Why are gold and silver tanking so rapidly?

[Guest]

Re: Why are gold and silver tanking so rapidly?

Moved To End Of Thread

[Guest]

Re: Why are gold and silver tanking so rapidly?

How many iTulipers holding precious metals are going to break into a cold sweat reading Robert Prechter's newest forecast attached below?

Faites vos jeux, Madames et Monsieurs, faites vos jeux! (Place your bets, ladies and gentlemen, place your bets!)

http://elliott.vo.llnwd.net/o18/pdf/0803EWTsilverxx.pdf

PRECHTER FORECAST FOR SILVER AND GOLD.jpg

[BlackVoid]

Re: Why are gold and silver tanking so rapidly?

Not me, LOL. Wow, this is really stupid. This guy should check out the gold price in the 1930s and the late seventies. He is totally clueless.

Asians love gold. Gold production has peaked in 2001. Gold coorelates quite strongly with oil. Oil production has peaked in 2005. Enough said.

As for the reason for this big commodity slide, I think EJ had the answer a few days ago when he wrote about global deleveraging. Traders are selling risky bets with high leverage. This is a buying opportunity in silver, gold and oil. There may be more drops though, I am really not sure this is the bottom. I am going to buy silver under $17, oil under $100 and gold under $900.

[BlackVoid]

Re: Why are gold and silver tanking so rapidly?

According to the above chart, the silver bull has 3-4 more years to run.

[Guest]

Re: Why are gold and silver tanking so rapidly?

What's wrong with this picture?

PRECHTER CHARTING WITHOUT ANY AGENDA.jpg

Another view of the same "commodity" - inflation adjusted:

bubbly_silver.png

Beware the exquisitely erudite economist / financial analyst with a preconceived agenda. Cranks can appear in many appealing guises.

[Guest]

Re: Why are gold and silver tanking so rapidly?

... Let's ask the customers of the customers of Rio, Vale or BHP about sub-prime, CDOs, Bear Stearns, recession, deflation, financial crisis. What are they going to say? Vale got 71 freakin' percent. No way the Chinese steelmakers aren't going to pass that on to their customers, and no way the customers don't know already know it. ... When was the last time we had all the OECD economies slowing down, led by the USA, while oil is at $100, copper at $3.60, lead at $1.20, and aluminum at $1.25. You deflationists and commodity bears out there: run a five year chart on these and then try to convince yourself we've had a commodity price "crash". ... Gentlemen (and ladies too!), start your engines. The fastest part of this little race will begin soon.

AKA: COGNITIVE DISSONANCE

[Rajiv]

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

GRG and NicolasD you might find this article by Tom Whipple in the Falls Church News Press interesting - "The Peak Oil Crisis: Stirrings in Ottawa" also reprinted in energybulletin.net

Based on recent experiences, some believe this week’s interest rate cuts soon will send oil to circa $120 a barrel.

Others are saying the winter heating oil demand is over and given the world’s precarious economic situation, oil will be down to $80 a barrel by summer. Both sides make plausible cases.

In the meantime, while waiting to see how this plays out, the question of just how much longer Canada will continue pouring so much of their national heritage into U.S. gas tanks has been in the news lately and deserves some consideration.

In recent years, Canada has been sending about 2.3 million barrels of oil each day, more than we get from the Persian Gulf, south of the border. The United States also gets about 3.4 trillion cubic feet a year of its natural gas from Canada. Many in the U.S. are expecting that increasing imports of synthetic oil extracted from Alberta tar sands will keep the U.S. functioning for many decades as other sources of oil decline.

If you are not that familiar with the Canadian energy situation, there are a few things you should know. Canada produces about 3.4 million barrels of real and synthetic (tar sands) oil each day and consumes about 2.36 million. So far, so good.

Canada is energy independent just like the Saudis, Russia, Mexico, and Venezuela. But I just told you something that doesn’t add up. If they are sending 2.3 million barrels per day to the U.S., they must be importing about 1.2 million barrels a day and indeed they are. Most of eastern Canada, including about half of Ontario, imports oil from abroad and is paying world prices. Of course, they are selling at world prices so the problem in the long run is not the balance of payments, but the availability. Add in some Canadian-style taxes and drivers north of the border are currently paying about $4.25 a gallon for gasoline unlike their fellow oil-exporter, Venezuela, where they are paying about 17 cents.

Another major factor in this equation is the NAFTA treaty with the U.S. which requires Canada to keep dividing its oil production with the U.S. in the current proportions, even if production is declining. Neither country may reduce the proportion of its energy exports to the other relative to the "total supply" of the exporting country during the prior 36-month period. Among other things this makes it tough to sell oil to China, should the Canadians be of a mind to do so.
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The big question in the next 10 years is what happens to NAFTA and the proportionality clause that sends so much Western Canadian oil down into the U.S. A big issue is that currently there is no pipeline bringing oil from Western to Eastern Canada. Trains are just not up to moving oil in the volumes it is consumed today.

