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

[Guest]

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

Maybe he's concerned some prior incautious and flamboyant "bold assertion" in the matter will sneak up and bite him in the ass while he's napping? That kind of worry can run you ragged after a while.

[bart]

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

Maybe he's concerned some prior incautious and flamboyant "bold assertion" in the matter will sneak up and bite him in the ass while he's napping? That kind of worry can run you ragged after a while.

http://www.nowandfutures.com/grins/rimshot.mp3 ;)

He actually very specifically noted last week that he was "moving on" from the intervention and 'conspiracy' areas.

I'm among those who think that was a clear (and masked) admission that he blew it big with his dubious journalism and poor research and attention to actual facts. Perhaps he will learn from it, but I'm not holding my breath.

[Spartacus]

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

That's a CLAIM ASSERTED WITHOUT PROOF by some parties.

An easy and quick evasion, which cannot be proven ... I want to ask for proof, but even I am stymied ... how would anyone prove or disprove it?

An easy and quick evasion, which cannot be proven ...
convenient.
timely.
easy.

This claim surfaced months ago with Silver, less than a month ago with Gold, yet when several wholesalers started rationing 1000 oz Silver bars (no fabrication bottleneck) these same people (who originated the "only shortage is in coinage", then "only shortage is coinage and small-size rounds") refused to address the issue.


months ... has it been six? in this age of "instant or sooner" arbitrage and instant availability of almost everything, including the most sophisticated contracted manufacturing and design, that can duplicate a new Nike shoe in days, and if a book can be written about Sarah Palin in a couple of days and be in bookstores within a few weeks, and you can order up custom cars to be delivered in a week - and in that world, NO ONE is able to tool up coin production - that's been done for thousands of years, in 6 MONTHS to capture $7 per ounce premiums? sales on ebay are at $17 and $18, which is today a $7 premium over spot.


yes, I know this is "argument by personal incredulity and hysterical, hyperbolic rhetoric", but at some point even logical fallacies make some sense.

EDIT (more hysterical hyperbole) : so at one week of high Silver premiums (Gold had yet to have a huge paper to metal spread) the arbitrageurs and the entrepreneurs and the rapid-manufaturers of the world all thought it wouldn't last. At 1 month, they thought the same, even though the spread was rising. At 2 months, the same ... at some point, Gold gets into the action, and still no response?

retail precious metal production is tiny and the fabricators have limited capacities. right now buyers are metaphorically trying to drink a gallon a minute through a soda straw.

[Guest]

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

... in this age of "instant or sooner" arbitrage and instant availability of almost everything, including the most sophisticated contracted manufacturing and design, that can duplicate a new Nike shoe in days, and if a book can be written about Sarah Palin in a couple of days and be in bookstores within a few weeks ... and in that world, NO ONE is able to tool up coin production ... in 6 MONTHS to capture $7 per ounce premiums?

Thinking Like "Fat Tony" - by James Turk - September 08, 2008 -

_______________

In his daily market commentary on September 1, 2008, Bill Murphy (Le Metropole Cafe') observed:

"You have to wonder how many times people can look at the exact same chart, with gold dropping at the same time, before they ask what the heck is going on? Free markets just don't trade that same way over and over and over, no matter what the outside fundamental factors are."

Indeed, one really does have to wonder, which made me think of two of the characters in Taleb's book, "Fat Tony" and his complete and total opposite, "Dr. John". Here is how Taleb describes them:

"Fat Tony...[is] more politely, Brooklyn Tony', because of his accent and his Brooklyn way of thinking, though Tony is one of the prosperous Brooklyn people who moved to New Jersey twenty years ago...He started as a clerk in the back office of a New York bank...and figured out the game of how you can get financing from monster banks, how their bureaucracies operate, and what they like to see on paper...Tony has a remarkable habit of trying to make a buck effortlessly...Tony's motto is "Finding who the sucker is."...Finding these suckers is second nature to him. If you took walks around the block with Tony you would feel considerably more informed about the texture of the world just "tawking" to him. Tony is remarkably gifted at getting unlisted phone numbers, first-class seats on airlines for no additional money, or your car in a garage that is officially full, either though connections or his forceful charm."

