Uh-oh: Gold on the front page of Sunday's NYTimes

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investorzzo's picture
investorzzo
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Farmer Brown's picture
Farmer Brown
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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

Well, it's not the mother of all contrarian indicators, i.e., Newsweek, but it's likely correction time!  

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investorzzo
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Re: Uh-oh: Gold on the front page of Sunday's NYTimes
Farmer Brown wrote:

Well, it's not the mother of all contrarian indicators, i.e., Newsweek, but it's likely correction time!  

If you look at the chart, it says it's far from the price of 1980 and the factor of todays inflation. I have noticed that the press is determined to tell us all that gold is in a bubble. The same folks who missed everything else. The same press who asks the banksters where gold will be this and next year. They ask, even thow the banks have continued to be wrong? And when asked if they are selling their gold, the gold bashers say no, it's just over priced. Can't help but add up two and two and say. Ask yourself this question: " when have you ever seen a ponzi scheme succeed"? Have we forgotten "Madoff" already.

 I found it interesting that the politicians who trashed the CEO from BP; stating that he was kicking the can down the street, instead of dealing with the real issues. Doesn't this sound like us talking about he politicians? They need to watch the metaphors they use.

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

1)   Itulip:  Gold may decline 50% before the World Cup is over

And the World Cup may be won by a herd of wild Burundi elephants

Monday Morgan Stanley issued a headline grabbing prediction that gold prices may crash 70% as they did in the 1980s:

Possibility of gold experiencing a meltdown
Ruchir Sharma - Times of India 

http://www.itulip.com/forums/showthread.php/15978-Gold-may-decline-50-be...

2)  UK Telegraph - Ambrose-Evans-Pritchard

GOLD RECLAIMS ITS CURRENCY STATUS AS GLOBAL SYSTEM UNRAVELS

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/784196...

3)  UK TELEGRAPH -

LORD ROSHSCHILD FUND JOINS WORLD GOLD COUNCIL TO PUT 12.5M STAKE IN BULLION VAULT.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7842235/...

'I have used Bullion Vault for both GOLD & SILVER'.  Roshschild involvement makes me nervous ! ?Surprised

 

 

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

How does the iTulip author know that the US holds 8,000 tonnes when there have been no audits?  Is the US actually the richest country because of all this supposed gold and not on par with PIIGS and UK?  

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes
investorzzo wrote:

you look at the chart, it says it's far from the price of 1980 and the factor of todays inflation. I have noticed that the press is determined to tell us all that gold is in a bubble. The same folks who missed everything else. The same press who asks the banksters where gold will be this and next year. They ask, even thow the banks have continued to be wrong? And when asked if they are selling their gold, the gold bashers say no, it's just over priced. Can't help but add up two and two and say. Ask yourself this question: " when have you ever seen a ponzi scheme succeed"? Have we forgotten "Madoff" already.

Nothing moves up or down in a straight line.  I'm not a gold basher.  I own and continue to buy gold, but I am cautious, stay away from extreme price moves, and wait for a retrace before buying again.  I haven't purchased any gold since it was at $1,025.  The fact the msm is going gaga over gold or anything else for that matter, is usually a sign that a market turn is eminent.  Main-stream (non-financial) rags are almost always the last to catch on to what is happening, and hence signal the end of the move in the vast majority of cases.  Note the Newsweek cover that came out a week or so before the beginning of the decline that started in April.

I must admit, their timing is impeccable, LOL!!

http://weblogs.baltimoresun.com/business/hancock/blog/COVER-Were-back-Newsweek-.jpg

 

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

The Gold Report: You've said that it would be "foolish to think officials aren't manipulating the gold market." Could you tell our readers why you say that?

Brien Lundin: I've never been a big believer that the government manipulates the gold price on a day-to-day basis. By and large you can't blame everyday fluctuations on the secret hand of some government bureaucrat. My feelings that they don't do this every day has nothing to do with motivation, but rather government inefficiencies. I don't think they could do it. However, they're certainly motivated to manipulate gold prices in a broader sense. That's something they have done, and I think they are doing it now.

