PM End of Week Market Commentary - 10/3/2014

davefairtex
By davefairtex on Sat, Oct 4, 2014 - 1:40am

On Friday gold was hammered, dropping -21.90 to 1192.90 on very heavy volume.  Silver did slightly better, dropping only -0.26 to 16.83 on moderately heavy volume.  Both metals made new cycle lows, driven lower by the good Nonfarm Payroll report at 0830 EDT which caused USD to scream higher (up a huge +1.07 to 86.81) and in response metals drove clean through their previous lows, stopping out a bunch of hopeful longs.

Mining shares did not like gold making new lows; GDX was off a massive -4.58% on extremely heavy volume, while GDXJ was pounded down -6.95% also on extremely heavy volume.  Both mining ETFs also made new lows, closed at the dead lows of the day, and are approaching their Dec 2013 lows.  It was a very bad day for the miners, with no buyers in sight.

For the week, gold was down -27.10 [-2.22%], silver down -0.82 [-4.67%], GDX down -6.14%, and GDXJ down a massive -9.95%.  Silver down more than gold, miners down more than metal: a perfect risk off picture.  Gold is not far from 1179.40 support.  Another day like today, and we go right through it.

The USD

Its a broken record - another strong week for the buck, this time coming all on Friday.  On the week, the buck closed up +1.05 [+1.22%], 12 straight weeks without a correction, and the move up appears to be accelerating.  The move in the buck has the weekly RSI-7 at 97, which doesn't happen very often.

This week, the move higher in the buck was mostly about the euro, which was off -1.78 [-1.40%].  Remember that euro chart that showed "a lot of air" once 127.50 support was lost?  Well, that's what we are seeing now, the euro dropping with no support in sight.  The hope last week that the bank stress tests would prove to be a sell-the-news event - well that sure didn't happen.  The drop in the euro appears to be accelerating, the inverse of the dollar's move skyward.

This week I read some articles that suggested that Draghi is now suspected of talking a good game, but the opinion is that he will most likely not deliver on his promises to print money.  He said before that he will do everything it takes, but now that deflation has very clearly hit the eurozone, he's going to be expected to come up with the goods.

Here's a picture of the Eurozone deflation in action.  It's all about declining bank credit, which in turn drives the CPI lower.  Post debt bubble, do we really expect borrowers to load on more debt?  I guess Draghi thinks so.  Just drop rates low enough and all will be well, back to business as usual in a jiffy.  So far, we can see that strategy is just not working.

Miners

Mining shares dropped through their June 2014 lows, breaking support which led to a lot of selling as I had feared.  There was a modest attempt by GDX to rally back to support on Wed and Thu, but today's drop in gold took the mining shares down really hard - massive volume, down -4.58%, closing at the dead lows of the day, very bearish.  If further dollar moves push gold through its 2013 crash low of 1179.4 (and it would not take much for this to happen, given the buck has rallied 1% each week for the past 3 weeks), the selling in the mining shares will probably accelerate.

The chart of GDXJ looks pretty similar - break below support, massive selling on huge volume, closing at the lows of the day.

US Equities/SPX

On Thursday SPX printed a picture-perfect doji with good volume, and so Friday it was not surprising that SPX rallied strongly, closing up +21.73 to 1967.90.  On the week SPX was off -14.95 [-0.75%].  News this Friday might say this was all about the Nonfarm Payrolls report, but my sense was the downside momentum reversed on Thursday, and this was the logical extension of that move - and the Nonfarm Payrolls report certainly didn't hurt.  VIX gapped lower and dropped -1.61 to 14.55; still elevated, but falling fast.  If I had puts, I'd have sold them today and I'd be waiting on the sidelines for this rally to run out of steam.

Rates & Commodities

Bonds rose, with TLT up +1.72%; my sense was this is a combination of equity market weakness, as well as capital flows from overseas.   However if the equity market continues to rally, it will take a lot of foreigners to keep bonds moving skyward.  JNK has been rallying for the past four days.  Perhaps strength in JNK was a clue that SPX would bounce?

Commodities fell this week, off -0.80%, making new another new cycle low after holding steady last week.  What more can I say?  Bad news in commodities = bad news for PM.

Oil had a bad week.  While WTIC looked like it might have found a low Thursday, it was hammered again Friday - possibly because Saudi Arabia said it was going to drop prices rather than lower production.  As is sometimes the case, surprising news will trump nice chart candlesticks, and I believe this is what happened with WTIC, which dropped a big -3.62 this week, closing at 89.74.  Brent moved down a similar amount, losing -3.58 to 93.42.  If you are long oil, this has been a pretty unfortunate three months, echoing the unfortunate experience in PM.  News articles highlight increased supply even from fractured Libya, and steadily increasing production from the US.  Price action seems to bear this out.

