The dollar, precious metals, and the 'other' invisible hand

[EJ]

The dollar, precious metals, and the 'other' invisible hand

I don’t always disagree with Mike (Mish) Shedlock. He and I are in agreement on gold and silver manipulation: there isn’t any. Unless you count the actions of central banks trying to maintain a dysfunctional global monetary system.

"What you have here is the footprints of the hedge funds exiting the commodities' markets in a mass stampede. Nothing more than that."

Jon Nadler, Senior Analyst Kitco, Chimes In On The Precious Metals Conspiracy

Correct.

From our March 5, 2008 Gold Update: The small trade within the big trade:

"We remain long gold as we have since August 2001. Recent price action compels us to remind readers that the precious metals markets have two primary drivers, with the currency depreciation and inflation trade driving long term prices and highly leveraged trades by funds driving short term price action.

"Within the current rapid speculative trade, we are watching for short term price volatility much as occurred at the end of the previous similar period C (H1 2006): a 20% correction from $720 to $580. A similar correction today would take gold prices down $200. We are also within the long term for volatility that will portend the end of the currency depreciation and inflation trade that began in 2001."

On August 13, 2008 when gold was trading at $844 we estimated that the gold price correction driven by fund selling for this dollar rally would take gold to $780 then stop. The table below is from People are sentimental, markets are not:

Another lucky iTulip guess.

FIRE Economy vs Adam Smith

Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. - Adam Smith, The Wealth of Nations, Book IV Chapter II

Adam Smith, writing in the 1700s, never imagined the FIRE Economy or the circumstance of governments around the world banding together to extend and maintain uneconomic system of money and trade.

Precious metals prices are primarily a function of dollar purchasing power, and dollar purchasing power is now dominated by foreign central bank demand for dollar denominated financial assets. One cannot forecast long term trends without incorporating the actions of the "other" invisible hand in the money markets, that of global central banks, into one's investment thesis.

According to our theory of the "Dollar Ratchet" since 2001 the dollar has been managed down by central banks in a series of depreciations such as 2001 to 2005 and 2006 to 2008, with an approximate one year rest period between depreciations to allow economies to adjust. We estimate the next period of depreciation starts up again in 2009 and the dollar and commodities move sideways until then, unless there is an accident that forces the Fed to cut rates and other CBs do not go along with it, in which case the dollar continues down sooner than later.

Since the mid 1980s, currency intervention primarily occur indirectly via purchases of dollar denominated financial assets, namely Agency and Treasury debt, by foreign central banks versus overtly as currency interventions by the Treasury Department.

FIRE Economy and the Dollar Ratchet ($ubscriber)

Starting in 1957, the year foreign private institutions and individuals were able to buy treasury securities, foreign private holdings of US treasury debt grew to 28% of the total by 1959. Foreign private holdings then steadily declined after that until 1973, the year after the US officially abandoned the international gold standard, collapsing to a mere 1% of total foreign holdings.

Markets saw it coming from day one, so central banks stepped in to keep the game going.

After 1973 private foreign holdings had only one way to go, up. The big game changer was the birth of the FIRE Economy in the early 1980s. Private market driven holdings steadily increased until reaching parity with official foreign holdings in 1998.

Private treasury holdings then began another long period of decline, falling to the current level of 34% for foreign private investors and 64% foreign central banks. Our macro analysis views the start of that decline as the beginning of the end of the FIRE Economy, and much like the decline that started in 1959 at 28% and ended at 1% reflects the assessment of markets that the US economy and the standing of its debt and currency are in secular decline.

The other major US financial asset that foreign investors by is US agency debt, primarily Fannie Mae and Freddie Mac bonds. At the end of 1991, 91% of foreign ownership of agency debt was private, mostly institutional holders, and only 9% were official. By the end of the first quarter of 2008, 64% of agency debt was held by foreign governments and only 36% by private institutions. So much for the faith of the invisible hand of markets in US housing as an investment.

In the mean time, the decline in purchases of US agency and treasury debt, and the associated weakness in the dollar, is managed down by the central banks of governments that 1) are hurt by a rapid collapse of the dollar, and 2) have sufficient economic surplus to allow them to intervene.

