Gold Breaks Out to a Record

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machinehead's picture
machinehead
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Gold Breaks Out to a Record

Gold spiked just before 10 am this morning. Bloomberg took note:

Sept. 14 (Bloomberg) -- Gold rose to a record ... gold futures rallied as much as 1.8 percent to $1,269.20 an ounce as investors pursued assets believed to be the safest.

China’s yuan surged to the strongest level since 1993 on speculation the government will allow appreciation to head off U.S. trade sanctions as its economy improves. The currency gained 0.2 percent to 6.7469 per dollar and touched 6.7400, the strongest level since the central bank unified official and market exchange rates at the end of 1993. The central bank fixed the reference rate at 6.7378 per dollar, the highest level since the dollar peg was scrapped in July 2005, before the U.S. House Ways and Means Committee discusses China’s currency policy tomorrow and Sept. 16.

Gold futures for December delivery rose $20.40, or 1.7 percent, to $1,267.50 an ounce on the Comex in New York after touching $1,269.20. The previous all-time high was $1,266.50 on June 21.

Gold, heading for the 10th straight annual gain, has offered insurance against fluctuations in the dollar and the euro, and the metal has outperformed most stocks and bonds this year. The Federal Reserve and the European Central Bank have kept benchmark lending rates at the lowest level ever to revive the economy.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aytEcIn4NFJQ&pos=1

Both the background factors mentioned by Bloomberg are probably significant: the appreciating Chinese yuan (which signifies a depreciating dollar); and the Federal Reserve's desperate attempts to keep the real short-term interest rate negative (which amounts to 'free money' for banksters who can borrow at zero and buy something that's going up).

Bubble me up, Ben -- there's no sound money on this planet! Laughing

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Re: Gold Breaks Out to a Record

Drudge has it up as the big center of their page with a picture of Gold bars!  It links to the article you inserted from Bloomberg.

 

Silver is up big time .45.

 

 

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Re: Gold Breaks Out to a Record

Oof! From a contrarian perspective, I'd prefer quotes from 'gold is a Bubble' theorists, warning folks to stay away from this dangerous speculation.

But arguably, everything is a Bubble now. That's what we do.

Money mouth BUBBLES 'R US! Money mouth

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Re: Gold Breaks Out to a Record

Can it be a bubble when <1% of populace owns bullion?  (although that may be changing rapidly)

Doug

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Re: Gold Breaks Out to a Record

A couple of related points. Silver is creeping up on its 2008 high of $21.34/ounce. If silver were to break out past that level, it would be a double confirmation, echoing the message of gold's breakout.

Meanwhile, the broader CCI (Continuous Commodities Index, the former CRB) is rising sharply, to the highest level since August 2008. Its record high was set a month earlier in July 2008. It still has quite a way to go to reach the record, since crude oil's collapse from $147/bbl in the summer of 2008 made the CCI plummet from its peak like an Acapulco cliff diver. Here's the CCI chart:

http://futuresource.quote.com/charts/charts.jsp?s=CI%20A0&o=&a=W&z=650x450&d=medium&b=bar&st=

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Re: Gold Breaks Out to a Record

"Ben's in!' say wild rumors being reported by Bloomberg. Here is a sample:

James Bullard, president of the Federal Reserve Bank of St. Louis, said he wants any additional expansion of the balance sheet to be done in small increments rather than a “shock-and- awe” policy of announcing $1 trillion in purchases.

“There is a debate” within the Fed on which approach works better, said Antulio Bomfim, a managing director at Macroeconomic Advisers LLC in Washington and former member of the Fed Board staff. Announcing $1 trillion in purchases is like “putting your gun on the table and making it clear that you mean it,” he said. That may cause the FOMC to get locked into a policy that it may want to end sooner. An incremental approach, by contrast, risks making the Fed look powerless.