"Dr. John is a master of the schedule; he is as predictable as a clock...Dr. John is a painstaking, reasoned and gentle fellow. He takes his work seriously, so seriously that, unlike Tony, you can see a line in the sand between his working time and his leisure activities. He has a PhD in electrical engineering...Since he knows computers and statistics, he was hired by an insurance company to do computer simulations...Much of what he does consists of running computer programs for risk management'."

Taleb then brings these two completely different people together in a make-believe encounter to ask them a question in order to compare their answers. He tells them that he has a coin and that it is "fair", meaning that it has an equal probability of coming up heads or tails when flipped. He then tells them he has flipped it ninety-nine times and the coin has landed heads each time. Taleb then asks them to calculate the odds of the coin landing tails on the next throw.

"Dr. John: Trivial question. One half, of course, since you are assuming 50 percent odds for each and independence between draws.

NNT [Taleb]: What do you say Fat Tony?

Fat Tony: I'd say no more than one percent, of course.

NNT: Why so? I gave you the initial assumption of a fair coin, meaning that it was 50 percent either way.

Fat Tony: You are either full of crap or a pure sucker to buy that "50 pehcent" business. The coin gotta be loaded. It can't be a fair game. (Translation: It is far more likely that your assumptions about the fairness are wrong than the coin delivering ninety-nine heads in ninety-nine throws.)

NNT: But Dr. John said 50 percent.

Fat Tony (whispering in my ear): I know these guys with the nerd examples from my bank days. They think way too slow. And they are too commoditized. You can take them for a ride.

As Bill Murphy noted, free markets just don't trade the "same way over and over and over." If the gold market were a coin' flipped ninety-nine times in recent years, each time it came up heads. As Fat Tony understands, da coin gotta be loaded.

Taleb goes on to write: "Now, of the two of them, which would you favor for the position of mayor of New York City? Dr. John thinks entirely within the box, the box that was given to him; Fat Tony almost entirely outside the box...Have you ever wondered why so many of these straight-A students end up going nowhere in life while someone who lagged behind is now getting the shekels, buying the diamonds, and getting his phone calls returned?...Some of this may have something to do with luck in outcomes, but there is this sterile and obscurantist quality that is often associated with classroom knowledge that may get in the way of understanding what's going on in real life."

Here's another example how Fat Tony may see current events. We are told that the US Mint is unable to meet the demand for American eagle gold coins. Do we accept the Mint's word for it, or dig deeper and consider other possibilities?

Well, before answering that question, take a look at the accompanying chart of US Mint coin sales. It was prepared by Nick Laird of Sharelynx.



What's clear from this chart is that current sales demand (the blue line shows sales of one ounce gold eagles) is not out of line with previous periods in which the US Mint was able to meet demand. So why can't the Mint meet demand this time around?

Here's something else about the US Mint that Fat Tony may find curious. The Treasury reports the US Gold Reserves monthly at this link: http://fms.treas.gov/gold/index.html

These reserves include "gold held by U.S. Mint facilities", which the report labels as "working stock" and describes it as "the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins." The August 29, 2008 report says the quantity of working stock is 2,783,218.656 ounces. Yet we are told by the Mint that none of that can be minted into gold eagles? Would Fat Tony say we are a "sucker" to believe that the Mint cannot produce gold eagles to meet demand?

Here's something even more bizarre. One would assume that the size of the Mint's working stock varies from month to month, just like inventory varies from month to month in any business as a result of changes in production and the ebbs and flows in sales. And indeed, the Mint's inventory did vary monthly, up until March 2006. But according to the Treasury's reports, the Mint's working stock has remained exactly 2,783,218.656 ounces since April 2006. How is it possible that the Mint's working stock has remained unchanged for 28 months? Have you ever seen any business anywhere in the world for which its working stock was unchanged for a day, let alone 28 months?

It's not hard to imagine what Fat Tony would say about the accuracy of the Treasury's reports. And he would no doubt call anyone who believes them a "sucker".

