonight?

Walking the wall of fear here, without fear.

 

Personally, I'm lining up some silver purchases, being a bit heavy on Au already.

 

[Steve Netwriter]

GoldMoney Alert - 14 September 2008

 

The Window is Open

http://www.goldmoney.com/en/commentary/2008-09-14.html

 

The money creation window of the Federal Reserve is wide open, but it doesn't seem to be doing much good. The share price of countless financial institutions continues to crater, as the market senses that these overleveraged behemoths have assets on their balance sheet that do not reflect today's reality. The boom has passed, and we are now in the bust, just like night follows day. Wealth destruction is today's prevailing force as assets of all sorts are marked down in value.

 

What the Federal Reserve wants to make us believe is that the liquidity it is providing through its various lending schemes is sufficient to make solvent those financial institutions that have become insolvent. Unfortunately, economics doesn't work that way. Capital - and not newly printed dollars - is needed to make insolvent banks solvent, and given decades of over-consumption and under-saving, capital is in short supply.

 

Last year the Treasury and the Federal Reserve told us the sub-prime crisis was "contained". Then they told us that bailing out Bear Stearns would end the financial meltdown. They told us that Fannie Mae and Freddie Mac had sufficient capital and liquidity and would not need a bailout. What else are they going to tell us trying to make us believe that today's over-indebted financial structure will not collapse?

 

The point is that financial assets are based on promises, and promises are being broken right and left. It is no surprise therefore that bank balance sheets no longer reflect reality, and that many financial institutions are trading below their book value. The market understands the nature of today's wealth destruction and is therefore taking a prudent 'hair-cut' to bank balance sheets. The result is that a firm's market cap is probably a better reflection of a financial institution's real value than its quarterly reports. In short, the assets of many financial institutions are overstated.

 

In the 1930s wealth destruction resulted in deflation because the dollar's fixed link to gold led to a contraction in the money supply. As promises increasingly came to be doubted, wealth moved out of financial assets into tangible assets. As the most liquid tangible asset, gold benefited the most, and its purchasing power soared as a consequence, even against the dollar, which was devalued 69% against gold from $20.67 to $35 per ounce. In a deflation, the value of money increases, and in the 1930s, the value of gold increased the most of any money.

 

There is wealth destruction now, but the value of dollars and all national currencies is decreasing because of inflation. The cost of living is rising today even by the government's own measure, which many people including me believe understates the true loss of dollar purchasing power. Of course, gasoline prices have fallen over the last couple of months, but compare today's gasoline prices to where they were a year or two ago. In fact, to get a true measure of the loss of purchasing power in all national currencies, compare the price of nearly everything to a year or two ago. With the notable exception of real estate, the price of most everything is going up.

etc

[wren]

GoldMoney Alert - 14 September 2008

 

The Window is Open

Now and again a helicopter (sometimes two) comes past my place.

 

I keep hoping it's Ben with free cash but no luck so far for me.

 

Which oddly reminds me of this poem (italics and bold are my own.)

 

Slough

 

Come friendly bombs and fall on Slough!

It isn't fit for humans now,

There isn't grass to graze a cow.

Swarm over, Death!

 

Come, bombs and blow to smithereens

Those air -conditioned, bright canteens,

Tinned fruit, tinned meat, tinned milk, tinned beans,

Tinned minds, tinned breath.

 

Mess up the mess they call a town-

A house for ninety-seven down

And once a week a half a crown

For twenty years.

 

And get that man with double chin

Who'll always cheat and always win,

Who washes his repulsive skin

In women's tears:

 

And smash his desk of polished oak

And smash his hands so used to stroke

And stop his boring dirty joke

And make him yell.

 

But spare the bald young clerks who add

The profits of the stinking cad;

It's not their fault that they are mad,

They've tasted Hell.

 

It's not their fault they do not know

The birdsong from the radio,

It's not their fault they often go

To Maidenhead

 

And talk of sport and makes of cars

In various bogus-Tudor bars

And daren't look up and see the stars

But belch instead.