U.S., Europe, Japan Devised Plan to Prop Up Dollar, Nikkei Says

By Timothy R. Homan

Aug. 27 (Bloomberg) -- Finance officials from the U.S., Japan and Europe in mid-March drew up plans to strengthen the U.S. dollar following troubles at Bear Stearns Cos., Nikkei English News reported, citing unnamed sources.

he intervention designed by the U.S. Treasury Department, Japan's Finance Ministry and the European Central Bank called for the central banks to purchase dollars and sell euros and yen, with Japan providing the yen needed for the currency swap if the greenback's value dropped significantly, the news service said.

The three groups, which considered making an emergency statement through the Group of Seven industrial nations, did not stipulate a specific exchange rate for the potential intervention, nor did they detail the amount of money to be used, Nikkei said.

As news of the planned intervention leaked out in March, funds not eager to trade against governments unwound their dollar hedge positions in commodities, including gold and silver; platinum – less discussed by the precious metals conspiracy types, presumably because few don't own any, fared even worse.

iTulip Gold Forecast

Medium Term (six months to a year): Trades sideways to moderately up.

Dollar Ratchet price of gold

Long Term (two to seven years): Eventually peaks around $2,500.

Dollar versus gold across four major economic epochs

iTulip Select: The Investment Thesis for the Next Cycle™
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[jtabeb]

Re: The dollar, precious metals, and the 'other' invisible hand

The dollar, precious metals, and the 'other' invisible hand

I don’t always disagree with Mike (Mish) Shedlock. He and I are in agreement on gold and silver manipulation: there isn’t any. Unless you count the actions of central banks trying to maintain a dysfunctional global monetary system.

"What you have here is the footprints of the hedge funds exiting the commodities' markets in a mass stampede. Nothing more than that."

Jon Nadler, Senior Analyst Kitco, Chimes In On The Precious Metals Conspiracy

Correct.

Sorry EJ, not buying. [Thanks LUKESTER for this post]

HOUSTON (ResourceInvestor.com) -- On August 6 the Got Gold Report took a look at this year’s action in silver and noted that it looked like we were headed for a harsh August, similar to the previous August in 2007. That article, with the prophetic title “August Silver Swoon Again,” suggested that the first two weeks of August this year might be rough for silver metal, because it looked like technical support levels had been breached.

The price action for the second most popular precious metal since that report has been rough indeed. Silver literally fell off a price cliff, ripping through sell stops and trailing stops for silver investors and traders. Silver dived lower so far and so fast that it became a seemingly unexplainable and irrational panic. However, over the past few days some startling evidence has surfaced which just might explain silver’s record-breaking August plunge of 2008.

Once the evidence now coming to light reaches the mainstream Wall Street press, just about everyone will likely conclude that silver investors world wide were just sucker punched by two very well funded U.S. banks.

Silver Smacked 40% Lower Despite Big Popular Demand

Silver just endured a near collapse, having fallen from the $19s in July all the way down to test the middle $12s. Very seasoned silver traders who correspond with this report have expressed their shock and disbelief as to how violent and how strong the down-spike has been so far.

In the world of silver just about everyone has to be asking how it was possible that during the month of July silver would peak at over $19.00 and even though physical silver was commanding high premiums even then, the metal could plunge off a cliff seven dollars or more, a drop of 40%?

Well, it could be that silver commentator and analyst Ted Butler has discovered evidence of what might be the single largest commodity manipulation in the history of the metals futures markets in the U.S. If Butler is correct, (and the data are compelling that he might be), two U.S. based banks apparently crushed the silver market with an overwhelming onslaught of short selling of silver futures on the COMEX, division of NYMEX in New York, sometime between July 1 and August 5, 2008.

In a short article entitled “The Smoking Gun,” Butler examines the reported positioning of banks in the futures markets. The bank positions are reported monthly by the Commodities Futures Trading Commission (CFTC) and those public reports are available on the CFTC website here.