[phirang]

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

Thinking Like "Fat Tony" - by James Turk - September 08, 2008 -

_______________

In his daily market commentary on September 1, 2008, Bill Murphy (Le Metropole Cafe') observed:

"You have to wonder how many times people can look at the exact same chart, with gold dropping at the same time, before they ask what the heck is going on? Free markets just don't trade that same way over and over and over, no matter what the outside fundamental factors are."

Indeed, one really does have to wonder, which made me think of two of the characters in Taleb's book, "Fat Tony" and his complete and total opposite, "Dr. John". Here is how Taleb describes them:

"Fat Tony...[is] more politely, Brooklyn Tony', because of his accent and his Brooklyn way of thinking, though Tony is one of the prosperous Brooklyn people who moved to New Jersey twenty years ago...He started as a clerk in the back office of a New York bank...and figured out the game of how you can get financing from monster banks, how their bureaucracies operate, and what they like to see on paper...Tony has a remarkable habit of trying to make a buck effortlessly...Tony's motto is "Finding who the sucker is."...Finding these suckers is second nature to him. If you took walks around the block with Tony you would feel considerably more informed about the texture of the world just "tawking" to him. Tony is remarkably gifted at getting unlisted phone numbers, first-class seats on airlines for no additional money, or your car in a garage that is officially full, either though connections or his forceful charm."

"Dr. John is a master of the schedule; he is as predictable as a clock...Dr. John is a painstaking, reasoned and gentle fellow. He takes his work seriously, so seriously that, unlike Tony, you can see a line in the sand between his working time and his leisure activities. He has a PhD in electrical engineering...Since he knows computers and statistics, he was hired by an insurance company to do computer simulations...Much of what he does consists of running computer programs for risk management'."

Taleb then brings these two completely different people together in a make-believe encounter to ask them a question in order to compare their answers. He tells them that he has a coin and that it is "fair", meaning that it has an equal probability of coming up heads or tails when flipped. He then tells them he has flipped it ninety-nine times and the coin has landed heads each time. Taleb then asks them to calculate the odds of the coin landing tails on the next throw.

"Dr. John: Trivial question. One half, of course, since you are assuming 50 percent odds for each and independence between draws.

NNT [Taleb]: What do you say Fat Tony?

Fat Tony: I'd say no more than one percent, of course.

NNT: Why so? I gave you the initial assumption of a fair coin, meaning that it was 50 percent either way.

Fat Tony: You are either full of crap or a pure sucker to buy that "50 pehcent" business. The coin gotta be loaded. It can't be a fair game. (Translation: It is far more likely that your assumptions about the fairness are wrong than the coin delivering ninety-nine heads in ninety-nine throws.)

NNT: But Dr. John said 50 percent.

Fat Tony (whispering in my ear): I know these guys with the nerd examples from my bank days. They think way too slow. And they are too commoditized. You can take them for a ride.

As Bill Murphy noted, free markets just don't trade the "same way over and over and over." If the gold market were a coin' flipped ninety-nine times in recent years, each time it came up heads. As Fat Tony understands, da coin gotta be loaded.

Taleb goes on to write: "Now, of the two of them, which would you favor for the position of mayor of New York City? Dr. John thinks entirely within the box, the box that was given to him; Fat Tony almost entirely outside the box...Have you ever wondered why so many of these straight-A students end up going nowhere in life while someone who lagged behind is now getting the shekels, buying the diamonds, and getting his phone calls returned?...Some of this may have something to do with luck in outcomes, but there is this sterile and obscurantist quality that is often associated with classroom knowledge that may get in the way of understanding what's going on in real life."

Here's another example how Fat Tony may see current events. We are told that the US Mint is unable to meet the demand for American eagle gold coins. Do we accept the Mint's word for it, or dig deeper and consider other possibilities?

Well, before answering that question, take a look at the accompanying chart of US Mint coin sales. It was prepared by Nick Laird of Sharelynx.



What's clear from this chart is that current sales demand (the blue line shows sales of one ounce gold eagles) is not out of line with previous periods in which the US Mint was able to meet demand. So why can't the Mint meet demand this time around?