 

In labour-saving homes, with care

Their wives frizz out peroxide hair

And dry it in synthetic air

And paint their nails.

 

Come, friendly bombs and fall on Slough

To get it ready for the plough.

The cabbages are coming now;

The earth exhales.

Blimey, that's a bit harsh. But from a Poet Laureate indeed. Is (was) Slough so bad?

 

(Published 1937, I believe, for those checking the prices. )

[romans holiday]

Oil down, gold up!

 

Is gold coming into its own? Is this the beginning of the decoupling we were looking for?

[headmelter]

Oil down, dollar down... gold up! Is gold coming into its own here and is this the beginning of the decoupling we are looking for?

 

 

Here's hoping.

 

Any idea what happened to silver? spot seemed to dive to about $6 then bounce to $11. according to the kitco chart. :blink:

[romans holiday]

Here's hoping.

 

Any idea what happened to silver? spot seemed to dive to about $6 then bounce to $11. according to the kitco chart. :blink:

 

Maybe someone's idea of a joke over there.

 

Mind you, I was expecting another bout of deflation to hit the metals [credit crisis only half-way] ... maybe the continual bad news in the banks is starting to develop a crisis [banking crisis] psychology in the market already.

[warpig]

I went the same way tonight, silver seems under valued more so than gold at the moment.

 

Walking the wall of fear here, without fear.

 

Personally, I'm lining up some silver purchases, being a bit heavy on Au already.

 

[Steve Netwriter]

At times like this I am reminded of this:

 

Dirty Harry "Do You Feel Lucky?" Scene

http://www.youtube.com/watch?v=1-0BVT4cqGY

 

[sylvester]

Showing my (lack of) class, I once thought I'd invented the word 'crud' but then years later I heard Rambo say it in his first film.

 

[kernull]

Here's hoping.

 

Any idea what happened to silver? spot seemed to dive to about $6 then bounce to $11. according to the kitco chart. :blink:

 

it is politely called 'bad tick' , but in reality it is a manipulation at NY exchange and it is used to take bullish positions off on stop or margin calls. usually happens before a bullish wave. later this bad ticks are removed like nothing happened.

 

[narrowescape]

it is politely called 'bad tick' , but in reality it is a manipulation at NY exchange and it is used to take bullish positions off on stop or margin calls. usually happens before a bullish wave. later this bad ticks are removed like nothing happened.

 

Ooh! Sneaky!

[kernull]

i am still waiting for the USD to pull up to 80 area once again. and gold make a higher low on this move confirming uptrend. the screaming buy imho, is oil right now. this drop on no volume on sunday (special huricane trading window) should not last much with all the commodities up.

[drbubb]

THE BIG BOUNCEBACK continues

 

Earlier Today

Updated Charts

 

Some charts showed an Island reversal on Friday.

Now Monday's jump retraces that OTP down

 

This is beginning to look like a classic V-bottom is in place

[Steve Netwriter]

FIRE Economy D-Day: Greenspan's Black Swan

 

Here we are. The day we have been warning you about since we re-opened iTulip April 2006 at the "peak of complacency" has arrived.

 

The circuit breakers installed after the 1987 crash will prevent a repeat. Don't worry about that. Maybe the DOW goes down 300 to 600 points today but not lower than 800.

 

Yet the comfortable fiction that governments – represented by global central banks – control markets will be put to the test. In truth, governments merely influence markets. At times that influence is effectual and at others not.

 

Today, not.

 

A quick review of how we got here and where we're going.

http://itulip.com/forums/showthread.php?p=47721#post47721

 

 

[bitbigt]

Oil down, gold up!

Is gold coming into its own? Is this the beginning of the decoupling we were looking for?

"Oil down, gold up! ...Is this the beginning of the decoupling"

 

Probably!