What caused Butler to issue a special report about the most recent CFTC bank position report was the fact that exactly two U.S. banks had apparently taken extremely large short positions on the COMEX just prior to the recent plunge in price for silver metal.

Before concluding whether this is just a case of a couple banks getting it right and profiting from their superior analytical skills, or whether it was a case of a couple banks intentionally manipulating the global market for silver metal by forcing the market lower themselves, let’s take a closer look at the data brought to everyone’s attention by Butler.

Silver Market Sucker Punched by Two U.S. Banks?

This first chart takes a look at the net positions in COMEX silver futures by U.S. banks according to the CFTC Bank Participation in Futures Markets Reports since September, 2006. For that 24-month period there were two to four U.S. banks reporting positions. The report also includes participation by non-U.S. banks, but this analysis is focused strictly on the U.S. bank’s reporting.



From September 2006 to July of 2008 the COMEX net silver contract positioning of the two to four U.S. banks reporting ranged from being 3,376 contracts net long on September 4, 2007 to being 12,381 contracts net short on March 4, 2008. As of July 1, there were two U.S. banks reporting and they collectively held a net short position in silver futures of 6,177 contracts as silver closed at $18.10. By August 5, 2008, after silver had declined to $16.45, these two U.S. banks had increased their net short positioning to a staggering 33,805 contracts.

So, using just the COT reporting dates, from July 1 to August 5, as silver declined $1.65 or 9.1%, these two U.S. banks INCREASED their net short positions by 27,628 contracts or a mind boggling 547%.

A short position of 33,805 contracts is a big number. It represents 169,025,000 ounces of silver. That is a net short position by two U.S. banks of 5,257 tonnes on silver worth about $2.7 billion at $16.00 the ounce.

In order for these two U.S. banks to have taken these net short positions, they had to sell short silver futures on the COMEX. Lots and lots of them. Apparently, sometime between July 1 and August 5, these two U.S. banks became the dominant force in the New York silver futures markets. As anyone can see from the data, they were dominant on the short side, or the side pushing the price of silver lower on the futures markets.

For perspective and to show just how much the trading of the two U.S. banks might have affected the COMEX silver futures price, and thereby affecting the spot price, this next chart looks at the two U.S. bank’s net silver futures positioning relative to the entire open interest for silver on the COMEX.

From September 5, 2005 to July 1, 2008, the net short positioning of the 2-4 U.S. banks never amounted to more than 11% of the total open interest. Then, suddenly, as of August 5, 2008, with only two banks reporting, their net short positions spiked up to 25.37% of all the contracts on the COMEX, division of NYMEX.




On August 5, exactly two U.S. bank’s net short positions for silver futures accounted for over a quarter of all 133,255 of the contracts on the COMEX. Two banks, whose identities are protected and kept secret from U.S. citizens by the rules of the CFTC, had taken an overwhelming net short position in silver (and in the process drove silver much lower in price) and these two banks were so sure of their silver-is-going-lower call that they increased their short positioning AFTER silver had already fallen over 9%.

It would be one thing if these two U.S. banks were merely part of a much bigger exodus out of silver metal; if the positions of these two unnamed U.S. banks were merely a small percentage of many commercial entities taking the short side. It would not raise the slightest question if two bank’s net short positioning was large if the overall commercial net short positioning for silver was much larger. But when we compare the net short positioning of these two U.S. banks on August 5, 2008 to the entire commercial net short position of all commercial traders on the COMEX, we find that these two unnamed U.S. bank’s net short positioning accounted for a sickening 60.95% of the entire silver commercial net short positioning on the COMEX.



From September 5, 2006 to July 1, 2008, the 2-4 bank’s net short positioning never accounted for more than 18.21% of the commercial net short positioning on the COMEX. Then, suddenly as of August 5 it spiked up to 60.95%.

Demand for SLV Surging

Sooner or later, if large players attempt to overwhelm the market in one direction, (as has apparently just occurred), their efforts will run into the very real laws of supply and demand. (As the Arabs and the Hunt brothers learned from the other side of the market in January, 1980.)