Here's something else about the US Mint that Fat Tony may find curious. The Treasury reports the US Gold Reserves monthly at this link: http://fms.treas.gov/gold/index.html

These reserves include "gold held by U.S. Mint facilities", which the report labels as "working stock" and describes it as "the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins." The August 29, 2008 report says the quantity of working stock is 2,783,218.656 ounces. Yet we are told by the Mint that none of that can be minted into gold eagles? Would Fat Tony say we are a "sucker" to believe that the Mint cannot produce gold eagles to meet demand?

Here's something even more bizarre. One would assume that the size of the Mint's working stock varies from month to month, just like inventory varies from month to month in any business as a result of changes in production and the ebbs and flows in sales. And indeed, the Mint's inventory did vary monthly, up until March 2006. But according to the Treasury's reports, the Mint's working stock has remained exactly 2,783,218.656 ounces since April 2006. How is it possible that the Mint's working stock has remained unchanged for 28 months? Have you ever seen any business anywhere in the world for which its working stock was unchanged for a day, let alone 28 months?

It's not hard to imagine what Fat Tony would say about the accuracy of the Treasury's reports. And he would no doubt call anyone who believes them a "sucker".

Metals are volatile, and so unless you've a two-week payback period, it's a terrible investment to add to capacity (unless you can forward-sell).

[Spartacus]

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

And all this having been written ...

after committing myself so vociferously and dramatically in x number of posts (albeit with some qualifying and hedging language), how, oh HOW do I maintain the proper skeptical attitude required for good investing?

If "the market" is always right, what is "the market" telling us?

And which market is speaking?
ebay or COMEX?

COMEX, which has seen enormous "sales" of "Silver" and "Gold",
or SLV, the Silver ETF, which has seen NO net disposal of Silver stock, that I've seen reported so far, and, in fact, has been adding Silver?

And apparently the Gold ETFs have sold off a little, but definitely not much.

Being in precious metals is like being cheesed (like being creamed, just takes a lot longer)

That's a CLAIM ASSERTED WITHOUT PROOF by some parties.

An easy and quick evasion, which cannot be proven ... I want to ask for proof, but even I am stymied ... how would anyone prove or disprove it?

An easy and quick evasion, which cannot be proven ...
convenient.
timely.
easy.

This claim surfaced months ago with Silver, less than a month ago with Gold, yet when several wholesalers started rationing 1000 oz Silver bars (no fabrication bottleneck) these same people (who originated the "only shortage is in coinage", then "only shortage is coinage and small-size rounds") refused to address the issue.


months ... has it been six? in this age of "instant or sooner" arbitrage and instant availability of almost everything, including the most sophisticated contracted manufacturing and design, that can duplicate a new Nike shoe in days, and if a book can be written about Sarah Palin in a couple of days and be in bookstores within a few weeks, and you can order up custom cars to be delivered in a week - and in that world, NO ONE is able to tool up coin production - that's been done for thousands of years, in 6 MONTHS to capture $7 per ounce premiums? sales on ebay are at $17 and $18, which is today a $7 premium over spot.


yes, I know this is "argument by personal incredulity and hysterical, hyperbolic rhetoric", but at some point even logical fallacies make some sense.

EDIT (more hysterical hyperbole) : so at one week of high Silver premiums (Gold had yet to have a huge paper to metal spread) the arbitrageurs and the entrepreneurs and the rapid-manufaturers of the world all thought it wouldn't last. At 1 month, they thought the same, even though the spread was rising. At 2 months, the same ... at some point, Gold gets into the action, and still no response?

[Guest]

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

Phirang -

The entire point of the post above :

http://www.itulip.com/forums/showthr...46298#poststop

Was that all market participants who maintain constantly fluctuating positions long the metals by virtue of commercial inventories do forward sell to hedge their changing positions. From the CB's down to the bullion banks, down to the refiners, down to the retailers. One should assume most of the larger actors are of course hedging. In the silver market especially this is a given.

Therefore the argument that PM's supply is constrained coming to the retail market because of the price risk and because "it's a terrible investment" for those punting into a sharply fluctuating price environment, is an invalid argument.