A middle ground, Bomfim said, would be to announce an “up to” target of $500 billion or $1 trillion and make it conditional on the economic developments. The central bank can lower the yield on the 10-year Treasury note by about 3 basis points for each $100 billion it spends, Macroeconomic Advisers estimates. A basis point is 0.01 percentage point. “We think this is the way to bridge this,” he said. “You announce a bigger number, but you say we could buy more or less depending on how the outlook evolves.”

Bond investors are growing more convinced that the Fed will push Treasury yields down to the levels of the 1950s with another round of asset purchases.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aYquxwbjchHA

"Thin air" "shock 'n awe"? $100 billion for 3 lousy basis points?? Oh, man ... PhD econs sho' is crazy! 

And 'real life' is stranger than fiction ... Surprised

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Re: Gold Breaks Out to a Record

The HUI gold index is up over 4.5% today reflecting the leverage of holding gold in the ground through mining stocks. Unallocated, no storage fees but available in some places at under $500 an ounce.

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Re: Gold Breaks Out to a Record

Something tells me we might see a mass exudes from the camp next door.

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Re: Gold Breaks Out to a Record

'The camp next door' ... you mean the Bond Bubblers?

This is what happens when Bond Bubblers mate with gold bugs (not Photoshopped, by the way!):

http://www.nytimes.com/2010/09/14/science/14creatures.html

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Re: Gold Breaks Out to a Record

"Deflationist campers"

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Re: Gold Breaks Out to a Record

When Ben Bernanke became Fed chairman in Feb. 2006, I wrote that his tenure would be characterized by a vast expansion of the Fed's balance sheet. It wasn't hard to figure out. In a 2002 speech, Bernanke had extolled the use of 'a technology called the printing press.' 

In Feb. 2006, the Fed's $864 billion balance sheet had only risen by a sedate $30 billion in the year before Bernanke took over. With markets inflated by trillions in Bubble valuation at the time, it was obvious that at some point a crisis would occur, and Bernanke would step in with his printing press.

By the time Bernanke left, I projected, routine growth of tens of billions a year in the Fed's balance sheet would rise to hundreds of billions a year. This was linear thinking on my part -- it never occurred to me that Bernanke would stuff a trillion into the Fed's assets in a matter of months.

Today, former Fed staffer Antulio Bomfim is stage-whispering to the press that the Fed can depress long Treasury yields another 30 basis points with a fresh trillion in purchases. Bond Bubbler Bomfim Bumfuddle has truly lost his marbles. You can see what's gonna happen.

These Fedfools are going to drive the bond Bubble into the stratosphere until it pops. Then, in conjunction with a weakening dollar and commodities prices which already are soaring, long interest rates are going to reverse and blast higher -- probably by late 2011.

At that point, the Fed will be trapped. Rising long rates exert a braking effect on the economy. The Fed may feel obliged to raise short rates as well, to counter rising inflation. But shedding a trillion dollars of Treasuries from their balance sheet would push rates up higher and faster than the Fed wants, with the risk of triggering another recession.

This is why I firmly maintain that the Fed can never meaningfully shrink its balance sheet again. The long-term, macro reason is that a Ponzi economy must continually expand. But the near-term technical mechanism is that having created a monster bond Bubble, the Fed is going to lose control of long rates when it pops, and dare not exacerbate the unwelcome rate pressure by unloading securities into a crashing market.

Indeed, if 'Double Down Bennie' is as loony as I think he is, he may ante up another trillion next year to 'bring back the Bond Bubble.' Little did we know -- these are the good old days! 

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Re: Gold Breaks Out to a Record
machinehead wrote:

Bond Bubbler Bomfim Bumfuddle has truly lost his marbles. You can see what's gonna happen.

+1

Yup, we can see, super call you nailed it MH, the Moron Fed Rats can't see. Rats, after all have 20/600 vision.

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Re: Gold Breaks Out to a Record

Love it MH. 

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Re: Is Food As Good As Gold?

Yes, I'm a proponent of precious metals..but you can't eat precious metals.