What has demand done during this historic decline for the price of silver? Demand has exploded for all kinds of silver metal products here in the U.S. Bullion dealers are reporting they have been overrun by investors trying to buy the actual metal. Premiums for physical silver have shot much higher for those dealers still willing or able to book new sales and many dealers have no silver to sell at all.

Some dealers have resorted to booking sales now, but promising to deliver metal in the future from future business. Unless the dealer has learned to “lock-in” his sales using the silver ETF or some other method of hedging, booking physical silver sales today for delivery from future activity can be a dangerous business practice for a bullion dealer because it is like selling silver short. We’ll have more about that in future reports.

At any rate, as silver has come down so far in price, one would naturally expect that there would have been a panic out of the metal and into cash. If this sell down for silver were something systemic or something that threatened the very sustainability of the silver bull market, one would have expected the “smart money” to have dumped their holdings in both physical silver and in the silver exchange traded fund.

That hasn’t happened. Instead premiums, the amount over the current spot price demanded by dealers for physical silver, have skyrocketed and availability for silver is extremely scarce even at the injuriously high premiums evident in the physical marketplace today.

The silver ETF has seen consistently more buying pressure than selling pressure throughout this August silver swoon too. In fact, just since August 15, SLV has added a huge 308.839 tonnes to hold 6,474.04 tonnes of average 1,000 ounce silver bars.

The authorized market participants for SLV have to add shares to the trading float and increase the amount of silver held for SLV when buying pressure is significantly stronger than selling pressure. The reverse occurs when there is more selling pressure than buying pressure.

Instead of the silver price plunge creating a panic exodus out of SLV it has just created much more demand for it as shown in the chart below.



It should be obvious that investors have not panicked with silver and are instead thankful for the lower prices so they can buy more of it with the same money.

People Don’t Like to be Sucker Punched

Everyone can look at the data and form their own conclusions. But when silver is in short physical supply, commanding injuriously high premiums and difficult to locate; when investors are piling into the silver ETF in droves, a 40% silver price plunge is not only not warranted, it smells.

It is difficult to imagine a legitimate reason that two U.S. banks could quickly and systematically amass a net short position on the COMEX which amounts to over a quarter of the entire action on that bourse. It will not be surprising at all if we learn that these two U.S. banks are taken to task by regulators for their actions. It will be even less surprising to learn that they have become the target of multi-billion dollar class action lawsuits by hungry lawyers representing silver investors everywhere.

Futures markets are supposed to answer the actual physical markets, not the other way around. In other words, futures markets are supposed to be a place where producers or large holders of a commodity can lay off price risk to speculators and thereby hedge against unforeseen adverse movements in the price of the commodity. Futures markets are definitely not supposed to be a place where a couple of well connected and well funded entities can bully the market with their own heavy handed trading.

If silver really was just taken down by a couple of very big U.S. banks to irrationally low levels, it won’t be long before the laws of supply and demand reassert themselves. Got silver?

[metalman]

Re: The dollar, precious metals, and the 'other' invisible hand

that is a friggin loooong reply. you guys must own a lot of silver!!!

[jtabeb]

Re: The dollar, precious metals, and the 'other' invisible hand

that is a friggin loooong reply. you guys must own a lot of silver!!!

25% more than I owned two weeks ago (if it actually gets delivered, that is)

[metalman]

Re: The dollar, precious metals, and the 'other' invisible hand

25% more than I owned two weeks ago (if it actually gets delivered, that is)

you made a good buy but for the wrong reasons, if your post is any indication.

silver bottomed with gold as the fund shorts pissed their pants.

the game goes on and on until the big shoot out.

so which one of these players folds first?



that is THE question!!!

figure that out and you're in the big money.

so... where is the russian or chinese central bank head in the picture?

[World Traveler]

Metalman, mind extrapolating a little more?

Metalman,

These are some very intriguing hints that you posted. Since I'm probably not as financially sophisticated as some other folks on this board, I'm having trouble reading the tea leaves.