You are employing arguments whose primary task seems to be to refute that any tightness in supply can really exist, up at the top wholesale levels of the world bullion markets, e.g. COMEX. If it did really emerge, that there were increasing hints of real tightness at those global wholesale levels, this would be huge information to the retail public.

It's not an article to be taken on faith. It is a point wherein skepticism is an asset, rather than a liability, in 2008.

Skepticism is an excellent working trait to adhere to - but in the precious metals markets, in a world of quite evident looming fiat currency dysfunction, one should make sure the habitual skepticism does not obscure or impede one's ability to look with a gimlet eye at the plausibility of the displayed facts. This was the point of Jim Turk's "Fat Tony" analogy.

Metals are volatile, and so unless you've a two-week payback period, it's a terrible investment to add to capacity (unless you can forward-sell).

The McClellan Market Report detects a "peculiar behavior" emanating from gold's price action here too apparently. An increasing number of observers are beginning to note the curious convergence of myriad little "hints" of these anti-fiat hedge market segments behaving "oddly".

Here is an excerpt from the current week's McClellan's newsletter. Notice his comment regarding the "peculiar" constrained quality of the action in Gold? A lot of alert analysts are paying attention to this. It seems here at iTulip we have a contingent who adhere to the "skepticism theology" with undue universality.

Charles Mackay has an excellent post in the select forums (which I believe you've read) commenting on the slew of "odd coincidences and conundrums" which when all assembled into a line-up and scrutinized with due skepticism, in fact seem to share certain slightly malodorous "common denominators".

Taken as a group, their collective little coincidences require a "suspension of disbelief" which begins to put a strain upon the "skepticism theologians" habitual moorings in a world where collusions are considered a-priori to be the least probable hypotheses.

As evidenced by my posts everywhere around here for the past couple of years, I have in fact been vehemently anti-collusion practically everywhere. I've long considered it to be an expression of weak-mindedness.

But when it comes to fiat money getting increasingly dysfunctional, and in the case of the USD, now backed into a corner, the habitual anti-collusion view of the world begins to llook increasingly like it needs an overhaul in this particular regard.

Observers such as Sinclair and Veneroso have long since understood the "Fat Tony" thesis. Everyone else is playing catch up.

___________

McClellan Market Report (current excerpt)

T-Bond traders did not like the weekend news about Freddie and Fannie at first, but they warmed up to it as the day rolled on, and as the dollar made a huge rally. The growing consensus seems to be that the financial situation in the USA might look bad, but it looks a lot better than everywhere else. Richard Russell writes in his latest Dow Theory Letters that the price for loose diamonds larger than 10 carats has gone up dramatically. Why, you ask? Because Russian capitalists who are worried about economic troubles and devaluation of their rubles are scurrying to put money into a safe and mobile form, and large diamonds fit the bill. T-Bonds are also safe and mobile, at least compared to other assets. But that perception of safety can quickly erode once inflation rears its head again.

The up close on Monday for December TBonds means that bonds have made a marginally higher high. This has happened on a single day price bar that saw a big long tail, and a close high in the day’s range. We saw a similar condition back in March, circled at the left end of the chart, when a big-tailed reversal bar was followed briefly by a higher close on a similar daily bar. That did not stop bond prices from entering a 3-month downtrend, and it seems likely that we will see a similar outcome this time. The really peculiar event on Monday was gold strength in the face of a strong dollar. Gold was initially up nicely as the dollar sold off on Sunday night, right after the open of trading and after the announcement about Freddie and Fannie. But the dollar turned around sharply intraday, and closed up by more than 1%.

That hurt gold a bit, but December gold futures still managed to finish about unchanged at the end of the day session on Monday, which keeps that contract very near the same closing price level it has seen for the past 3 days.