Copper has also had a bad few months - it has declined to just below $3, right at support.  There is no good news right now from the commodity sector - at least not for PM.

Physical Supply Indicators

* Premiums in Shanghai vs COMEX were up +0.29 to +5.65 vs COMEX, last traded on September 30.  Delivery volumes rival what we saw on April 11th 2013, in the middle of the gold crash; they are very high right now.

* The GLD ETF lost -4.78 tons, with 767.47 tons remaining.

* Registered gold at COMEX dropped -0.76 tons, with 29.86 tons remaining.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on October 3) of 1192.10 and silver 16.80:

  OUNZ 11.90 -0.02% to NAV [flat]
  PSLV 6.74 +3.29% to NAV [down]
  PHYS 10.06 -0.69% to NAV [down]
  CEF 12.16 -7.23% to NAV [down]
  GTU 40.76 -7.56% to NAV [down]

ETF premiums were down across the board, but most premiums dropped only modestly. 

Futures Positioning

The COT report is as of September 30th, when gold was trading around 1210 and silver around 17.00.

Not much happened this week on the gold COT report; there were slight adjustments to positions but things are more or less unchanged from last week.  Since the big move in gold took place Friday, we'll have to wait for next week to get the details.

Silver COT report showed Managed Money increasing their short exposure somewhat, but not dramatically.  That's surprising, since there was a large move down for silver on Tuesday.

Moving Average Trends [20 EMA, 50 MA, 200 MA]

Gold: short term DOWN, medium term DOWN, long term DOWN.

Silver: short term DOWN, medium term DOWN, long term DOWN

Moving averages are all pointing down.

Summary

Gold tracked lower for the week and fell off a cliff Friday after the buck rallied +1.25% in just one day.  Silver fared worse, having two such days in the same week.  The dollar's unstoppable rise has silver driven far below its 2013 crash lows, and gold is on the ropes, hovering not far from its important 1179.40 support - only $12 away.  Any further increase in the buck will probably drive gold right through that low, leading to even more selling in gold, and likely silver too.

Things have worsened in the ratio area.  Gold and silver moving averages are still pointing down.  Gold/silver ratio jumped +1.59 to 70.71, which is bearish and another new cycle high.  GDX:$GOLD moved substantially lower, as did GDXJ:GDX, as did SIL:$SILVER.  There is no good news here, only increasingly bad news that shows the trend in place, and strengthening.

The COT reports show not much change this week.  There is plenty of fuel for a short-covering rally at this point, but that would require the dollar to stop moving higher.

Shanghai premiums are up a bit this week and remain positive, delivery volumes of spot gold in China have been extremely strong, GLD tonnage dropped, while ETF premiums are down.  Physical demand looks strong.

The dollar appears unstoppable at this point.  Moves like this are quite unusual - they are special occasions, where a particular instrument goes in just one direction for literally months at a time.  In this case, we have seen 3 solid months of dollar rally with nary a correction in sight.  As I have written for weeks, the buck is extremely extended, and when it corrects it should be a sight to behold.  When will this occur?  I have no idea.

Are you ready to capitulate?  This is what capitulation feels like.  Just when you think things can't possibly get any worse - they get worse!  OMG silver is at 16.84!  Ultimately, my advice is to respect the trend, which is currently down, especially as measured by the EMA-9.  Until we see PM cross over that EMA-9 and the market proves to you that it is ready to rally, it is probably best to just sit on your hands and watch.

What's the line again?  Cheap gets cheaper...and by now, you know the rest.

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24 Comments

Jbarney's picture
Jbarney
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Posts: 233
Dollar Cost Averaging

Just some thoughts.  I began buying silver when it was around $26 dollars an ounce several years ago.  I have basically been dollar coast averaging for that time, but my purchases are small and irregular.  Watching the metal go up from $26, buying along the way, all the way to $49 was exciting.  I didn't have the money to bet the farm, but I did put some of my limited resources in at MUCH higher levels.  The downslide hasn't scared me off.  I was buying as much silver at $35 as when it was in the high $40 range.  As a small investor, I just don't have much money at any one time.  When it plummeted through the $20 range I really didn't care, as I just keep trying to accumulate.  An ounce here.  An ounce there.  Paying off debt along the way.  Investing in apple trees on the property.  Buying and planting blueberry bushes.  So silver is down below $17 right now....and my faith isn't shaken.  Even if the trend is down, I'll just buy what I can.  It will go back up at some point.  It is a world view.  Long term thinking.  Years have gone by and $17 is a better entry point than $26.  Keep the faith guys.

Arthur Robey's picture
Arthur Robey
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Meaning.