"the game goes on and on until the big shoot out. so which one of these players folds first?

that is THE question!!! figure that out and you're in the big money.

so... where is the russian or chinese central bank head in the picture"

Followup Questions:

1. What do you mean by the big shoot out? And by implying that one of the central banks folds first? Which one might fold first and what happens then?

2. How will not being in the picture benefit Russia and China?

Thanks,
WT

[phirang]

Re: The dollar, precious metals, and the 'other' invisible hand

you made a good buy but for the wrong reasons, if your post is any indication.

silver bottomed with gold as the fund shorts pissed their pants.

the game goes on and on until the big shoot out.

so which one of these players folds first?



that is THE question!!!

figure that out and you're in the big money.

so... where is the russian or chinese central bank head in the picture?

EJ/FRED/MGMT: Can we have an ECB/BoJ/PBoC/Fed/BoE thread, where we track policy, statements, trips (when they fly around, they mean biz!), etc? It'd be great to have a single thread where we can keep au courant with the FX gods and also discuss and futilely second-guess them.

[Guest]

silver bottomed with gold as the fund shorts pissed their pants.

Metalman - Are you taking someone's word for this, or is that a high confidence assessment of your own? I don't see it as at all clear that gold has clearly bottomed. And as for silver, it's got a 50% chance of seeing further lows, IMHO. I like Silver just like Jtabeb, and if I was underweight in silver I might well buy a significant further increment at these prices. But silver is definitely vulnerable in the next year - more so than in previous years. Of course six years out from now, silver could trounce gold's returns. But that does not mean we are unlikely to see it behave in seriously ugly fashion in a severe global recession. I guess Jtabeb's the right sort of guy for this kind of positioning however, as his stomach is likely accustomed to "high G's". For all I know the guy even enjoys it. Like kicking the afterburners when you are already headed straight for the ground. Nuts!

However bottom line is I agree squarely with Jtabeb. Read Butler's pointed commentary above. It evidences just how far we are supposed to strain our own credulity in order to continue regarding this determinedly as a correction brought about solely by hedge fund deleveraging. In the context of this article's exposition of the extraordinary concentration of shorts, with their vertiginous multiplication into only one or two large bank hands, stating "it just isn't manipulated, period" seems an assertion that's encountering at very least some headwinds. The thing to keep in ind about this commentator (Szabo) is that he has been a most determined proponent of exactly what EJ is suggesting, that there IS NO COLLUSION. He is however growing increasingly intrigued by Butler's own claims, while avoiding adopting them wholesale.

There is a point to posting all this stuff here. The point is, even despite the below careful investigation of WHO it was, who actually piled on the massive short positions in the PM's, which coincided (or preceded rather) the recent plunge in those PM's, what Mr. Szabo is illustrating is that he "remains unsure" despite all the added clarification as to the participants uncovered here, whether these shorts were hedging positions or if they were indeed naked and manipulative positions. The operative term is REMAINS UNSURE. I have nowhere seen EJ's meticulous deconstruction of these trades, only a brief dismissal of any collusive thesis. What I wonder therefore is, how could EJ be so assured, while Szabo, a skeptic every bit as much as EJ about collusion (in fact even more so in the past), claims that "there is ultimately no real way to know for sure here"?

Tom Szabo writes of Mish's " great expose' " on this topic:

Mike “Mish” Shedlock takes no prisoners in his blast at conspiracy theorizing in the gold and silver camp. While much of his logic is dead on, he does flippantly dismiss several factors that deserve more analysis. For example, the large short position by the two “U.S. Banks” constituting Ted Butler’s “naked gun” does not appear merely to be a matter of longs and shorts doing their thing in the futures markets (it could turn out to be that but right now it does not appear that way).

Similarly, what we recently saw in the silver market, where the price traded down dollars at a time in illiquid electronic markets yet market orders were filled with almost no slippage, does not appear to be merely a matter of longs and shorts doing their thing.

Furthermore, Mish states the following: “When a long sells his position, a short automatically covers.” This is either ignorance or gross oversimplification. A long, of course, may sell his position to another long. In fact, the only way to determine whether a long is selling to another long who is establishing a new position or to a short who is covering a short position is by looking at open interest. But since the open interest figure is only available on a daily basis, as an analysis tool it is more often a sledgehammer than a scalpel. Still, that doesn’t mean we should ignore it.