It seems just a little suspicious to have gold prices held so tightly at a specific price level, especially in light of wild gyrations in the dollar. Such behavior implies that somebody is holding gold prices in place until certain conditions are met, after which it can be released like the spring-plunger on a pinball machine. A good example of this comes from the flashback chart at the bottom of page 3, which looks at gold prices back in 2001. The 3 circled areas show examples of gold prices being held in a tight range, and then finally being released to fly free at the point of someone’s choosing. The robust pop of the last one was helped by the 9/11 attacks, but the principle is the same. At some point soon, the fetters will be loosed, and gold will fly.

MCCLELLAN NEWSLETTER - GOLD CHART - SEPT. 2008.jpg

[phirang]

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

Phirang -

The entire point of the post above :

http://www.itulip.com/forums/showthr...46298#poststop

Was that all market participants who maintain constantly fluctuating positions long the metals by virtue of commercial inventories do forward sell to hedge their changing positions. From the CB's down to the bullion banks, down to the refiners, down to the retailers. One should assume most of the larger actors are of course hedging. In the silver market especially this is a given.

Therefore the argument that PM's supply is constrained coming to the retail market because of the price risk and because "it's a terrible investment" for those punting into a sharply fluctuating price environment, is an invalid argument.

You are employing arguments whose primary task seems to be to refute that any tightness in supply can really exist, up at the top wholesale levels of the world bullion markets, e.g. COMEX. If it did really emerge, that there were increasing hints of real tightness at those global wholesale levels, this would be huge information to the retail public.

It's not an article to be taken on faith. It is a point wherein skepticism is an asset, rather than a liability, in 2008.

Skepticism is an excellent working trait to adhere to - but in the precious metals markets, in a world of quite evident looming fiat currency dysfunction, one should make sure the habitual skepticism does not obscure or impede one's ability to look with a gimlet eye at the plausibility of the displayed facts. This was the point of Jim Turk's "Fat Tony" analogy.



Scott McClellan's nose is twitching here too apparently, and he's not the only one. An increasing number of observers are beginning to note the curious convergence of myriad little "hints" of these anti-fiat hedge market segments behaving "oddly".

Here is an excerpt from the current week's McClellan's newsletter. Notice his comment regarding the "peculiar" constrained quality of the action in Gold? A lot of alert analysts are paying attention to this. It seems here at iTulip we have a contingent who adhere to the "skepticism theology" with undue universality.

Charles Mackay has an excellent post in the select forums (which I believe you've read) commenting on the slew of "odd coincidences and conundrums" which when all assembled into a line-up and scrutinized with due skepticism, in fact seem to share certain slightly malodorous "common denominators".

Taken as a group, their collective little coincidences require a "suspension of disbelief" which begins to put a strain upon the "skepticism theologians" habitual moorings in a world where collusions are considered a-priori to be the least probable hypotheses.

As evidenced by my posts everywhere around here for the past couple of years, I have in fact been vehemently anti-collusion practically everywhere. I've long considered it to be an expression of weak-mindedness.

But when it comes to fiat money getting increasingly dysfunctional, and in the case of the USD, now backed into a corner, the habitual anti-collusion view of the world begins to llook increasingly like it needs an overhaul in this particular regard.

Observers such as Sinclair and Veneroso have long since understood the "Fat Tony" thesis. Everyone else is playing catch up.

___________

Scott McClellan (current excerpt)

T-Bond traders did not like the weekend news about Freddie and Fannie at first, but they warmed up to it as the day rolled on, and as the dollar made a huge rally. The growing consensus seems to be that the financial situation in the USA might look bad, but it looks a lot better than everywhere else. Richard Russell writes in his latest Dow Theory Letters that the price for loose diamonds larger than 10 carats has gone up dramatically. Why, you ask? Because Russian capitalists who are worried about economic troubles and devaluation of their rubles are scurrying to put money into a safe and mobile form, and large diamonds fit the bill. T-Bonds are also safe and mobile, at least compared to other assets. But that perception of safety can quickly erode once inflation rears its head again.

The up close on Monday for December TBonds means that bonds have made a marginally higher high. This has happened on a single day price bar that saw a big long tail, and a close high in the day’s range. We saw a similar condition back in March, circled at the left end of the chart, when a big-tailed reversal bar was followed briefly by a higher close on a similar daily bar. That did not stop bond prices from entering a 3-month downtrend, and it seems likely that we will see a similar outcome this time. The really peculiar event on Monday was gold strength in the face of a strong dollar. Gold was initially up nicely as the dollar sold off on Sunday night, right after the open of trading and after the announcement about Freddie and Fannie. But the dollar turned around sharply intraday, and closed up by more than 1%.