The salient points that I have extracted from my foray in PMs is that it takes a lot of discipline to sell on a rising market and a lot of courage to buy on a falling market.One has to ignore greed and fear.

However the price of silver is below the cost of production. That has got to mean something.

I speculate that this downward spike could mirror the upward spike that we saw in January 2010. This has got to be a buy for any loose jingle that you have in your pocket, even if it hurts.

Jim H's picture
Jim H
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For what it's worth...

Arthur said,

I speculate that this downward spike could mirror the upward spike that we saw in January 2010. This has got to be a buy for any loose jingle that you have in your pocket, even if it hurts.

I am doing the same.. took 40 more Eagles off the market yesterday.  I really need a new car... but I can't bring myself to do it when future money is on fire sale.  I am 100% sure that the car will be a depreciating asset.  I am also 100% sure that Silver will, someday, appreciate in a wild manner.  That being said, I would not be willing to say that they can't or won't smash it to 15 before this is over.  

I think that the manipulators have done a very good of destroying sentiment and creating the expectation of ever lower Silver and Gold prices.  Once the expectation of lower prices ahead is set in the minds of those who might buy, the price can be pushed lower, and lower, and lower, and the markets don't run dry.  While I have seen limited signs of stress in Silver coin availability over the last week or two... there is still broad availability at reasonable premiums... as I have said before, the extent of the premium rise is exemplified by Gainesville selling Eagles for $2.75 over spot now (roll quantities) whereas before the latest smash, two weeks ago, they were $2.55.  I would have predicted that the continued pushes into the 16's would have caused widespread shortages.. and that is not happening yet.  I never cease to be amazed by the times we live in. 

What might be ahead?  Some good discussion here;

        http://www.silverdoctors.com/gold-silver-finish-brutal-week-rolling-over...

Doug's picture
Doug
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just a thought

It took about 31 years for silver prices to move from one peak to the next (1980-2011).  OBTW, the second peak was at less than half the first peak.  For 16 of those years ('89-'05) the price was < $10.  Are you prepared to wait that long?

http://www.macrotrends.net/1333/gold-and-silver-prices-100-year-historic...

Doug

 

 

 

 

 

thc0655's picture
thc0655
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Yes, Doug

Yes, Doug. Yes, I can.  If gold and silver don't shoot the moon in the next 10-15 years, that means the events I have been insuring against by buying them didn't happen.  That means that we'll be able to retire on our savings, social security and pensions and be comfortable.  So if this very unlikely turn of events were to occur (no high inflation, no collapse of the dollar), then I'll just pass off our gold and silver to our kids and they can retire too after decades of low paid work and no pensions.  Good for them!

KugsCheese's picture
KugsCheese
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Employment Report

John Williams of SGS said in his latest report that Census Bureau (who does the Household Survey for the unemployment rate; counts those persons with jobs, some have multiple jobs) has changed how it samples the report but has not released the new methodology.   Surprise, surprise as an election is coming up and the House is investigating Census Bureau fraud before the 2012 election; see http://nypost.com/2013/11/18/census-faked-2012-election-jobs-report/   SGS Unemployment is at 23.1%  Some 41% of Americans contribute no net taxes and receive transfer payments of one kind or another.   Medicare and Social Security cost increasing year by year as pool of workers decrease on a relative basis.

HughK's picture
HughK
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My reasoning too, Tom
thc0655 wrote:

If gold and silver don't shoot the moon in the next 10-15 years, that means the events I have been insuring against by buying them didn't happen.  That means that we'll be able to retire on our savings, social security and pensions and be comfortable.  

This has also been my reasoning.  If my non-mainstream forms of saving do not pan out in the way that I expect that they will, then it's very likely that the economy stayed more stable than I expected, so in that case low (non-realized) returns - or even negative returns - on PM investments will be a good problem to have.

Arthur Robey's picture
Arthur Robey
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Mind the gap, Jim H.

The thought that I have persuaded anyone to speculate in anything horrifies me Jim H.

Warren Buffet should hire me as a contra-indication of future trends.

Let me take this topic into the realm of meta-physics. Reality ends here-Please mind the Gap.

This thing looks to me as though it is a tussle between the old physics of "Things behaving mechanically.(Newton)" and the new Quantum Mechanics where it is all about Information. In one corner we have the Old School which is represented by the Physical Silver and in the other corner we have The New Boy Silver represented by Paper Silver, which is just information.

I for one have not got religion about either contender. Which is going to win- Silver or it's representation?

robie robinson's picture
robie robinson
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"Silver"

The physical will buy your children grain,vegetables,meat and milk from the farm. We don't take American Express,Visa,Mastercard...