And this further commengt from Szabo, delving into the identity of the participant banks or other entities playing in the massive short positions which developed:

August 28th - The Usual Suspects after All:

I said before that the 2 or 3 “U.S. Banks” that have reported, per the Bank Participation report published by the CFTC, a huge short position in COMEX silver and gold were not “money center banks” or “dealers”. Well, after an exhaustive review of the bank quarterly Call Reports filed by each U.S. commercial bank with the Federal Financial Institutions Examination Council (FFIEC), it seems that I’ve established that in fact the primary U.S. banks involved in the futures market are the usual suspects after all. The specific banking entities reported by the CFTC are not “dealers” per se in the sense of being futures brokers but they most definitely have “swap desks” and they are “money center banks”.

Before getting to my findings, I will discuss the process I used so you can try to recreate, if you wish, what I did. First, I took the Quarterly Banking Profile as of 6/30/08 issued by the FDIC and noted the total “Commodity & Other” derivatives were $1.137 trillion in notional value across all FDIC insured commercial banks and state-chartered savings banks. See Table VI-A on page 11 of the report. Also, I noted that “Futures & Forwards” were $23.6 trillion. In addition, I noted that more than 99.9% of derivatives were held by banks with assets greater than $10 billion. Then I ran an “FDIC - Statistics on Depository Institutions” report that matched and reconciled the derivatives totals to the Quarterly Banking Profile. This statistical report indicated that the top 84 commercial banks over $10 billion in assets held the vast majority of commodity derivatives and all futures and forward contracts, while the top 48 savings institutions held almost none.

Note that savings institutions file quarterly Thrift Financial Reports, not Call Reports, and the TFR does not provide notional amount information on derivative positions (only market value or credit risk equivalents are reported). Still, we can safely assume that savings and loans are not involved in commodities or futures and forward contracts to any large extent on a notional basis (this is probably why they don’t report the notional amount of derivative positions in the TFR). Not a lot to be surprised about except I didn’t think Wachovia would have that much in commodity futures ($12.2 billion). What does come as a bit of a surprise is that more than 99% of commodity (and equity) futures and forward contracts held by U.S. banks are concentrated in just 5 institutions. Yet if we look back at the Bank Participation report for July 1, 2008 (which corresponds very closely timewise with the 6/30/08 Call Reports), we indeed can see that no commodity futures were held by more than 5 U.S. banks. And now we know the names of those 5 banks: JPMorgan, BofA, Citibank, HSBC and Wachovia.

And further on in this same article:

So, which of the 5 are the actual 2 big shorts in COMEX silver and 3 big shorts in COMEX gold? Well, the Call Reports seem to reveal that as well (Schedule RC-R, Page 40):

JPMorgan
Gold Contracts: $85.2 billion
Other PM Contracts: $10.9 billion

HSBC
Gold Contracts: $27.5 billion
Other PM Contracts: $6.9 billion

Citibank
Gold Contracts: $0.5 billion
Other PM Contracts: $3.0 billion

Bank of America
Gold Contracts: $0.4 billion
Other PM Contracts: $0.2 billion

Wachovia
Gold Contracts: $0.0 billion
Other PM Contracts: $0.0 billion

Bank of Oklahoma
Gold Contracts: $0.0 billion
Other PM Contracts: $0.0 billion

Thus, it appears that the swap of forward contracts for futures contracts is being driven by the need of the JPMorgan and HSBC banking subsidiaries to hold most of the consolidated capital reserves. And that, in turn, could be the result of the massive loan write-offs on subprime mortgages and collateralized securities, which apparently have required JPMorgan and HSBC to boost banking reserves at the expense of the reserves held at the futures dealer subsidiaries. You can see what I’m talking about by reviewing some of the historical Futures Commission Merchant reports, noting that most other large futures dealers have increased their reserves by a multiple in the past couple of years whereas JPMorgan and HSBC have remained near historic levels despite a large increase in their futures trading activities.

