Who is shorting Gold?

[Sapiens]

Re: Who is shorting Gold?

Sapiens as you correctly note, "who has the deep pockets at this stage to hammer gold down to $750?". The only parties that have the deep pockets sufficient to take the kind of "expense" this involves are the CB's, who were engaged in the same faltering exercises already when gold passed $700 on the way up. The size of the short positions are not dramatically larger in the past week than they were last August during the last swoon, nor were the short positions dramatically altered at any step of the way up the past $300 in the POG. The whole "they suddenly want" thing is stale bunk.

Quick question - why do you never, ever propose a thesis which does not include some component of conspiracy? Not ever once it seems - I am straining to recall one single "scoop" post of yours that did not refer to hidden collusions. Do all those other theses (the humdrum ones without conspiracy components, like severely overbought market correction) merely seem dull and stale to you?

Also, all the agonizing as to why the gold price is "collapsing" is reminiscent of an AA meeting, where people "confess" their darkest fears and feelings of vulnerability in efforts to expiate the evil omens of misfortune. It's just a freaking correction. An egregiously overdue correction. Plain old exhaustion of a parabolic up-move. Where have we seen these repeat over and over again? In the metals markets. Suddenly the correction is a piece of conspiracy news? This stuff gets really tired.

There are some large shorts and hedges playing the correction for a buck, but they are the same damn shorts that have been playing the parabolic up moves and resulting corrections for years now. "who is shorting gold" is just a resuscitation of the same news that was non-news when the price of gold was soaring. You post some great stuff. Really. But your stature is diminished every time you can't resist going after every last scrap of "conspiracy news" to be found. Even iTulip's editors seem to be toying with the idea it's some startlingly new collusion going on among the short community. Could it be rather that this is plain old "momentum opportunism" in the markets!? Profiteers on the way up. Profiteers on the way down.

Lukester,

Take what I post with a grain of salt. You are also welcome to ignore my posts.

Now, care to explain to me why some hedge funds are naked-short selling Gold to honor their redemptions?

Why would they do that? If the standard answer is: We are bust either way, might as well live another day.

Do you call it a conspiracy if those that are doing it are just serving their own interest without express acknowledgement?

You may call it a conspiracy, I just call it a trend serving self interest. Label me whatever you want, I will just go about my own business, since it is none of my concern what your opinions are.

Adios,

-Sapiens

[friendly_jacek]

Re: Who is shorting Gold?

It's not just gold, but oil that's taking a hit. Moving the price of oil is no trivial thing.

It's not just gold and oil. ALL tradeable commodities and agriculture funds as well as resources equities are down big time and all at once. This is a very unusual pattern of trading.

I found this tidbit dated yesterday:
"Deleveraging continues. All the big brokers know that the surest way to avoid a Bear Stearns problem is to make sure they aren't over exposed to hedge funds. Supposedly there have been several commodities-oriented funds which are selling today. Gold getting crushed. Haven't heard anything about equity-oriented funds but that might be part of what's going on today as well."

This looks like a mini Ka in commodities, but lower commodities are better for equities, so the new equity rally is born.

[jimmygu3]

Re: Who is shorting Gold?

This is just a reaction to the fed being hawkish when the market was betting dovish.

A 'hawkish' 75 basis point cut in the Fed funds rate? I guess it's all relative. Maybe Bernanke's this kind of hawk:

I sometimes wonder if abolishing the federal reserve is a good idea.

Unfortunateley, the problem with that, is what do you use as a currency to replace it? I really really don't think gold is the answer any more than sand dollars is.

I think the solution is dollar unions like the EU and then use inflation targeting. When you have a wide mixture of economies, it's hard to manipulate the funds rate to tweak things, as different parts will be impacted in negative ways. Generally the best bet is just to leave it alone and be very conservative.

It would take a hell of a crisis to get Uncle Sam to give up control of the printing press. Any future fiat currency will be subject to the same pitfalls as the dollar unless it is pegged to something tangible. But then I guess it wouldn't be fiat.

[dbarberic]

Re: Who is shorting Gold?

This market is nuts...

Silver is under $17, while 19 silver dealers are reporting that silver is sold out.

Silver Shortage: 19 dealers reported "Sold Out"

(SOLD OUT!!)