 

Though I think we need to look at the coupling between gold and the major stock markets.

 

Recall:

- August '07 start of credit crunch: gold and DOW DEcoupled (basically, people got scared)

- March '08 Bear Sterns: gold and DOW REcoupled (basically, people got confident)

- Sept '08 Lehman collapse: .....?

 

 

[bitbigt]

Any rally in gold today may be tempered by some gold selling to raise cash in response to margin calls as the stock markets tumble.

 

But of course, as that fade, that will just mean the rise will be more steady and more sustained.

 

 

 

 

[jinbal]

THE BIG BOUNCEBACK continues

 

Earlier Today

Updated Charts

 

Some charts showed an Island reversal on Friday.

Now Monday's jump retraces that OTP down

 

This is beginning to look like a classic V-bottom is in place

 

I would like to see the gap up filled sooner rather than later though - what do you think?

[Gatesy]

Any rally in gold today may be tempered by some gold selling to raise cash in response to margin calls as the stock markets tumble.

This is my main concern in any apparent strength. The scramble to unwind positive positions to offset losing ones will surely have a negatve impact on gold?

[jinbal]

This is my main concern in any apparent strength. The scramble to unwind positive positions to offset losing ones will surely have a negatve impact on gold?

 

OR

 

the unwinding of their large short positions on PM's causes the exact opposite

 

(assuming they have a large short position on PM's)

[Mr Pipples]

I went the same way tonight, silver seems under valued more so than gold at the moment.

 

Would just like to bring to the attention of those thinking of buying silver, Bob Hoyes opinion (and Frizzers it seems - anyone else?) of silver not trading alongside gold in crisis times - he predicts a G to S ratio of 1:100! Check out the 'watch silver' thread for more info.

 

Having more silver bullion then gold now, this would be horrendously bad for me (things are already dire) and I hope things don't go that way - but thought I'd at least try and give people the heads up in case this is news to you. Fair play if you think otherwise - please let me know why if so!

[Pixel8r]

The Window is Open - James Turk

 

The money creation window of the Federal Reserve is wide open, but it doesn't seem to be doing much good. The share price of countless financial institutions continues to crater, as the market senses that these overleveraged behemoths have assets on their balance sheet that do not reflect today's reality. The boom has passed, and we are now in the bust, just like night follows day. Wealth destruction is today's prevailing force as assets of all sorts are marked down in value.

 

What the Federal Reserve wants to make us believe is that the liquidity it is providing through its various lending schemes is sufficient to make solvent those financial institutions that have become insolvent. Unfortunately, economics doesn't work that way. Capital - and not newly printed dollars - is needed to make insolvent banks solvent, and given decades of over-consumption and under-saving, capital is in short supply.

 

Last year the Treasury and the Federal Reserve told us the sub-prime crisis was "contained". Then they told us that bailing out Bear Stearns would end the financial meltdown. They told us that Fannie Mae and Freddie Mac had sufficient capital and liquidity and would not need a bailout. What else are they going to tell us trying to make us believe that today's over-indebted financial structure will not collapse?

 

The point is that financial assets are based on promises, and promises are being broken right and left. It is no surprise therefore that bank balance sheets no longer reflect reality, and that many financial institutions are trading below their book value. The market understands the nature of today's wealth destruction and is therefore taking a prudent 'hair-cut' to bank balance sheets. The result is that a firm's market cap is probably a better reflection of a financial institution's real value than its quarterly reports. In short, the assets of many financial institutions are overstated.

 

In the 1930s wealth destruction resulted in deflation because the dollar's fixed link to gold led to a contraction in the money supply. As promises increasingly came to be doubted, wealth moved out of financial assets into tangible assets. As the most liquid tangible asset, gold benefited the most, and its purchasing power soared as a consequence, even against the dollar, which was devalued 69% against gold from $20.67 to $35 per ounce. In a deflation, the value of money increases, and in the 1930s, the value of gold increased the most of any money.