KennethPollinger's picture
KennethPollinger
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Rickard's latest Contributions

I posted this elsewhere but believe it should get PRESENCE here.

Rickard's Latest Contributions
 
I recall reading Currency Wars and then The Death of Money and his interview with Chris.  I liked his comments at the end about % of what in your portfolio. However I found those comments/suggestions to be rather general and vague.
Chris recommended creating TARGETS somewhere, so that when the time is ripe, with cash, you can jump in and add to your reserves.
 
Well, Rickards now has offered some more detailed and concrete suggestions.
I will attempt to summarize them for our virtual community below.  All I ask, in return, is feedback.
 
A Crash Plan
 
1. Shelter from Dollar's Fall:
      It's literally impossible for the US to ever pay its debt off.
     Therefore, the only solution is to INFLATE the currency to reduce the real
        value of the debt.
     If you have any kind of fixed income, you LOSE.
 
    a) Therefore SHORT the US Dollar (as a pure hedge against the decline in the 
           dollar).  HOW: UDN, PowerShares DB U.S. Dollar Index Bearish Fund
    b) BUY the Euro (more speculative).  Eurozone has 10,000 tons of gold=
           a backing of their currency. Not the Yuan, China has major problems.
                        HOW: URR, Market Vectors Double Long Euro ETN
 
2. Insurance Plan for Market Collapse (Rickards predicts a 70% drop)
     a) SHORT the S&P500
                        HOW: SH, ProShares Short S&P 500 ETF
    b) Financial Sector Crash (major banks have more than $700 TRILLION in
          risky derivatives exposure, on and off the books) Sell BAC,C, MS. WFC,                   DB, GS HBSC (We are less prepared for the coming crash than ever 
            before)
                          HOW: FAZ, Direxion Daily Financial Bear 3x Shares
            (Risky and require regular diligence)
    
3. Invest in Things Folks cannot live without (food, water, energy, medical
      supplies, essential goods and services)
     a) Food Investment (the most basic)  Agricultural sector is important
                             HOW: CNHI, CNH Industrial N.V.
     b) Water Investment drinking water and water management)
                              HOW: AWK, American Water Works Co. Inc.
     c) Medical Supplies Investment
                               HOW: BDX, Becton, Dickinson & Co
     d) Electricity Investment
                                HOW: ABB Ltd. (ADR)
 
4. HARD ASSETS Companies
     a) Rail Industry    HOW: UNP, Union Pacific Corp
     b) US Coal (fastest growing major fuel)
                                 How: BTU: Peabody Energy Corp
    c) Energy Development  HOW: AEP, American Electric Power Co
                                               and XOM, Exxon Mobil Corp (it has 25.2 billion barrels worth of oil and gas                                                                         in current reserves on the books)
    d) Even Gun Manfacturers (ultimate security)
                                      HOW: RGR, Sturm, Ruger and Co; and SWHC,
                                                                               SMITH & Wesson Holding Corp
 
 
He has much, much more to say but this is a good beginning shot.
However, here are two Portfolio Allocations:
 
A) Initial                                        B) "The Day After"
20% land                                       30%land
20%cash                                       30%PMs
15%bonds                                     30%fine art                                                                                                                                                                               10%cash
15%stocks
10% PMs
10% hedge funds
10% fine art
 
However, fine art appears to be out of reach for most of us--requires large sums of money, even for art funds.  As for PMS, he recommends two:
PHYS: Sprott Physical Gold Trust ETV
OUNZ: The Merk Gold Trust (ETF)
 
So, feedback, please.    Ken

 

Oliveoilguy's picture
Oliveoilguy
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Posts: 578
Kenneth

Thanks for the detailed post. 

I want to look at some of the equities you listed before commenting, however it all makes sense in a world where truth ultimately triumphs over deceptive manipulation. I guess my only reservation is that the underlying premise is that markets will remain functional through the "day after" allowing people to move money around. I have less confidence in that outcome and therefore would urge people to get money out of conventional investment vehicles and into their "home" investments, weaning themselves from the fraudulent financial sector into the safety of personal property and off grid living. 

davefairtex's picture
davefairtex
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Posts: 5463
silver drives gold

My current experiments trying to develop a gold pricing mechanism using the machine learning algorithm seem to point to silver as an important driver of the price of gold.  As in, if silver drops to 14, my algorithm says gold drops to 1050.  And if silver rises to 30, gold hits 1668.

I've always thought silver led gold, and the learning algorithm seems to confirm this.  Silver also seems to work better than crude oil as the "commodity representative" in my collection of input timeseries.  Likewise, the overall commodity index doesn't work as well as just silver alone.