Silver Stock Report

by Jason Hommel, March 19, 2008

http://www.silverstockreport.com/2008/crunch.html

So I go over the web site for The Northwest Territorial Mint and here is what they have posted:

American Eagle Silver Coins Temporarily Out of Stock

High Demand for 2008 Eagles
The United States Mint has found itself unable to fully meet the unprecedented demand for silver Eagle coins with its current supply, and has temporarily suspended shipments. This situation is a temporary one until more of this fine bullion product can be struck and shipped. Because many of our customers want to purchase this product at today's prices, Northwest Territorial Mint will accept orders now for shipment when the product becomes available, which we expect will exceed 30 days. If the wait for product proves too lengthy, we reserve the right to substitute a similar silver product.

Same thing for Candian Maple Leafs:

Canadian Maple Leaf Silver Coins Temporarily Out of Stock

High Demand for 2008 Silver Maple Leafs
The Royal Canadian Mint has found itself unable to fully meet the unprecedented demand for silver Maple Leaf coins with its current supply, and has temporarily suspended shipments. This situation is a temporary one until more of this fine bullion product can be struck and shipped. Because many of our customers want to purchase this product at today's prices, Northwest Territorial Mint will accept orders now for shipment when the product becomes available, which we expect will exceed 30 days. If the wait for product proves too lengthy, we reserve the right to substitute a similar silver product.

Tell me how the hell you can shortages of a product with a falling price? Something stinks.

[blazespinnaker]

Re: Who is shorting Gold?

There is a difference between silver stocks and silver coins.

[jmdpet]

Re: Who is shorting Gold?

As reported in this thread: I experiences silver shortages myself yesterday:

http://www.itulip.com/forums/showthr...31110#poststop

[krakknisse]

Re: Who is shorting Gold?

This market is nuts... [snip] Silver Shortage: 19 dealers reported "Sold Out" ... So I go over the web site for The Northwest Territorial Mint and here is what they have posted: Tell me how the hell you can shortages of a product with a falling price? Something stinks.

On the front page of APMEX, their online ordering system is down as of today. They only take telephone orders for >$5000:

Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers’ needs. During this time, we will have a minimum order of $5,000.

It could be a coincidence. Larger players don't buy at these shops. If consumers suddenly have discovered metals, pouring in, and larger players are getting out, you could see this pattern. But the temporal pattern is puzzling. I've seen it speculated that "they" are pushing the price down, to be able to load up at the bottom. But again, pushing the market down this far would require very deep pockets, and potentially very large losses. You would have to think that StreetTracks GLD were fiddling the books, as James Turk has suggested. I don't know for certain, and we probably never will. So nothing actionable, IMHO.

[tree]

Re: Who is shorting Gold?

As I have written elsewhere here, in the past few weeks my two favorite contrarian gold bugs -- who have been buying gold since the late '60s and early '70s -- both warned me that there would be a coordinated effort by governmental entities to stop the gold party.

I didn't ask exactly who or what they were referring to. They said it matter-of-factly, without the slightest bit of drama, because they care about me, and there seemed no reason to pursue their statements.

These two guys are both around 60. They've seen this all before.

A conspiracy? That's a funny word, isn't it. But if I were in charge in Washington, I would not want to see Americans's dollars flowing into stores of value such as commodities. I would want to see them flowing into American companies.

America -- love it or leave it!

[dbarberic]

Re: Who is shorting Gold?

There is a difference between silver stocks and silver coins.

The artilce from "Silver Stock Report" is in reference to the bullon, not silver stocks.

[jtabeb]

Re: Who is shorting Gold?

We've heard a rumor of gold to $800 from several sources. Anyone else heard this?

Wait a minute! I though the tin-foil hat crowd was all CRAZY for saying the market is being manipulated. NONE of this sounds like "market forces" to me!

[tree]

Of possible interest re gold

http://
http://www.321gold.com/editorials/ge...ino032008.html

[EJ]

Re: Of possible interest re gold

http://
www.321gold.com/editorials/gerbino/gerbino032008.html

Reminder of my note from two years ago comparing gold, inflation, and the DJIA. It relates to the theory of the long term trade versus the short term trade.

U.S. citizens were not permitted to own gold bullion for 42 years, from 1933 until January 1975. After that, the last gold bull market began. It got off to a slow start. Private and institutional investors had not had any experience investing in gold for 42 years. Plus, right after the gold market re-opened in the U.S. in 1975, inflation fell dramatically, from 10% to 2.5% and with it the price of gold. Even the following year when inflation shot back up to 12.5%, the price of gold increased only modestly, as market participants were slow to catch on to what was happening. But gold continued to climb modestly even as inflation fell again between 1977 and 1978 as the first wave of buyers -- the early adopters -- started to show up. Then, a couple of years into the bull market, the second wave of buyers entered the market and gold took off in its second stage of growth 1979, even though inflation was relatively tame that year compared to recent spikes. That price rise anticipated the spike in inflation that occurred in 1980 when both inflation and gold peaked in its final bubble wave in 1980.

