Why are gold and silver tanking so rapidly?

[GRG55]

Re: Another question: Why is gold and silver tanking so rapidely?

you point to something important. it isn't ka if equities are rising, which they are at this moment anyway.

Precisely.

[jk]

Re: Another question: Why is gold and silver tanking so rapidely?

Precisely.

so, grg, what is it? the dollar is rising along with equities. commodities are falling along with gold. is the market saying that all the extra demand from ems [for commodities] isn't really there? or that agricultural commodities are going to become much more plentiful? or that the antidollar trade was just a bad dream?

[Andreuccio]

Re: Another question: Why is gold and silver tanking so rapidely?

or that the antidollar trade was just a bad dream?

The Yen still seems to be holding it's own.

[GRG55]

Re: Another question: Why is gold and silver tanking so rapidely?

Got anything more specific? Saying that "the Dollar is a "share" in USA, Inc" is not quite the same thing as saying the dollar is backed by demand from debtors who are short it...

Good thing I am not a monk, taking oaths in front of God. I once took a vow here on iTulip that I would never, ever take on the Shadow Fed Chairman again. Maybe I am just a slow learner (and why to I get the feeling I am going to regret "rising to the bait" - JN's descriptor)

My dear Finster: Your debtor demand argument has one gaping hole:

...They assume that gold or other tangible backing is the only possible backing. But the USD is backed by something better than gold. It is backed by the fact that millions - even billions - of people owe the stuff. This means they are willing to trade their labor, accumulated assets, whatever, in order to get dollars. They have to because the owe them. The USD is backed not merely by gold, but by human time and effort...

Your last sentence above is the most correct of the lot. There are millions upon millions of people on earth that are not directly and personally indebted, and...surprise...they also willingly trade their labour, and output for US Dollars. Every single day.

The US Dollar (FRN) is a claim (or share of) the current balance sheet of the United States economy. US T-bills and T-bonds are a claim on the expected future output (future income statement) of the United States economy.

Using Buffett's weighing machine/voting machine analogy, in the short run interest rate differentials and similar factors may influence relative (fiat)currency valuations. In the long run, I am sure you will agree, the relative value of a nation's fiat currency (against other fiat, and against hard) is determined by its economic stature, and that economy's ability to support and sustain such things as its military power, social stability, growth rate, legal system, foreign policy, etc.

Ask someone who is a citizen of, say Singapore as one example, where can they turn to, and which nation will come to their aid in the event of aggression from one of their neighbours? Singapore exists ONLY because the USA is what it is.

If anything, the ideas are almost polar opposites. The vague "share in USA, Inc" formulation presumably addresses why the dollar has been as weak as it is (and gold prices as high as they've been). In contrast, the much more concrete "debtor demand" notion explains why the dollar isn't weaker than it is (and gold prices higher than they are).

The US Dollar has been falling in recent years for a wide range of reasons, not just money printing and sub-prime. The globalization of trade, the creation of the EU, increasing economic interdependence, all served to reduce the world's dependence on the USA for many things compared to 50 years ago, including manufactured goods, markets, military protection.
The Dollar is as strong as it is because the world still needs USA, Inc. The Dollar is not as strong (sought after) as it used to be because the world doesn't need USA, Inc. quite as much as it used to a decade or five ago.

[c1ue]

Re: Another question: Why is gold and silver tanking so rapidely?

GRG,

Why do you say Singapore is protected by the US?

I've always believed Singapore was bought out by bamboo network money as an overseas Chinese enclave.

Furthermore Singapore's neighbors is singular: Malaysia.

Sure, Malaysia could charge into Singapore and take it over, but then all of the capital accumulated there would vanish. What would be the point?

Just as invading Monaco or Luxembourg is completely pointless unless France/Germany/some other EU country wants to eliminate some tax haven once and for all - even so probably not worth the expense.

[touchring]

Re: Another question: Why is gold and silver tanking so rapidely?

Furthermore Singapore's neighbors is singular: Malaysia.

Sure, Malaysia could charge into Singapore and take it over, but then all of the capital accumulated there would vanish. What would be the point?

Not so simple, Malaysia itself is controlled by the chinese, although the show is run by indigenious, the real power behind the scene are the malaysian chinese.

The main threat in the region is indonesia, which is predominantly indigenious.

[Honzajs119]

Re: Another question: Why is gold and silver tanking so rapidely?

Just to start a discussion --all opinions welcome

yesterday were expiring options.

Just idea:

The purpose of this week growth was to shake down owners of bank puts and gold longs... Look into the past, I remember something similar from 2007.

If it is true, gold will grow, stocks will decline next week...

[phirang]

Re: Another question: Why is gold and silver tanking so rapidely?

I have to think that when Cheney goes o'er to the oil states to discuss "security" and "iran", he's really going around with his hat in one hand and a knife in the other(i.e. a coup)... we're running a protection racket(i dont object, btw), but i think the dollar is rising not only because of an unwinding of goofy commodity bets, but also a realization that there's more blood to squeeze from the gulf states' to boost the USD.

[friendly_jacek]

Re: Another question: Why is gold and silver tanking so rapidely?