Bottom line: my experiments suggests we need to watch silver for price direction.  This isn't opinion, its what the learning algorithm has come up with...kind of interesting.  Once I come up with some actual conclusions that bear up better under serious scrutiny, I'll write up something longer.

 

Tycer's picture
Tycer
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Posts: 610
davefairtex wrote:. . .  Once
davefairtex wrote:

. . .  Once I come up with some actual conclusions that bear up better under serious scrutiny, I'll write up something longer.

Please and Thank you.

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 654
A MUST READ

Will Gold Crash with the Dow… or Soar?

International Man
by Jeff Thomas | October 06, 2014
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In 2008, we projected that the crash in the market was in fact a mini-crash and that the day would come when a more major crash would occur—one that reflected the level of debt. In recent months, this prognostication has been gaining traction—that a second, more severe crash is inevitable.

There are two primary camps amongst economists with regard to the economic direction that a crash will generate: inflationists and deflationists.

Inflationists tend to feel that the governments of the world that are now in debt over their heads will do what governments always do in such a situation. Rather than get off the monetary heroin, they will instead increase the dosage. Inflation will then ramp up dramatically, eventually causing collapses in currencies.

Deflationists, on the other hand, argue that when there is a market crash, there will be deflation. And since the debt level is so great, the severity of the deflation will likewise be great.

The argument goes back and forth, yet there seems to be the misconception that one must be either an inflationist or deflationist. This is not at all the case.

Recently, there have been vehement arguments from some very notable people in the deflationist camp that we shall soon see major drops in the Dow—first to 6000, then to 3300. They feel that, as this occurs, there will be a further real estate crash, gold will sink to $750, and unemployment will go through the roof.

Inflationists will inevitably reply that, in the event of a crash, the central governments will print money like never before, as soon as there is even a whiff of deflation. (Their argument is strongly supported by the repeated confirmations by the previous chairman of the US Federal Reserve, Ben Bernanke, that no deflation will be acceptable to the Fed, that they will indeed print as much as it takes to counteract any possible deflation.)

However, each camp is overlooking a significant factor. The deflationist reasoning tends to lead up to the occurrence of deflation… and then stops. They rarely comment on what happens next: the influx of newly-created currency units.

The inflationists overlook the fact that, when a major crash occurs, it happens suddenlyand when it occurs, it carries other markets with it. No amount of monetary printing can react quickly enough to simply cancel out the precipitous deflationary force of a crash. All that can be hoped for by the Fed and others in their situation is that they “play catch-up” as quickly as possible—injecting money into general circulation (not just crediting it to the banks, as they are now doing) to reverse the deflation and to hopefully return to “controlled” inflation.

Are we headed for a crash in the stock market? Almost certainly, and probably a more severe one than in 2008.

Are we headed for dramatic inflation or even hyperinflation? Again, almost certainly.

So what will this look like? How will it play out?

Consider the following as an order of immediate events (in brief form):

  1. The Dow crashes, in downward lurches, interspaced with false recoveries.
  1. As the crash unfolds, we will see innumerable people who bought on margin selling everything to cover their losses. (If they hold gold or gold stocks, these will be sacrificed even if the holders remain confident about gold. Their goal will be to cover immediate losses, at whatever cost.)
  1. Due to the dramatic selloff in gold, the price of gold plummets.

This is the deflationist argument and it is a logical one. (Popular estimates for the gold price are between $1000 and $750 as a potential floor.)

But this scenario rings true only if all those who hold gold are forced to sell.

What could actually happen might be similar to what we have seen with the unravelling of paper gold—that the development only serves to encourage those who understand gold to buy all they can. This serves to create a floor for the gold price.

There may well be sudden downward spikes that would tend to prove deflationists right, but as we now live in an electronic age, the turnaround by purchasers will be almost as quick as the crashes themselves. It may be that we will see sudden precipitous drops in gold, followed by immediate rises in purchasing—a real rodeo ride.

It is entirely possible that gold stocks will stay down longer than the gold price, and some (otherwise viable) companies may even go into liquidation. However, gold itself will not drop to $750 and stay there, as deflationists imply. More to the point, its recovery may be quite swift.

The market is experiencing a divide that didn’t exist before. Until recently, there have been many people (millions) who misunderstood gold, treating it like a stock. Many of those people are disappearing from the market (having been washed out by the paper gold failure), and soon, most of those who are still in gold will be those who understand it. The higher the percentage of gold ownership that is in their hands, the more solid the floor.

Whatever that floor may prove to be, gold will stabilise. Then, inevitable inflation will cause renewed interest in gold by the misinformed, as it begins its inflationary rise. By the time gold passes $2000, the misinformed will be falling all over each other to get back in—still not understanding gold, but desperate to ride the coattails of “a winner.” It would be at this point that we would go into a period of dramatic inflation, with a concurrent gold mania.