If the calculations about the course of the world’s oil supply are correct, in two or three years prices are likely to increase markedly as demand simply outruns supply no matter the state of the world economy. When Canadian gasoline prices, currently a dollar or so a gallon higher than in the U.S., increase by several more dollars, political pressures on Ottawa will increase rapidly.

The real problems will come when shortages develop in Eastern Canada while oil is still being pumped into the U.S. At that point, a major paradigm shift in the U.S.-Canadian energy relationship is likely to occur.

[Guest]

Re: Why are gold and silver tanking so rapidly?

Somnambulant American government (the dunce Congress for starters) has a hellacious wake-up call speeding straight towards it. But they will sit there, flat-footed and dumbfounded, for several years after Canada gets to the point of repudiating it's NAFTA oil export quotas, before understanding the ugliness of their predicament.

The ignorance and stupidity in Congress and the US Senate in observing the criticality of this problem is stunning. It makes you want to grab each one of these idiot Congressmen by the belt and administer a series of vigorous kicks in the rear - perhaps in the form of a prolonged, vigorous dance - several times around the Capitol to drive the point home.

Repeat after us:

"Elected stewards of the nation are supposed to STEER THE SHIP, prior to smacking into a brick wall on energy supplies!"

[globaleconomicollaps]

Re: Why are gold and silver tanking so rapidly?

i cannot for the life of me remember what board i got this from, but i think it is terrific!

http://kereport.com/WeekendSpecial/WS032208-1.mp3

[Guest]

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

People who buy gold in large amounts of their portfolios are speculators. It is way too volatile (just look at the history - it's undeniable).

They're like the poker players who go all in because they have a hand that has a 60% chance of winning.

Sure, you *should* win, but their is a good chance that you could also face something called "gambler's ruin". If you bet more than 50% of your portfolio, there is a very good chance (40%) you're going to have a hard time coming back. Even if you bet 20-40% of your savings, there is a chance you could lose two times in a row. (about 1 in 6) .. Do you really want to gamble your life savings on a 1 in 6 chance?

And there might not be another 60% bet that'll come along to help you dig out of your hole.

Going all in, when you bet 5%, even 10% of your total portfolio makes sense. You can do that quite a few times, and it's pretty darn unlikely you'll face ruin before you go beneath your ability to come back on future bets.

Gold is simply far too volatile to bet a large chunk of your portfolio on.


As for 'it's the asset class of the future' ... You need to be pretty god dammned sure. You need proprietary models that are beyond the reach of the public if you plan to beat the market. You won't find advice on a public forum, because anything here is probably already priced in. People like Warren Buffet can beat the market, because they have access to data that is not available to folks like you and I (he gets stats from all his own companies, etc)

I'm not following the gambling stuff, but you're quite right that going "all in" is risky. The same could be said for any asset class, though. I'd sure like to hear opinions on other things to invest in that will perform well in a horrible economic environment with high inflation. Other commodities come to mind. But they seem just as prone to speculative forces.

The problem is, most of the other asset classes will perform very badly if the economy tanks and inflation skyrockets, while gold has done well in that environment. Today's gold price is based on a huge percentage of people thinking everything is just like 2001 or 1991. I don't happen to agree.

I like the aspects of gold as a hedge against bad news. Say we're wrong and the economy does fine. We lose. But how much? How fast? I wouldn't care a bit if the economy recovers quickly and I lose 50% in gold. I made almost 50% in just the last last year in it, so I'm still ok. Because things turned out ok, my and my wife's incomes will remain solid, inflation low, and we'll be fine. This is a LOSE-WIN.

If I'm right and gold continues its rise due to fundamental factors and the economy recovers quickly or doesn't go into depression, and I sell above $2,000 but below any "crash", it's WIN WIN.

But IF I'm right and the economy tanks badly, inflation rises rapidly, and we enter a depression-like environment, and I'm holding the same mix of treasuries, index stock funds, a few bonds maybe, and one or both of us is unemployed, it's LOSE LOSE. I'm much broker, unemployed, and have nothing to offset it.

Of course there are combinations of allocations involved, but to me the arguments for gold rising are much stronger than for stocks or bonds or treasuries even matching inflation. I can limit risk being 'safe' but in an inflationary environment that can be a risky move it itself.