That hurt gold a bit, but December gold futures still managed to finish about unchanged at the end of the day session on Monday, which keeps that contract very near the same closing price level it has seen for the past 3 days.

It seems just a little suspicious to have gold prices held so tightly at a specific price level, especially in light of wild gyrations in the dollar. Such behavior implies that somebody is holding gold prices in place until certain conditions are met, after which it can be released like the spring-plunger on a pinball machine. A good example of this comes from the flashback chart at the bottom of page 3, which looks at gold prices back in 2001. The 3 circled areas show examples of gold prices being held in a tight range, and then finally being released to fly free at the point of someone’s choosing. The robust pop of the last one was helped by the 9/11 attacks, but the principle is the same. At some point soon, the fetters will be loosed, and gold will fly.

[ATTACH]563[/ATTACH]

The ECB sold some gold this week, but it's a drop in the liquidity bucket.

If there is a conspiracy, then why doesn't someone buy a bunch of gold futures and demand delivery? Why doesn't Russia go do that and f' the US hard?

[Guest]

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

Phirang -

It is not "conspiracy" - this is a misnomer and a misconception, to some extent anyway. It is in great part a "dysfunction" in the PM markets, due to long term, laxly regulated metals leasing. There is a long legacy of "metals hedging" which on it's flip side by definition is metals leasing from the counterparty, which all parties have necessarily indulged in as a standard component of price risk exposure in the precious metals. It has quite evidently become dysfunctional as you need only look at the 100 to 1 ratio of paper silver to actual silver trading to readily accept. This is by no means a controversial assertion these days. That metals leasing legacy has been cumulative, bringing us to the point where, when credit markets dysfunction begins to heighten, which then demands increasing currency abuse, the spillover bid into the PM markets begins to put a strain on that same accumulated dysfunctionality which has been brought about by long term unregulated metals leasing. The metals leasing has quietly created large distortions in the PM's over time. Distortion in the real price signals, in availability, in underlying risk exposures, etc. This is where the "conspiracy" lies, and it is not conspiracy in the conventional, dumbed down sense.

[phirang]

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

Phirang -

It is not "conspiracy" - this is a misnomer and a misconception, to some extent anyway. It is in great part a "dysfunction" in the PM markets, due to long term, laxly regulated metals leasing. There is a long legacy of "metals hedging" which on it's flip side by definition is metals leasing from the counterparty, which all parties have necessarily indulged in as a standard component of price risk exposure in the precious metals. It has quite evidently become dysfunctional as you need only look at the 100 to 1 ratio of paper silver to actual silver trading to readily accept. This is by no means a controversial assertion these days. That metals leasing legacy has been cumulative, bringing us to the point where, when credit markets dysfunction begins to heighten, which then demands increasing currency abuse, the spillover bid into the PM markets begins to put a strain on that same accumulated dysfunctionality which has been brought about by long term unregulated metals leasing. The metals leasing has quietly created large distortions in the PM's over time. Distortion in the real price signals, in availability, in underlying risk exposures, etc. This is where the "conspiracy" lies, and it is not conspiracy in the conventional, dumbed down sense.

So I ask again, why doesn't Russia buy up all the gold in COMEX and force the 10yr to 7% and crush the US Empire in one day?

[Guest]

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

So I ask again, why doesn't Russia buy up all the gold in COMEX and force the 10yr to 7% and crush the US Empire in one day?

Search me Phirang. Question seems a bit ingenuous coming from you. Quite apart from anything else, there are stringent limits on buy orders for physical delivery from the COMEX as you well know.

I don't see why any of a range of reasons either pro or con your observation will even much affect the "plausibility" of metals leasing that has long preceded this point. That leasing has been real, it's cumulative effects are real, and whatever astonishing opportunities for financial warfare are presented here are barely emerging at this point. I find the financial warfare thesis highly implausible in comparison to the reality of large scale metals leasing, which is quite a mundane reality.

