The Manipulation of Gold Prices

[jtabeb]

Re: The Manipulation of Gold Prices

Interesting, and a potentially conflicting dynamic between these two public perceptions you mention; I would suggest that the price of Au, at least historically, is more reflective of inflation expectations, although presently, risk of currency collapse is significantly higher than in the past.

In combatting deflation/disinflation, I believe the FED would want to set public expectations toward inflation - so the price of Au going up tells the public "inflation is coming" and they 1) stop saving/hoarding cash and spend before consumer prices go up and 2) lever up with debt to pay it back with inflated $.

Perhaps at present, loss of confidence in the fiat currency system is much higher risk than say a deflation spiral (at least to the fed) and so protecting the paper currencies is goal # 1, but once people aren't afraid of currency collapse, allowing Au to go up will help set inflation expectations and stop the disinflation.

thoughts?

Very Apropos. That's my working idea as well.

[bart]

Re: The Manipulation of Gold Prices

Interesting, and a potentially conflicting dynamic between these two public perceptions you mention; I would suggest that the price of Au, at least historically, is more reflective of inflation expectations, although presently, risk of currency collapse is significantly higher than in the past.

I don't disagree, especially in theory, but in practice actually measuring inflation expectations isn't simple. My preference is took look at everything that can or has affected gold prices.

Major reasons for gold price changes, in no particular order

1. Limits in supply, "peak cheap gold"
2. Changes in demand
3. Inflation direction & speed of change
4. Real interest rate direction
5. Fear - social, political, "financial system"
6. Changes in confidence of money or a given currency or the "financial system"
7. Manipulation/control by central banks and others
8. Mania
9. Technical analysis factors

This is not intended as a complete list but at least provides a framework within which to judge price action.

In combatting deflation/disinflation, I believe the FED would want to set public expectations toward inflation - so the price of Au going up tells the public "inflation is coming" and they 1) stop saving/hoarding cash and spend before consumer prices go up and 2) lever up with debt to pay it back with inflated $.

In theory again I agree, but just like monetary velocity is likely much lower than the Fed and other CBs would like now, the chances that it will get out of control in the other direction are not low.

Perhaps at present, loss of confidence in the fiat currency system is much higher risk than say a deflation spiral (at least to the fed) and so protecting the paper currencies is goal # 1, but once people aren't afraid of currency collapse, allowing Au to go up will help set inflation expectations and stop the disinflation.

Good point. Bernanke sure is on record about FDR's dollar devaluation via gold revaluation in that 2004 paper, and there's zero question in my mind that its one of the tools at his disposal. I sure would love to hear his answer if Ron Paul brings up the area during Congressional testimony.

[Jay]

Re: The Manipulation of Gold Prices

Good point. Bernanke sure is on record about FDR's dollar devaluation via gold revaluation in that 2004 paper, and there's zero question in my mind that its one of the tools at his disposal. I sure would love to hear his answer if Ron Paul brings up the area during Congressional testimony.

How much would the dollar have to be devalued against gold to set things in motion again? Back then we were on a gold standard, now we have gigantic holes of leveraged debt. It would seem to me that any revaluing would have to be pretty drastic to be effective, no? Thoughts?

[grizam303]

Re: The Manipulation of Gold Prices

How much would the dollar have to be devalued against gold to set things in motion again? Back then we were on a gold standard, now we have gigantic holes of leveraged debt. It would seem to me that any revaluing would have to be pretty drastic to be effective, no? Thoughts?

I've read anywhere between $2-55k per ounce. Obviously the upper bound is reaching, but where I read it gave a mathematical explanation based on gold reserves and national debt.

The upside potential to gold overshadows the popular fear of deflation.

Post-bart edit: I believe the article I read gave a "probable" estimate at $5,900, so we're in the same ballpark.

[bart]

Re: The Manipulation of Gold Prices

How much would the dollar have to be devalued against gold to set things in motion again? Back then we were on a gold standard, now we have gigantic holes of leveraged debt. It would seem to me that any revaluing would have to be pretty drastic to be effective, no? Thoughts?

That's almost like asking "how high is up"... but the absolute minimum move in my opinion is a double. My long term minimum target is $3200, and Jim Sinclair's algorithm on which it was based is now around $4500.

And then there's:
The forecaster is a gentle man
With neither sword nor pistol
He walks along most daintily
Because his balls are crystal.
;)

[strittmatter]

Re: The Manipulation of Gold Prices

http://seekingalpha.com/article/1094...me-to-buy-gold


comments?


BTW - I'm long on physical gold and plan to stay.

[Jay]

Re: The Manipulation of Gold Prices

That's almost like asking "how high is up"... but the absolute minimum move in my opinion is a double. My long term minimum target is $3200, and Jim Sinclair's algorithm on which it was based is now around $4500.