Whatever level of drop gold experiences as a result of deflation, gold will rise up from it like a phoenix—long before other asset classes rise.

In fact, it will lead the pack.

The question for the investor should not be whether we shall see inflation or deflation. We shall see both. The rodeo is underway and we are, whether we wish to be or not, in the saddle of the bronc. Soon, the chute will open and he’ll start bucking for all he’s worth. When he does, it will matter little whether he bucks to the left or to the right. The only objective should be to ride it out.

In investment terms, what this means is that we need to have avoided those investments that are most greatly at risk and have chosen instead those investments that are likely to be intact when the ride is over.

If we have loaded up on precious metals, in truth, it matters little if gold drops to $1000 or (gulp) to $750 as deflationists have predicted. All that will matter is whether we have had the fortitude to stay in the saddle until the ride comes to an end.

Editor’s Note: Gold is inherently an international asset because it is disconnected from any government and its value is universally recognized everywhere in the world. Buying some is perhaps the easiest step you can take toward internationalizing your savings. The next step is to store your gold in a safe foreign jurisdiction. Perhaps one of the easiest and most convenient ways to own physical gold offshore is with the Hard Assets Alliance. To get a free report on how you can internationally diversify your physical gold see here.

 

davefairtex's picture
davefairtex
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PM rally - USD down big

We have ourselves a PM rally today, largely due to the fall in the buck.  Dollar is down a massive -0.76 today, not quite retracing all the gains it made on Friday, but - perhaps it will by end of day.

Silver is leading gold higher.  Whether this is just a one-day short covering wonder, or the start of something more solid remains uncertain.  Probably this depends on where the buck goes from here.

Silver looks to be quite close to a breakout - its rally has stalled right at its EMA-9, at least according to my trading app charting package.

The commodity complex is also rallying hard, up +1.80%.

Is this just a one-day wonder?  We'll have to let the market tell us, and likely we'll need to wait for tomorrow.  Miners aren't all that enthusiastic, which makes me a bit wary.  Also important to see how we close.

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KugsCheese
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davefairtex wrote: We have
davefairtex wrote:

We have ourselves a PM rally today, largely due to the fall in the buck.  Dollar is down a massive -0.76 today, not quite retracing all the gains it made on Friday, but - perhaps it will by end of day.

Silver is leading gold higher.  Whether this is just a one-day short covering wonder, or the start of something more solid remains uncertain.  Probably this depends on where the buck goes from here.

Silver looks to be quite close to a breakout - its rally has stalled right at its EMA-9, at least according to my trading app charting package.

The commodity complex is also rallying hard, up +1.80%.

Is this just a one-day wonder?  We'll have to let the market tell us, and likely we'll need to wait for tomorrow.  Miners aren't all that enthusiastic, which makes me a bit wary.  Also important to see how we close.

Since value is being destroyed (since 1971), they just "up/down/up..." the stuff to skim more profits.   How much longer can it go on?  Is CME starting to hoard gold?   If not, the jig may be up soon.

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Re: A Must Read

"In 2008, we projected that the crash in the market was in fact a mini-crash and that the day would come when a more major crash would occur" can we get a factual reference to this statement or just hindsight B.S.?

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KugsCheese
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davefairtex wrote: My current
davefairtex wrote:

My current experiments trying to develop a gold pricing mechanism using the machine learning algorithm seem to point to silver as an important driver of the price of gold.  As in, if silver drops to 14, my algorithm says gold drops to 1050.  And if silver rises to 30, gold hits 1668.

I've always thought silver led gold, and the learning algorithm seems to confirm this.  Silver also seems to work better than crude oil as the "commodity representative" in my collection of input timeseries.  Likewise, the overall commodity index doesn't work as well as just silver alone.

Bottom line: my experiments suggests we need to watch silver for price direction.  This isn't opinion, its what the learning algorithm has come up with...kind of interesting.  Once I come up with some actual conclusions that bear up better under serious scrutiny, I'll write up something longer.

Have you modeled politics and regulation too?

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Arthur2014
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KennethPollinger wrote: ...
KennethPollinger wrote:

... Rickard's Latest Contributions

...

...
So, feedback, please.    Ken

Dear Ken,

Thank you very much for your detailed and precise information!

Since you only ask for a feedback, but don’t require qualification and expertise I dare to answer.    ;-)

Perhaps you would get more resonance, if you reissued your posting as a separate discussion / as a new thread. Your helpful contributions merit more attention.

 

1.) Apparently, James Rickards recommends gold backed Exchange traded Commodities (ETC) for investing in gold instead of directly buying physical coins and or small bars. That is a bit surprising for me.