Back then you couldn't find an investment book that didn't tell you to buy gold and other hard assets and stay away from stocks. That was the exact opposite of what investors should have been doing because in came Paul Volcker to take over the Fed from Nixon's pal Burns. Volcker put the hammer down, cranking interest rates up in 2% rate hikes at times. None of this baby-step stuff that the Fed's doing today. Inflation collapsed from 18% in 1980 to -2.5% in 1983. The U.S. economy fell into a deep recession for most of that period. Imagine what a 2% rate hike would do today? It'd get inflation back under 5% from 7% in a hurry, that's for sure.

What does this mean for us today? After a 20 year bear market that started in 1980 and ended in 2001, investors have been as slow to catch on to the new bull market in gold, as well as other commodities including silver and platinum, as they were after the previous bear market in gold, or rather non-market in gold, as U.S. citizens were not allowed to own it. The DJIA has for the past several years been rising, much as it did between 1978 and 1981 when inflation and gold were also rising, but in inflation-adjusted terms in both periods the DJIA declined. The painful period of adjustment that the Volcker Fed created set the U.S. up for a long and massive expansion that during its healthy pre-bubble phase from 1982 to 1995 that saw the DJIA grow in inflation-adjusted terms by nearly 400%.

The crucial question is whether the rising price of commodities is again predicting a future rise in inflation. We believe that it is. We will see this inflation spike at some point and the price of gold with it. The second wave of gold investors are getting on board as we enter the next phase of the bull market, not only gold but silver and platinum as well. At some point commodities will too reach a bubble phase. The bookstore shelves will again be stuffed with books that tell you to buy hard assets, your mailman and neighbors will be lecturing you about gold, and it will be time to get out. The gold price then? We've been estimating $2,500 - $3,000 for several years and don't see any reason to change this.

- March 29, 2006

[SeanO]

Re: Who is shorting Gold?

Not a fan of conspiracy theories, though clearly there is some serious "coordination" happening right now. That said isn't the drop in gold and commodities more simply explained by massive, forced, de-leveraging requiring liquidation of assets? Seems to me that in their death throws one becomes willing to give up even their most prized possessions for a chance to breathe.

Whether they end up dead or coming back to life, seems like there will be more demand once the throws are over.

[ASH]

Re: Who is shorting Gold?

What fundamentals? Gold has no fundamentals.

This isn't a major point, but gold does have industrial uses -- it often gets used for electrical contacts because of its twin properties of high conductivity and resistance to corrosion. I work in the semiconductor industry, and gold is the main metal we use for our Ohmic contacts to III-V compound semiconductors (things like GaAs). However, it isn't used in the much larger silicon market because it will contaminate silicon. Anyway, I'm not proposing that a significant quantity of gold is consumed by the semiconductor industry (it gets deposited in layers 1 micron thick, which don't really add up very fast), but since it is the main metal I work with, I thought I'd mention that we do use it.

As an aside (and without reference to blazespinnaker), I'm inclined to agree with Lukester regarding conspiracy theories. Once you abandon yourself to the idea that most things are caused by unseen (and often malevolent) forces, you lose the ability to recognize straight-forward and rational cause-and-effect relationships. In my realm of the physical sciences, the equivalent thing to a conspiracy theory is superstition -- e.g. floods are sent by capricious gods to punish the errant villager, as opposed to being caused by a confluence of atmospheric conditions. This is not to deny that there have never been actual conspiracies, but rather to suggest that if one appeals to conspiracy to explain most things -- and especially things which admit to rather mundane explanations -- then one is likely in error. In the case of the weather, what causes it isn't particularly mundane or obvious. However, if we kept in the mind-set that weather was more likely to be explained by gods, perhaps we would never have recognized its rather complicated (but natural) causes. Likewise, there are many complicated relationships in finance and economics... if you appeal to conspiracy too frequently to explain what's going on, you have no hope of ever discovering and understanding those complicated relationships and economic processes.

[Ant]

Re: Who is shorting Gold?

Not a fan of conspiracy theories...

Not me - I dig conspiracy theories.

Blue Horseshoe *loves* GLD @ 75. I repeat: Blue Horseshoe *loves* GLD @ 75. ;)

-Ant