And then there's:
The forecaster is a gentle man
With neither sword nor pistol
He walks along most daintily
Because his balls are crystal.
;)

This is my favorite Bart post ever.

[grapejelly]

Re: The Manipulation of Gold Prices

This is what concerns me most right now about gold. There’s a good chance the bull market may be over. Gold is already down 25% from its March highs and a lot of investors are betting it’s just a correction. I’ve got to tell you, I’ve been through quite a few bull markets and I’ve never seen one like this.


A few months ago, gold shot up $70 an ounce in a day. It was gold’s biggest one-day move in history, but the rally was short-lived. Following the big move, gold prices dropped almost 30% before bottoming out just under $700 an ounce. After all those sharp ups and downs, no one was really surprised when gold would drop $40 in one day and then climb $30 the next, and vice versa.


This is what concerns me, because bull markets are usually much steadier. There’s some volatility, but ups and downs are usually pretty small.

THere is a reason why we haven't seen a bull market "like this one." Because this is the end of an epochal credit cycle that has arguably started in 1982 or even, you could say, 1973 when the gold window was closed.

We can't expect this to be a normal bull market.

[bart]

Re: The Manipulation of Gold Prices

http://seekingalpha.com/article/1094...me-to-buy-gold


comments?


BTW - I'm long on physical gold and plan to stay.

Guess I don't have to ask "Got gold?" ;)

It strikes me that Mr. Mickey is a bit young and a bit less than fully educated on market cycles and behavior, especially regarding his assertion about gold not being an investment. He even implicitly admits his lack of breadth and experience with "I’ve Never Seen a Bull Market Like This", and doesn't even realize it. If you haven't seen the charts in That '70s connection, I urge you to check it out.

Even his "... paper wealth and it was never real money that anyone could spend" shows quite a disregard for things like hedging or the "house ATM". And his quoting of the gold price at $770 also betrays he has little clue about the real street price and real supply, as well as the defensive characteristics of PMs and hard assets in general.

[Tulpen]

Re: The Manipulation of Gold Prices

Looks to me more like a paranoid reaction from a disgruntled long. I suppose the Illuminati are all behind it :rolleyes:

[tracer]

Re: The Manipulation of Gold Prices

Looks to me more like a paranoid reaction from a disgruntled long. I suppose the Illuminati are all behind it :rolleyes:

not trying to pick on a senior ituliper, but you seem to be somewhat gold averse. while i don't drink the koolaid at the gold bug parties, you ony have to look at the alphabet soup of lending from the fed, the actions of the treasury and guv, to see that they are steeped in manipulation.

not to mention the feds first role of providing price stability and low unemployment via ........ manipulation of the money market, the largest market in the world.

[bart]

Re: The Manipulation of Gold Prices

Looks to me more like a paranoid reaction from a disgruntled long. I suppose the Illuminati are all behind it :rolleyes:

There is no manipulation, and nothing ever happens behind the scenes, and governments and central banks always tell the truth.
Nothing to see here, move along. :rolleyes:

[Rajiv]

Re: The Manipulation of Gold Prices

I also presume that "Failure to Deliver" never takes place either -- and it is curious that neither the SEC nor the exchanges will disclose the names of the institutions failing to deliver, even through FOIA petition, as “fails statistics of individual firms…is proprietary information and may reflect firms' trading strategies.”

We are talking of market makers here -- and if failures to deliver are a part of their trading strategies, then it is apparent that the market is likely easily manipulable -- and of course these "proprietary" trading strategies take full cognisence of "market psychology" aka "market herd mentality"

[metalman]

Re: The Manipulation of Gold Prices

That's almost like asking "how high is up"... but the absolute minimum move in my opinion is a double. My long term minimum target is $3200, and Jim Sinclair's algorithm on which it was based is now around $4500.

And then there's:
The forecaster is a gentle man
With neither sword nor pistol
He walks along most daintily
Because his balls are crystal.
;)

that's awesome! thanks.

[Tulpen]

Re: The Manipulation of Gold Prices

not trying to pick on a senior ituliper, but you seem to be somewhat gold averse

Actually I am not gold averse but what I cannot stand is that every time gold plunges people have an urge to concoct and spread conspiracy stories or making silly conclusions like because some gold coins on Ebay trade high it implies that the gold spot price is manipulated.

Once we get inflation, or once the dollar plunges, or once the equities market rallies or all at the same time I think we will get a rise in gold. But right now gold, like oil, pretty much trades in sympathy with the equities markets. Oil broke that pattern to the negative yesterday and was a reason for me to go long oil and uranium.