What are the markets saying...compare food such as corn...wheat...oats to Gold and Silver.

Some "food for thought"

The past 6 months...

The past week...

Now just today...

Nichoman

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Re: Is Food As Good As Gold?

Perhaps adding to the excitment - Japan wants (needs) a weaker Yen lest exports suffer.  Yuan appreciating (bear in mind these are micro adjustments strictly controlled by the Communist govt as the Yuan is not subjected to normal market forces) would be counter to export expansion, but would soften the problem the Chinese have with "inflation".  So I don't know, but forex affects all markets.

Japan intervened in the foreign-exchange market for the first time since 2004 after a surge in the yen to the strongest against the dollar in 15 years threatened to stunt the nation’s economic recovery.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aXH4D2Aps0l0

My old friend the BDI - first a longer look for perspective.. log chart

Now log charts with gold, oil, the S*P 500 and finally the crb (non-log - log version N/A)

I draw no conclusions

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Re: Gold Breaks Out to a Record

And just for reference a long term chart of the yuan

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Re: Gold Breaks Out to a Record

i work at a place (a wall street gig) where gold, silver, and other precious metals get traded every day.  there has been an upsurge in activity as of late in this area.

we also do a lot of forex trading.  today was a really big day for that.  a boat load of activity there.  the BOJ will do it again if they want to.  pushed the yen down two big figures against USD.  that is a pretty big move in a pair in say four hours.  i have seen non-farm payrolls cause big moves like that before.  but all in all it is a rare thing.

the swiss did the same thing a little while ago.  when central banks intervene in the forex market it causes major distortions.   some people make a bunch of money and some people loose a bunch.

 

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Re: Gold Breaks Out to a Record

I read different metals sites everyday.  Harvey Organ always has great info on OI of gold and silver.  Yesterday he posted that there was a Huge increase of long orders of gold on the 14th - I would think those longs may stick to wanting the physical.  What is really interesting and I had no idea about - is the shorts have 22,000 Tons of shorts against Silver.  That is mind blowing.  Is the perfect storm being laid out against the shorts and derivatives of metals?  Overnight around midnight there was a huge push against the metals, I noticed on the chart - Gold was down around $10 when it was hit, but it easily bounced back up.  It will be interesting to keep watching those charts and see if the metals can keep coming back up as if nothing happened, when they are hit.

http://harveyorgan.blogspot.com/

 

I nearly jumped out of my chair when I saw that the open interest on the gold comex rose by an astonishing 16,068 contracts
 
and now tonight the OI sits at 594,058.
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Re: Gold Breaks Out to a Record

I absolutely Love Jim Willie - he always tells it like it is!

His latest out today.

 

http://www.marketoracle.co.uk/Article22733.html

Last Paragraph of article:

PMorgan is on the extreme defensive. While the new Financial Regulation Bill might have caused some disarray of the price suppression gamers, the bill surely has emboldened precious metals investors. By the way, a deep contact informs that Bank of America suffered a death experience on the weekend of July 24th, the same weekend that the London Bullion Market Assn went dark on reported data. Around the same time the Bank For Intl Settlements was fumbling around with phony stories regarding their 340 ton Gold Swap contract. The truth is... the BIS bailed out the London metal exchange, on the edge of default, which has suffered repeated gold raids. They have been forced to defend against a sequence of coordinated raids, all legal, demanding vast gold bullion and obtaining it. The BIS bailed out not commercial banks, not the Portuguese central bank, but the London metal exchange. The LBMA is struggling to avoid completely empty inventory. More BIS backdoor supply handoffs will come. Expect the gold raids against London to continue until the corrupt Anglo bankers are plowed under like a weeded lawn laced with rubbish. Soon a big bank will fall, from the incremental drain from losses defending the gold price without success. My guess is Bank of America. It will be absorbed by the titans on Wall Street, the corrupt monoliths. Eventually only two will stand, by the time the USTreasury default approaches.

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