Also I'd hazard a guess that hard headed global geo-political strategist would likely consider the financial warfare adventure you ask about as fraught with major imponderable secondary effects, which alone might give any nation pause before initiating such moves.

In short, I have no idea as to why Russia don't/won't/can't/shouldn't buy up all the gold on the COMEX to strike a deadly blow against the archenemy USA, or do/will/can/should do so. I doubt their ability to do such a thing today substantively (despite COMEX annual sales caps far smaller than any moves on these markets Russia could make) makes a bit of difference to plausibility of a precious metals leasing dysfunction having really existed.

This hardly seems like a robust argument to disprove the reality of dysfunctional metals leasing.

[phirang]

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

Search me Phirang. Question seems a bit ingenuous coming from you. Quite apart from anything else, there are stringent limits on buy orders for physical delivery from the COMEX as you well know.

I don't see why any of a range of reasons either pro or con your observation will even much affect the "plausibility" of metals leasing that has long preceded this point. That leasing has been real, it's cumulative effects are real, and whatever astonishing opportunities for financial warfare are presented here are barely emerging at this point. I find the financial warfare thesis highly implausible in comparison to the reality of large scale metals leasing, which is quite a mundane reality.

Also I'd hazard a guess that hard headed global geo-political strategist would likely consider the financial warfare adventure you ask about as fraught with major imponderable secondary effects, which alone might give any nation pause before initiating such moves.

In short, I have no idea as to why Russia don't/won't/can't/shouldn't buy up all the gold on the COMEX to strike a deadly blow against the archenemy USA, or do/will/can/should do so. I doubt their ability to do such a thing today substantively (despite COMEX annual sales caps far smaller than any moves on these markets Russia could make) makes a bit of difference to plausibility of a precious metals leasing dysfunction having really existed.

This hardly seems like a robust argument to disprove the reality of dysfunctional metals leasing.

Considering the impact of the Georgian conflict on Russia's ruble and economy, it'd perhaps countervail some of the damage.

Then again, does any oil-exporter want the US to stop consuming oil... naaaah!

[Guest]

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

Then again, does any oil-exporter want the US to stop consuming oil... naaaah!

As you observe, the relationships between nations have become so profoundly symbiotic that this sort of warfare has very high "collateral damage" for the instigator as well. Meantime, who would argue that fiat money and credit markets dysfunction is a mere illusion? That's like saying a barn door you are standing right next to is illusory. What is fiat money deathly afraid of in it's hour of weakness? It is most vulnerable to the "anti-fiat money". The observation is of course popularized to the point of being threadbare, and even the hallmark of dozens of hack "economic analyst" websites, but the essential insight is that this does not make it any less true. The plausibility of gold manipulation being real is rated as *high* in this environment - and the reasons should be as obvious as that barn door. It would be ingenuous to conclude in this environment that no real or urgent reasons existed for manipulation to not eventually appear. And if it's plausible that it appear eventually, how "eventually" is "eventually"?

[bart]

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

So I ask again, why doesn't Russia buy up all the gold in COMEX and force the 10yr to 7% and crush the US Empire in one day?

For the same reason that China and others don't - "blowback". The U.S. could have totally destroyed Russia in the late '90s too, and didn't. Also the Hunt Brothers tried a corner in 1980 and were defeated - that's not the way the "game" is played.

Also keep in mind that conspiracy also means a joining or acting together, as if by sinister design: a conspiracy of wind and tide that devastated coastal areas and does not have to mean "smoke filled back room".

And even though I strongly believe and have shown much proof that behind the scenes manipulation occurs, not only is it not 100% "evil" but I also characterize it as "control" too. A sudden jump of gold to $1200 or $1600 or $2000 or whatever in a very short period of time would not be a good thing overall.

[jk]

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

So I ask again, why doesn't Russia buy up all the gold in COMEX and force the 10yr to 7% and crush the US Empire in one day?

why take the risk when the "correlation of forces" is moving their way anyway?