gold is getting CORRECTED!!

[grapejelly]

Taken out to the woodshed...about time!

[WildspitzE]

Re: gold is getting CORRECTED!!

Check out Silver. Interesting divergence.

[grapejelly]

Re: gold is getting CORRECTED!!

Check out Silver. Interesting divergence.

silver hasn't participated so hyperbolically as gold, and hasn't (yet?) corrected the same either...this indicates that gold's runup is just beginning. Becuase at the end of the runup, silver seems to shoot up quickly, hyperbolically...and that hasn't happened yet which is a signal...

[Mashuri]

Re: gold is getting CORRECTED!!

Getting ready to add to my position.

[Raz]

Re: gold is getting CORRECTED!!

I can't believe you guys don't trust Ben S. Bernanke. Why just yesterday I heard him tell Dodd's committee that the Fed would not monetize the Treasury's debt so they best get the deficit under control.

And of course you must believe that no later than March he's going to end the purchase of mortgages - no matter what happens to interest rates.:rolleyes: I'm sure he knows he must protect the dollar.

So why are you buying more of that useless, barbaric relic? It earns no interest and you can't eat it.

[goadam1]

Re: gold is getting CORRECTED!!

I can't believe you guys don't trust Ben S. Bernanke. Why just yesterday I heard him tell Dodd's committee that the Fed would not monetize the Treasury's debt so they best get the deficit under control.

And of course you must believe that no later than March he's going to end the purchase of mortgages - no matter what happens to interest rates.:rolleyes: I'm sure he knows he must protect the dollar.

So why are you buying more of that useless, barbaric relic? It earns no interest and you can't eat it.

But what can you do? Gold is a hot paper trade. It's one thing to take cash and buy coins and save them against inflation and another to have people and bots trading gld or gtu while the gold vix flashes on cnbc.

[hayekvindicated]

Re: gold is getting CORRECTED!!

I can't believe you guys don't trust Ben S. Bernanke. Why just yesterday I heard him tell Dodd's committee that the Fed would not monetize the Treasury's debt so they best get the deficit under control.

And of course you must believe that no later than March he's going to end the purchase of mortgages - no matter what happens to interest rates.:rolleyes: I'm sure he knows he must protect the dollar.

So why are you buying more of that useless, barbaric relic? It earns no interest and you can't eat it.

I blame my genes. its that damned Indian obsession with the barbarous relic. ;)

[unlucky]

Re: gold is getting CORRECTED!!

I can't believe you guys don't trust Ben S. Bernanke. Why just yesterday I heard him tell Dodd's committee that the Fed would not monetize the Treasury's debt so they best get the deficit under control.

And of course you must believe that no later than March he's going to end the purchase of mortgages - no matter what happens to interest rates.:rolleyes: I'm sure he knows he must protect the dollar.

So why are you buying more of that useless, barbaric relic? It earns no interest and you can't eat it.

I think folks holding gold are in for a nerve-wracking time ahead. If today's news on jobs holds good, then Bernanke is on schedule to raise rates. Investors in "speculative assets" will be on the run for the time being. And there's no sign yet of the Great Inflation.

Personally I want to hold on to gold until there's evidence that the major economies can grow without dependence on excessive debt growth. I don't see any sign of that yet. But this is a time to check the validity of the investment thesis - and gird your loins. I don't think the market is going to be kind to gold bugs until major new bad news arrives.

Not that I'm hoping for bad news. Merry xmas to the 100,000 americans who didn't lose their jobs this month (assuming they are real people ).

[grapejelly]

Re: gold is getting CORRECTED!!

I think folks holding gold are in for a nerve-wracking time ahead. If today's news on jobs holds good, then Bernanke is on schedule to raise rates. Investors in "speculative assets" will be on the run for the time being. And there's no sign yet of the Great Inflation.

Personally I want to hold on to gold until there's evidence that the major economies can grow without dependence on excessive debt growth. I don't see any sign of that yet. But this is a time to check the validity of the investment thesis - and gird your loins. I don't think the market is going to be kind to gold bugs until major new bad news arrives.

Not that I'm hoping for bad news. Merry xmas to the 100,000 americans who didn't lose their jobs this month (assuming they are real people ).