I also found the research on the stock market history interesting. We came of age in the golden era of stocks. So I'm trained to think the dollar cost averaging march is the way to get wealthy. But before that, the entire decade of the 70's was a bear market for stocks. Toss in the demographics of baby boomers starting to draw on their stocks in retirement, (and broke unemployed people cashing in 401Ks and IRAs) and it's not a sure fire winner either. Especially for someone with my time horizon.

But the point here is that gold has value as long as people agree it does. If we could get 6 billion people to agree it's silly, its value would go back down to its value for jewelry and industrial use. But it had value for more than that 5,000 years ago. And they weren't loading Spanish galleons full of sand dollars 500 years ago. And except for a 20 year period in recent times it's been pretty good at storing value at the very least. I'm a history buff, and one thing I've learned is that our society rarely looks enough at history, seeing the world only through our own short period on earth.

But the same "it's worth what we agree it is" concept holds for the dollar. And unlike gold, the market seems to have more faith in gold now than dollars, which have been in a pretty steady march down in value against most other currencies and asset classes. And it takes as much effort to print/create $1 billion of fiat money as it does $1. The same can't be said for gold. With over $50 trillion in unfunded obligations, and a wave of socialism approaching, my bet is that our govn't will print far more dollars than miners will mine gold in the near future.

I think it comes down to if one thinks this is a "typical" economic cycle event or something very much more serious. My common sense gut test tells me that we as a nation spend so much more than we earn that a huge period of reckoning is ahead.

[zoog]

Re: Why are gold and silver tanking so rapidly?

My my, gold drops about 8% (so far) and people start freaking out. I'll admit, the suddenness was a head-turner. Curious to see what happens in the next week or two.

Reading through this thread and Who is shorting Gold?, these ideas about unknown überpowerful entities manipulating the market... it's all a bit much. I like conspiracy theories as much as the next guy, but I'm reluctant to believe in them.

Besides the puppetmaster theories, there are some good thoughts here. Gold has been cranking up at an unsustainable pace... various posters here have been talking about a correction for quite a while now. Of course, none of us knew when it would happen, and inevitably it comes when you least expect it, but beyond the timing, no one should be surprised.

After reading everyone's posts and some links to external articles and such, my conclusion is that this sudden drop is the result of a combination of factors.

Hedge funds and other large players got into gold and saw an opportunity to get out at profit. Some large players likely were using leverage and thus can have a fairly large effect on the price of gold with (relatively) small sums of money. That's the whole concept of the basic principle of a lever.

Apparently Bear Sterns had a large long gold position that is being sold off... well of course this affects the short-term supply/demand equation. Perhaps the CB's sold some of their gold last week as well, or at least claimed they were going to.

Even the seasonal factors play a part... gold often drops lower in mid-March before heading back up into May. Then there's just the herd mentality. Once something starts falling in price, especially if it's quick, people panic and bail out, dropping the price even more.

I don't believe that anyone, central banks included, has the resources to singlehandedly drop gold 20%. But if anyone was inclined to attempt to manipulate the price of gold, they'd surely be smart enough to coordinate their efforts with these other factors to amplify whatever effect they might have on their own. Again, leverage. I don't think it takes a gazillion dollars to move the gold market 8% if your lever bar is big enough.

[GRG55]

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

GRG and NicolasD you might find this article by Tom Whipple in the Falls Church News Press interesting - "The Peak Oil Crisis: Stirrings in Ottawa" also reprinted in energybulletin.net

I've been waiting for someone to point out that some day Canada is going to do a "reverse softwood lumber" to the US of eh...;)

[FRED]

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

I've been waiting for someone to point out that some day Canada is going to do a "reverse softwood lumber" to the US of eh...;)

"Reverse softwood lumber"? Hey, wood doesn't grow on trees.

Speaking of running out of oil:

Mexican oil exports: start saying adios!
March 19, 2008 (Energy Bulletin)

Author Martin Payne writes: Cantarell Field is a "poster child" for Peak Oil, and our mutual concerns about same. In my opinion, Cantarell/Mexico may be one of the most poignant, and easiest to grasp examples of what Peak Oil is all about. And, I think a drop in exports from Mexico may soon significantly impact the US.

I have created a "balance" of Mexican oil production, consumption, imports and exports, using data from a variety of sources. A discussion of the data follows. more...

[metalman]

Re: Why are gold and silver tanking so rapidly?

dollar tanking on lowest usa consumer confidence number in 20 years.

gold back up to $929, silver $17.50.

so much for the precious metals crash and deflation.

thank you itulip for the courage of a conviction.

[Sapiens]

Re: Why are gold and silver tanking so rapidly?

dollar tanking on lowest usa consumer confidence number in 20 years.

gold back up to $929, silver $17.50.

so much for the precious metals crash and deflation.

thank you itulip for the courage of a conviction.

Don't jump the gun, they are not done with us yet. "D" day is yet to come.