I thought that ETCs were rather a short term financial instrument for speculative minded persons. Perhaps he recommends ETCs because it allows a faster reaction than buying physical coins.

 

2.) What do the really competent and experienced forum members here think about the following commercial vendor of physical gold?

https://www.bullionvault.com/

 

3.) I don’t know who coined the term “the day after” in this context.

I read the Willem Middelkoop’s book and the two by James Rickards. In “The Death of Money” (page 295-298) he lists seven signs indicating a worsening of the economic situation.

Nevertheless there could be some misleading events. Perhaps Davefairtex would call them “headfake events”.

Was it a prudent decision to “hop out” of the stock market the day after the stock market crash in October 1987?

Was it clever to buy silver in summer 2011 expecting the start of the ultimate secular rally?

Panic reactions came too late. True silver believer would putatively think that they paniced too early.

 

4.) From a purely economic point of view he might very well be right that producers of fire arms will be a profitable investment.

Personally , I don’t think that more weapons will bring us more security. On the contrary. I am living in Western Europe and have grown but there. I am not willing to spend my savings for such investments. I don’t want to support this branch of economic activity. I’m optimistic that there will be enough alternatives for someone like me.

 

1.) A relatively recent interview with James Rickards

http://financialflood.blogspot.com.tr/2014/09/exclusive-interview-with-j...

THE GREAT FINANCIAL FLOOD

Saturday, 27 September 2014

“-Last question Jim, you are telling us in your books that there would be a financial panic... Can you describe us what kind of events could happen during this financial panic? What are your expectations?

I think this financial panic would be different than the last one. The reason is that in all of the financial panics since 1971 the solution was to print money provide liquidity. But prior to 1971 historically the solution was to shut the doors. To close the stock exchange, close the banks, close funds so you can not get your money. That’s what Nixon did in 1971 he closed the gold door so you can’t get your gold. Since then 1987 stock market crash, 1994 Mexico crisis, 1998 Russia LTCM dot com, 2007 mortgage crisis, 2008 panic; in all these crises the solution was to print more money. My expectation is that next time money printing is not gonna work because they can’t print more they have already printed a lot. So they gonna have to go to the old solution. We are already seeing this. For example, the SEC passed a rule last month saying that money market funds can suspend redemptions. This is the law. Now if you talk to the US investors who have money market funds they think it is cash. They think they can call the broker today and money is in the bank tomorrow. They gonna find it is not cash. It has actually closed the door. That’s gonna be a shock. So the financial panic itself will be as always a shock.... But the remedy is not gonna be printing more money. They could print SDRs but that is a little experimental. But, maybe in this case, they have to start closing things down. Which in the distant past that was always what they did.”

 

Best regards

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BIS, IMF, and G-20 finance ministers

Thanks Arthur 2014 for the kind comments.  Rickards DOES recommend buying physical gold, throughout but it wasn't in his outline that I summarized.  It was in another booklet though. And he has been saying that for some time.

For EMPHASIS, thanks for this:

Very interestingly BIS about a month ago issued a warning of systemic risk. They said that the system is getting dangerously close to collapse. A few weeks later the IMF issued a similar one. And then last week G-20 finance ministers meeting at Australia issued a warning. What was the last time you saw the three most powerful multilateral financial bodies BIS, IMF and G-20 issued warnings. I have never seen it before. They are telling you it is going to collapse. They see what I say and they are warning you. People would ignore it but when it happens they would be able to say we have told you. I think I have never seen anything like this. I have been in international finance since 1974 and I have never seen a situation like this…

Says Ken: And if they use the "old traditional way" of resolving things, (close stock market, close banks, close funds, etc.), then BE PREPARED.  The key word for me is "SUDDENLY."  Like "OVERNIGHT."  FDR, Nixon, LTCM, .com, housing/financial crisis (7 Trillion lost OVERNIGHT?--not sure of exact amount) and now with credit/bond bubbles, looks like the same scenario, no?

Thanks Arthur 2014 for joining into the fray.  May the Force be with you!!

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Arthur2014
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storing gold in a foreign jurisdiction

One should not underestimate large institutions. They have very intelligent and very far-sighted collaborators. I suppose that they think about all we think about. They will be prepared. And at the tipping point they will be more prepared than most of us. That does not imply that their plans will work out even, but they will act methodically, systemically and in a coordinated manner.

 

Dear Ken,

while today we can legally take money out of our current financial system by buying gold and while we can even store it in a foreign jurisdiction

( see: “The next step is to store your gold in a safe foreign jurisdiction.”

http://www.internationalman.com/articles/will-gold-crash-with-the-dow-or-soar  )

the problem will probably be to reintroduce it into our future financial system during a hard crisis or after a big reset of the financial system.