Gold can do very well in a raising rates environment. The key is whether real rates are negative or positive. They are negative right now. They can go up and still be negative. Gold will do very, very well in that environment.

I can't see where real rates will become positive any time soon, can you?

[Rajiv]

Re: gold is getting CORRECTED!!

Some of the best advice on owning gold, that I have seen at the Automatic Earth - A Golden Double-Edged Sword

Given the fervour over gold, and the fact that our view of it differs from that of many other commentators, it seems fitting to review our position on gold ownership. Firstly, the goldbugs are right that physical gold is real money (unlike paper gold, which is just another Ponzi scheme). It has held its value for thousands of years and will continue to do so over the long term. However, that does not mean that gold prices cannot fall or that purchasing gold now is the right way for everyone to preserve capital. Timing is critical, and people's circumstances are different. Those circumstances determine their freedom of action, both now and in the future.

Gold has recently seen a sharp speculative spike on fear as to the future of fiat currencies. The price shot up to over $1200/ oz, with a rise (nearly vertical recently) of over $300/oz in a matter of months. Sentiment has reached an extreme of 97% gold bulls, leaving very few additional people to drive the existing trend further. It has become almost universal received wisdom that gold can only rise in price (and the US dollar continue to fall) given current circumstances. In other words, herding behaviour has taken the trend just about as far as it can for the time being. (Of course, denominated in other currencies, the move has looked quite different.)

Commodity tops, like equity bottoms, are often sharp, as fear is an acute emotion. The reversal, when it comes, is also typically a sharp move. While the longer term future of fiat currencies is indeed bleak, that should be tomorrow's fear, not today's. When fear gets ahead of itself, it sets the stage for a pronged move in the opposite direction. That happened with equities in March and is what I would argue is about to happen to gold.

What begins as a speculative reversal is likely to be extended by the effects of deflation during the next stage of the decline, which in my view is rapidly approaching. Deflation knocks the price support out from under almost everything, as people sell whatever they can in order to raise scarce cash. 'Whatever they can' is the operative phrase. They won't be able to sell what they would like to, as no one will want what they would like to off-load. They will have to sell things of enduring value, such as precious metals. Those who are forced to sell at the wrong time will end up selling a valuable asset at a bargain basement price.

Buyers for most things will be few and far between, as those who still have cash will be unwilling to part with it. The vast majority of the effective money supply is credit, and credit is evaporating. As that happens, it will become increasingly apparent how little actual cash there is, and how important access to it will be. Rising unemployment and cuts in benefits will make access to cash more and more problematic. The value of cash, relative to available goods and services, will rise. While fiat currency has no long term future, cash will be king while deflation lasts. Liquidity will mean flexibility in an uncertain world, and that will translate into opportunity at the most critical time in all our lives.

Internationally, the US dollar should temporarily be the biggest beneficiary of a substantial flight to safety. The dollar should therefore rise not only in relation to goods and services domestically, but also in relation to other currencies. Those who hold dollars can therefore expect to do very well, provided, that is, that they manage not to lose them to a systemic banking crisis.

Those who buy gold now will be paying a premium price for it compared to what they might pay once deflation has exerted its effects. They might be buying at such a premium only to have to turn around and sell at a loss if they have not addressed their situation from a big-picture perspective. Holding debt, or not having sufficient liquidity in reserve, are the main reasons one could be forced to sell at a bad time. People need to deal with those circumstances before they consider buying gold. Some will be able to deal with the higher priority factors and still buy gold as an insurance policy, but others will not. The fewer one's resources, the harder the choices one will have to make, as it simply will not be possible to do everything. (Pooling resources with others will get you further down the list of possible preparations.)

Liquidity will be vital to cover living expenses in the absence of credit, especially as we move further towards a pay-as-you-go future. Eliminating debt is important given that servicing debt will become increasingly difficult. The ability to service debt depends on both access to scarce cash and interest rates. Interest rates on private debt are likely to diverge sharply from the prevailing rate on short term government debt. In other words, credit spreads will widen dramatically. While the short term government rate will be very low, at least in nominal terms, private debt will attract a much greater risk premium as deflation accelerates. All rates will be higher in real terms than in nominal terms, as the real rate will be the nominal rate minus negative inflation. This factor will keep central bankers mired in the liquidity trap (pushing on a string), and will magnify the burden of debt for everyone else.