 

There is wealth destruction now, but the value of dollars and all national currencies is decreasing because of inflation. The cost of living is rising today even by the government's own measure, which many people including me believe understates the true loss of dollar purchasing power. Of course, gasoline prices have fallen over the last couple of months, but compare today's gasoline prices to where they were a year or two ago. In fact, to get a true measure of the loss of purchasing power in all national currencies, compare the price of nearly everything to a year or two ago. With the notable exception of real estate, the price of most everything is going up.

 

Real estate is a special case. Its price is going down because it had become way overvalued a year or two ago, and prices at that level were unsustainable. Consequently, we are today seeing wealth destruction, but to get the true picture, we need to keep in mind that we are measuring the decline in house prices and other real estate assets with a currency that keeps inflating. And the prospects are that the dollar will keep inflating because the Federal Reserve's 'window' remains wide open, as is the 'window' at every central bank around the world.

 

In short, the wealth destruction of the 1930s resulted in deflation because national currencies had a fixed link to gold, and the quantity of dollars shrunk as insolvent financial institutions went bankrupt. This time around wealth destruction is leading to inflation because central banks are creating 'money' out of thin air to try plugging the black holes on the balance sheets of insolvent financial institutions in an attempt to keep them out of bankruptcy. It won't work. They will still go bankrupt because central bank liquidity does not help bank insolvency.

 

All central banks can do is postpone for a while the final reckoning. As more and more promises are broken, increasing amounts of wealth will exit financial assets to avoid counterparty risk. This wealth will go into tangible assets, and gold in particular because it does not have counterparty risk.

 

So why did the price of gold drop last week?

 

It's a good question, particularly given the fact that the Dollar Index was unchanged from the week before. I could and will point to the usual culprits, including governments and over-leveraged hedge funds. But the price of most things dropped last week, including crude oil and other commodities too. So here's the important point.

 

Have the reasons for owning gold and silver changed in the last week or last month? I don't think so. We are witnessing significant wealth destruction today that is undermining the solvency of financial institutions. Yet the cost of living today is rising because the dollar and other national currencies are being inflated as central banks around the world try to make insolvent institutions solvent by pumping money out their lending 'window'. But there is something even more worrying than inflation.

 

National currencies come with counterparty risk. They are based on promises, and promises are becoming increasingly unreliable. One does not have to rely on promises and accept counterparty risk when owning tangible assets like gold and silver, which in my view have become exceptionally undervalued.

 

Published by GoldMoney

Copyright © 2008. All rights reserved.

Edited by James Turk, alert@goldmoney.com

 

[wrongmove]

A question to the chartists - is 785 technical resistance? If so, where is the next resistance should 785 get broken? cheers.

 

 

[warpig]

Thanks for the info, I appreciate you bringing it to our attention. 100:1 seems extreme, can you briefly elaborate as to why this is the case on this thread? My ratio of G:S is currently 4:1, which seems healthy to me.

 

Would just like to bring to the attention of those thinking of buying silver, Bob Hoyes opinion (and Frizzers it seems - anyone else?) of silver not trading alongside gold in crisis times - he predicts a G to S ratio of 1:100! Check out the 'watch silver' thread for more info.

 

Having more silver bullion then gold now, this would be horrendously bad for me (things are already dire) and I hope things don't go that way - but thought I'd at least try and give people the heads up in case this is news to you. Fair play if you think otherwise - please let me know why if so!

 

[Johan van der Smut]

Well, well, well.

 

Peter McGuire, managing director of Commodity Warrants Australia, told Reuters: "Gold is on fire right now. There is a huge amount of nervousness about Merrill and Lehman. The financials are being hit really hard and things could get very interesting once US markets open."

 

"These are not normal events and people are running to safety, running to quality," he said, adding that gold could rally to $820 to $830 in the next couple of days.

 

http://www.guardian.co.uk/business/2008/se...ties.wallstreet