One final note. JPMorgan and HSBC are obviously huge individual players in the gold and silver markets and that includes the COMEX. The Call Reports prove, I believe, without a shadow of a doubt that these two U.S. banks constitute a significant portion, and probably the outright majority, of commercial short positions (both gross and net) in COMEX gold and silver futures. That might get the conspiracy-minded among us to start hootin’ and hollerin’, but I do want to point out that JPMorgan and HSBC have a much larger book of forward gold and silver contracts than they do COMEX gold and silver contracts. As a result, it is impossible to conclude with any degree of certainty that the COMEX gold and silver short positions are not in fact hedges of forward gold and silver long positions. Unless, of course, we have an agenda and a propensity to jump to conclusions.

[phirang]

Re: Metalman, mind extrapolating a little more?

Metalman,

These are some very intriguing hints that you posted. Since I'm probably not as financially sophisticated as some other folks on this board, I'm having trouble reading the tea leaves.

"the game goes on and on until the big shoot out. so which one of these players folds first?

that is THE question!!! figure that out and you're in the big money.

so... where is the russian or chinese central bank head in the picture"

Followup Questions:

1. What do you mean by the big shoot out? And by implying that one of the central banks folds first? Which one might fold first and what happens then?

2. How will not being in the picture benefit Russia and China?

Thanks,
WT

fold = cut rates.

the EMU is in chaos right now, especially with the resurgent Russian "threat" (imho a paper tiger). If the EMU punishes the crappy FSU states in the EMU, then, well, we could see an opportunity for Putinistas to come to power.

It's complicated, and the politics involved are beyond my ken. Insights here are appreciated.

[metalman]

Re: The dollar, precious metals, and the 'other' invisible hand

EJ/FRED/MGMT: Can we have an ECB/BoJ/PBoC/Fed/BoE thread, where we track policy, statements, trips (when they fly around, they mean biz!), etc? It'd be great to have a single thread where we can keep au courant with the FX gods and also discuss and futilely second-guess them.

i second that. call it 'dollar cartelology' the modern equivalent of kremlinology

[Charles Mackay]

Re: The dollar, precious metals, and the 'other' invisible hand

Sinclair, Turk, and Murphy say it's manipulated. Therefore, it is manipulated. But, why not use the manipulation to your favor for the extraordinary buying opportunities that it provides. Sinclair says the manipulators will ultimately be the ones that make the most money from the long side.

[Charles Mackay]

Re: The dollar, precious metals, and the 'other' invisible hand

Frank Barbera's US dollar chart showing the 30 year support line being broken...and the obligatory retracement to the support line for a "kiss goodbye"

[j4f2h0]

Re: The dollar, precious metals, and the 'other' invisible hand

Ted Butler, Israel Friedman and Jim Sinclair have convinced me that the market has manipulation end of story! I am struck by EJ's prediction of the top in the gold price is basically the inflation adjusted number of the peak in 1980, around 2500. So after all this insanity, i have a hard time believing that the 2-7yr projection is 2500 bucks. IN 5yrs the inflation adjusted 1980 high will probably be way higher the 2500 bucks, so i am to believe that the top actually lies lower than the 1980 top?????? I have a hard time swallowing that!

[phirang]

Re: The dollar, precious metals, and the 'other' invisible hand

Ted Butler, Israel Friedman and Jim Sinclair have convinced me that the market has manipulation end of story! I am struck by EJ's prediction of the top in the gold price is basically the inflation adjusted number of the peak in 1980, around 2500. So after all this insanity, i have a hard time believing that the 2-7yr projection is 2500 bucks. IN 5yrs the inflation adjusted 1980 high will probably be way higher the 2500 bucks, so i am to believe that the top actually lies lower than the 1980 top?????? I have a hard time swallowing that!

Please fully read all EJ's relevant (i.e. more than the one above) articles before posting on them.

[j4f2h0]

Re: The dollar, precious metals, and the 'other' invisible hand

Please point me in the right direction i haven't seen any other numbers predicted.