If you hold too little liquidity or are in debt, you could easily be forced to sell any precious metals you hold at the worst possible time. In general terms, I would not suggest holding precious metals unless you are reasonably confident that you will not need to rely on the wealth they represent for many years. If you can hold metals for the long term, they will be very valuable indeed. Gold should hold its value better than silver, as a greater proportion of silver's value is related to its industrial uses, and those attributes will be undervalued during a depression.

I would expect gold to bottom early in this depression, but I doubt if it will be possible for ordinary people to buy it at its nadir. During the last depression, gold was confiscated without compensation, and I think it likely that the same thing will happen again. A ban on owning gold would not stop you from owning it, but it would make ownership far riskier, and would make trading it for anything else you might need a very dangerous business indeed. You would have to go through 'informal channels', where these exist, and trying to do that with something representing a very concentrated source of value is generally unwise, to put it mildly.

Gold ownership is very much a double-edged sword. Personally, I think it far more important for those who have surplus resources to put those resources into obtaining as much control as possible over the essentials of their own existence. There are many hard assets one could buy now that may not be available later - assets that you could use to feed yourself, keep yourself warm or provided clean water. This is a much more important use for your wealth than owning something you intend to bury in a hole in the ground and sit on. Gold ownership really only makes sense for those who are wealthy enough not to have to make hard choices between competing priorities. If you can afford to do it all without making compromises, then gold is a good insurance policy. If you are not in such a fortunate position, that kind of insurance may be a luxury you can't afford.

[BlackVoid]

Re: gold is getting CORRECTED!!

Automatic Earth: they are deflationists. :confused:

Gold is an insurance policy, not just for the wealthy, but everyone. It is the only easily transportable, universally recognized and timeless form of money.

If you invest in other assets - they may go to zero in value, may be confiscated by the government, you may have to leave them behind due to political turmoil, etc. You should have some gold as insurance no matter how much money you have.

[WDCRob]

Re: gold is getting CORRECTED!!

Yeah... this is brutal. I think it's fallen all the way back to where it was before Thanksgiving, ten days ago. ;)

[Rajiv]

Re: gold is getting CORRECTED!!

From my above quote:

I think it far more important for those who have surplus resources to put those resources into obtaining as much control as possible over the essentials of their own existence. There are many hard assets one could buy now that may not be available later - assets that you could use to feed yourself, keep yourself warm or provided clean water. This is a much more important use for your wealth than owning something you intend to bury in a hole in the ground and sit on. Gold ownership really only makes sense for those who are wealthy enough not to have to make hard choices between competing priorities. If you can afford to do it all without making compromises, then gold is a good insurance policy. If you are not in such a fortunate position, that kind of insurance may be a luxury you can't afford.

An Example of an asset that I would prefer over gold of the same value.

If I am renting, or have a mortgage that I cannot pay off without a steady income stream - a used RV or small mobile home and a long term agreement with somebody to park it. (worth much more than an equivalent amount of gold at current prices)

Gold may have historically been money, and in some sense is still money. But it is not money that is in general circulation, and depends right now upon a volatile paper gold market that can be manipulated.

From Marketskeptics - Gold Market Reaching The Breaking Point

The gold market is an accident waiting to happen

Basically, the gold market operates on a fractional reserve basis. On average there are several claims of ownership on each gold bar conforming to London Good Delivery (LGD) standard on the "pool" of gold which acts as liquidity for the massive OTC gold trade based in London. Similarly, there are several claims of ownership on the gold bars in Comex wherehouses. If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it. Market failure isn't a risk, it is a certainty. The unregulated gold market is an accident waiting to happen.

Hence the need to be able to hold physical gold over the long term -- you cannot use it for short term needs!

[jtabeb]

Re: gold is getting CORRECTED!!

Automatic Earth: they are deflationists. :confused:

Gold is an insurance policy, not just for the wealthy, but everyone. It is the only easily transportable, universally recognized and timeless form of money.

If you invest in other assets - they may go to zero in value, may be confiscated by the government, you may have to leave them behind due to political turmoil, etc. You should have some gold as insurance no matter how much money you have.