The purpose of this week growth was to shake down owners of bank puts and gold longs... Look into the past, I remember something similar from 2007.

If it is true, gold will grow, stocks will decline next week...

I would restate it that Friday and some of this week rally was a short covering by day traders. However, if "week traders" or "month traders" decide to cover shorts or are stopped out from their short positions, we will see a multi-week or multi-month rally.

Similarly, if people who bought gold at $1000+ based on headlines featuring gold (old contrarian sign) start panic selling, the gold will go down more.

In other words, if 9 of 10 people bet that markets go down and max out on their short positions, the market will not go down, as there will not be enough suckers to sell more stock. Furthermore, the 9 short sellers will have to cover the shorts, producing a big rally. BTW, the ratio between smart money and dumb money is 15/85.

This is how markets work short term, it has nothing to do with logic, expectations, macroeconomics, or even market manipulations (well, there is maybe a little of that). This is why bear markets are punctuated by powerful bear rallies. We had that in april 01, oct 01, and oct 02. These bear rallies were very steep, even more so than declines. Now, the technicals and sentiments set us at the dawn of such a rally. Don't underestimate it.

[c1ue]

Re: Another question: Why is gold and silver tanking so rapidely?

Not so simple, Malaysia itself is controlled by the chinese, although the show is run by indigenious, the real power behind the scene are the malaysian chinese.

Touchring,

Do you have some type of evidence for this statement?

Also, which Chinese are you referring to? Mainlanders, Taiwanese, ex-patriate Hong Kong, bamboo network-ers, etc

Certainly I'd agree Singapore and its elite have some influence in Malaysia, but to say that it is controlled by Chinese seems a bit strong.

[touchring]

Re: Another question: Why is gold and silver tanking so rapidely?

Touchring,

Do you have some type of evidence for this statement?

Also, which Chinese are you referring to? Mainlanders, Taiwanese, ex-patriate Hong Kong, bamboo network-ers, etc

Certainly I'd agree Singapore and its elite have some influence in Malaysia, but to say that it is controlled by Chinese seems a bit strong.

By chinese i mean local chinese living in malaysia.

The chinese population in Malaysia is very big. The economic capital city KL and next most important city Penang are predominantly chinese (btw, these 2 states fell to the opposition). They control most of the economy and are also the backers behind "privileged" indigenious businessmen (that get most of their business from the government) and malay politicians.

The connections between the ruling malays and the chinese businessmen are very strong. The ruling UMNO malay politicians get to rule (as opposed to the more fundamentalist Malays from the PAS party), while the chinese businessmen support them financially and in return their businesses are protected by the country laws.

On the electoral front, the Chinese voters can also affect which party wins the election in quite a few states.

http://en.wikipedia.org/wiki/Malaysia

Malaysia's population comprises many ethnic groups, with the Malays making up the majority, close to 62% of the population. By constitutional definition, Malays are Muslim who practice Malay norms and culture. Therefore, technically, a Muslim of any race who practices Malay norms and culture can be considered a Malay and have equal rights when it comes to Malay rights as stated in the constitution. About 24% of the population are Malaysians of Chinese descent. Malaysians of Indian descent comprise about 8% of the population. About 90% of the Indian community are Tamils but various other groups are also present, including Malayalis, Punjabis and Gujaratis. There are also various non-Malay peoples who are designated as indigenous, mostly in East Malaysia. These make up about 7% of the population.^{[citation needed]}

[GRG55]

Re: Another question: Why is gold and silver tanking so rapidely?

I have to think that when Cheney goes o'er to the oil states to discuss "security" and "iran", he's really going around with his hat in one hand and a knife in the other(i.e. a coup)... we're running a protection racket(i dont object, btw), but i think the dollar is rising not only because of an unwinding of goofy commodity bets, but also a realization that there's more blood to squeeze from the gulf states' to boost the USD.

Sorry for the ignorance, but exactly what is the mechanism that the Gulf States, already choking on US Dollars, employ to "boost the USD"?

[Spartacus]

THEORY making the rounds - Bear Stearns was LONG, LEVERAGED in Gold

and this long position's being unwound for cash to meet the losing positions.

The other markets are so small and usually in sync with Gold movements, they're acting in sympathy but even more exaggerated than Gold.

I re-emphasize, it's a THEORY.

[blazespinnaker]

Re: THEORY making the rounds - Bear Stearns was LONG, LEVERAGED in Gold

and this long position's being unwound for cash to meet the losing positions.

The other markets are so small and usually in sync with Gold movements, they're acting in sympathy but even more exaggerated than Gold.

I re-emphasize, it's a THEORY.

Oil and commodities are hardly small markets. If anything, gold is moving in sympathy with them.

No, Gold is merely a sympton of what's going on.

The worldwide market of Gold is tiny compared to the rest of the world. It's one reason why it's so massively volatile. Anyone thinking that Gold is the correct place for capital preservation is wrong, whether gold is going up or down. Volatile markets are not where you park your cash when you want it to be safe.

[bart]

Re: Another question: Why is gold and silver tanking so rapidely?

...
But to give primacy to this latter force and completely forget about the former is grevious error. The reality is a tug of war, and each side gets its moments of advantage.