Let’s imagine that one buys gold via https://www.bullionvault.com/ and makes it be stored in a vault in Singapore.

Any government could easily impose windfall taxes. Gold is commonly seen as an unproductive asset attributing nothing to the national wealth. Here it does not matter whether this is right or wrong.

I suppose that the majority of the population in industrialized countries would think that it is fairer to highly tax an unproductive asset than a productive one.

If one additionally assumes that only a small minority of people will dispose of physical gold then such a windfall tax would be seen as fair by the large majority. Especially if gold is seen as an asset of a small very wealthy minority and profiteers of the crisis.

Let’s imagine that Singapore will not tax gold but the United States and Europe will do so. For common people it is not easy to immigrate to Singapore as permanent residents because it is already very densely populated. Only billionaires would have a chance.

At the moment one tries to bring one’s gold back home to the USA or to Europe one has to pay extreme high taxes.

Mobile metal detectors could be installed at any place at any police control– not only at airports as today. All what they need is electricity.

Let’s imagine the alternative that one simply keeps one’s physical gold coins in one’s household.

If electronic money substitutes paper money then there will be no uncontrolled way to re-exchange one’s gold against the currency as legal tender in order to reintroduce the value one had stored in form of physical gold into the electronic payment system in the USA or in Europe where one lives.

The warehousing / the storage of gold in a foreign jurisdiction may be a very profitable business idea for those practicing it but I doubt that it is favorable for small savers and common citizens.

What do you think?

Best regards

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KennethPollinger
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Like YOUR Thoughts

Arthur 2014.  Nothing like exploring ALL options.  Sometimes methinks that the Global Power Elite, (are they The Bilderberg Group??, according to Stephen Leeb's latest attempt for me to buy HIS reset plans).

For example: "China has been stocking up on gold since 2010, when they stopped buying and began selling Treasuries (true or not?). If China gets their way and some form of the gold standard is reintroduced to the world's economy, whoever has the most gold will have the most power. (Ken: however, maybe the US MILITARY MACHINE will overcome all odds?) The Bilderberg Group will lose their power if the dollar is eliminated. And China will reign supreme.  As an aside, see Mauldin's latest Hmmmmm thoughts: a HISTORICAL analysis of the major TURNING points of geopolitical power shifts.

"This is not a war--this is a cataclysmic battle, says Leeb. And, "On one side you have the guardians of the current broken economic order. On the other side, you have the emergence of a country looking to finally surpass everyone else and become the dominant global superpower.  (Ken: NOT just shared global superpower status!!, a la Rickards)

More: "If one side wins, your retirement accounts will continue to BLEED (my emphasis) their value in the coming years while your future is determined in secret (the SECRET Bilderbergers)  Recommended: Rule BY Secrecy, by Jim Marrs.

 

If the other side wins, your nest egg is eliminated entirely in one fell swoop while the world's economy is RESET.

So there you have it: Rickards, Mauldin, Leeb, Marrs and who knows who else--??? Are these just scare tactics, vested interests trying to get your subscription $ or buy their products, or have much of the geopolitical/historical truth??

 

As for your excellent thought  "If electronic paper money substitutes . . . I believe one should hold precious metals IN HAND (however done), and then use it as money when needed, no to use the electronic systems wherever.  It's really hard to imagine ALL possible ways that "they" can control us--infinite possibilities!!  Sometimes I get depressed about all this and get a sense of hopelessness,

That's why I am a daily Zen meditator and am building two retreat centers, in the Catskills and in Costa Rica: see--www.AwarenessCenters.com 

Your feedback is appreciated.  By the way, fellow PPers, who is Daniel Estulin???????????

 

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KennethPollinger
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Another Rickards interview

Every time he talks I learn something new!   Enjoy.  P.S. Looked up Danel Estulin--intriguing but  . . . .

 

read more  

Jim Rickards - Obama Ending Alliance with Saudi Arabia and Killing the Petrodollar

Jim Rickards explains the unique privilege the US has enjoyed and abused as the issuer of the world's reserve currency. He also discusses what could replace the dollar in that role.

 

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jgritter
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Posts: 273
Bullets and Bellybuttons

Ken

You sound anxious.  Have you covered the basics?  Do you have a place to go with clean, dependable, water?  Do you have a rifle? Do you have food stores? Do you have some people that you trust and who trust you?  My experience has been that I have become less anxious about preserving my "wealth" as I have become more confident about preserving my life. 

You mention "Retreat Centers".  Are these places where you are known and trusted as a neighbor by the surrounding community?  A bunch of uptight white people, expecting to be taken care of, are unlikely to be welcome.

I make these comments with concern and respect from one PPer to another, you don't sound like you are in a good head space,

John G.

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