And they TOTALLY ignore a currency crisis and they forget What Michael hudson has already shown, debts that can't be repaid, won't be.

Who in their right mind is going to liquidate a precious metals holding to pay let's say a uncollateralized loan like a credit card?

The author ASSUMES that people would sell gold to pay credit card debt for example, I would assume the opposite. As things get worse and people see that the system is one big game rigged against them, who is really going to play by the rules, when all the big players are breaking them left and right.

I think this is already happening, people are telling themselves, Fuck-it! Sure I'll take that credit card or that mortgage with the corresponding $8000 tax credit, put no money down and then default and live RENT FREE for 18 months till they can kick me out.

People know the system is failing and observe that the Elites are already changing the rules for the umpteenth time, which the elites will then break again when the time comes. The masses see this behavior and are duplicating it at their level.

It's one thing for the elites to game the system, but when all the J6P's realize that they can game the system too (on a smaller scale but with a much larger impact due to shear numbers) then the system fails.

Bottom line, when EVERYONE knows the system is a Joke, there is no reason to even attempt o play by the rules anymore and then the old system collapses.

The analysis above misses this entirely.

(And the fact that the gold market is in defaco backwardation).

I wouldn't plan on this being anything more than the spike down followed by immediate recovery to a new high that we saw two weeks ago.

(And here is WHY)..

http://jessescrossroadscafe.blogspot...-physical.html




All deliveries CASH SETTLED, NO PHYSICAL came out of COMEX last month. What do YOU think that means? (I have a pretty good idea, myself)

The criticality of the financial and monetary system IS FAR GREATER than they allow for.

Holding CASH in the event of currency crisis is ABSOLUTE SUICIDE. (Notice how they fail to mention that tidy little tidbit) .

[grapejelly]

Re: gold is getting CORRECTED!!

And they TOTALLY ignore a currency crisis and they forget What Michael hudson has already shown, debts that can't be repaid, won't be.

Who in their right mind is going to liquidate a precious metals holding to pay let's say a uncollateralized loan like a credit card?

The author ASSUMES that people would sell gold to pay credit card debt for example, I would assume the opposite. As things get worse and people see that the system is one big game rigged against them, who is really going to play by the rules, when all the big players are breaking them left and right.

I think this is already happening, people are telling themselves, Fuck-it! Sure I'll take that credit card or that mortgage with the corresponding $8000 tax credit, put no money down and then default and live RENT FREE for 18 months till they can kick me out.

People know the system is failing and observe that the Elites are already changing the rules for the umpteenth time, which the elites will then break again when the time comes. The masses see this behavior and are duplicating it at their level.

It's one thing for the elites to game the system, but when all the J6P's realize that they can game the system too (on a smaller scale but with a much larger impact due to shear numbers) then the system fails.

Bottom line, when EVERYONE knows the system is a Joke, there is no reason to even attempt o play by the rules anymore and then the old system collapses.

The analysis above misses this entirely.

(And the fact that the gold market is in defaco backwardation).

I wouldn't plan on this being anything more than the spike down followed by immediate recovery to a new high that we saw two weeks ago.

(And here is WHY)..

http://jessescrossroadscafe.blogspot...-physical.html




All deliveries CASH SETTLED, NO PHYSICAL came out of COMEX last month. What do YOU think that means? (I have a pretty good idea, myself)

The criticality of the financial and monetary system IS FAR GREATER than they allow for.

Holding CASH in the event of currency crisis is ABSOLUTE SUICIDE. (Notice how they fail to mention that tidy little tidbit) .

The boobs-geoisie are slowly catching on.

Paper's credibility is slowly falling. This takes many, many years. We have probably had the high point in paper's credibility in 2005 or so.

Buy 'n' Hold stocks hasn't worked for 10 years.

People are desperately SELLING their few gold items for 11% to 40% of the precious metal content.

But slowly they will be catching on.

That is why gold has years to run and I think will astonish us all and there will be this flight into tangibles that will catch the public, maybe in 5 or 10 years, maybe next year.

I agree with you, traditional respect for paying back one's obligations has fallen. Paying debts is old fashioned when everyone is defaulting. This erosion of traditional values is one more casualty of fiat banking.