The reasons I think it's foolish to believe that governments aren't manipulating the gold market in some broader sense are: 1) it suits their purposes; and 2) they've done it in the past. Gold serves as the barometer not only of government mismanagement of the currency but of investor and saver confidence in the currency. As such, the gold price has been marching higher relentlessly, which certainly can be interpreted as a decline in confidence in the dollar and in government management of finances.

Both overtly and covertly, government manipulation of the gold price dates back to 1933, when Roosevelt confiscated private gold that U.S. citizens owned and proceeded to revalue it, raising the official gold price from $20.67 an ounce to $35. That, in effect, devalued the dollar; but, because they did it after confiscating the gold, it's an example of overt manipulation.

After Bretton Woods, following World War II, in concert with foreign governments the U.S. government routinely manipulated the gold price, primarily with the establishment of the London Gold Pool in the 1960s. They tried in vain to suppress the price, to keep the exchange rate closer to the official rate of $35 an ounce. As with all such manipulations of the market, that eventually failed and the London Gold Pool collapsed.

After legalizing gold ownership again in 1974, the U.S. government immediately cratered the price through Treasury sales of gold, which resulted in tremendous gains for the U.S. Treasury and tremendous losses for private investors. Throughout the 1970s, those efforts continued through public Treasury auctions of gold, which obviously were designed to suppress the gold price. Of course, ultimately these efforts failed as well, because the gold price broke free in 1979 and hit record levels.

After that, gold leasing through bullion banks was used to depress the gold price for some time. That was the primary tool throughout the 1990s.

TGR: Did that work?

BL: As detailed in research by Frank Veneroso, which we first published in the late 1990s, gold from central government vaults was loaned to the market either through fabricators or miners using gold hedges to protect the price they received for gold and thus their profit margins. That's still being done to some extent for project financing, although not nearly as much as in the 1990s and the early 2000s. But bullion banks essentially hedged their positions with gold miners and gold fabricators, borrowing gold from central banks at very low interest rates and selling it into the market, which would depress the price. Then they reinvested the proceeds into more leveraged investments—at least T-bills, but often using T-bills as collateral for even riskier investments. In that manner, the official central bank gold holdings dropped from about 30,000 tons to less than 15,000 tons.

TGR: Wow!

BL: In effect, that's a large, accumulated gold short position. Citizens of a lot of nations don't realize that much of the gold they think sits in the vaults of their central banks is really a pile of IOUs that can't be settled with gold. These IOUs would have to be settled with cash at some level. That's a lit fuse, and it's been out there for some time. It's a potential X-factor in the gold market that could send prices higher much more quickly.

TGR: Any other examples of how government manipulation is manifesting itself now?

BL: One of the ways is simply through manipulation of the futures and options markets and gold derivatives.

TGR: Europe's problems also seem to be influencing the gold price. This week, just after Moody's downgraded Greece's credit rating to junk bond status there was a late—though small—rally in gold.

BL: Right. As you know, gold and the U.S. dollar were on opposite sides of a seesaw for some time; when one rose, the other one fell and vice versa. I've been arguing that gold's real breakout would come when gold could rise regardless of what happened to the U.S. dollar. That actually happened with the early troubles with the euro. Early this spring, when we saw the first signs of this, we reported on them in Gold Newsletter. For brief periods, gold began to rise even when the dollar was strong. It wasn't a very pronounced trend, but it was the first sign that the inverse correlation between gold with the U.S. dollar was weakening.

As troubles began to mount in Euroland, especially Greece's sovereign debt troubles, gold began to trade completely independently of the direction the dollar—in fact, both were acting as safe havens. The real impact of these problems, particularly among the PIIG nations, is that gold has regained its status as a reserve currency, not only in the minds of central banks, but also with individual investors and savers around the world.

Gold's been a currency for some 5,000 years of human experience, but in the last century or so it lost much of its allure as a reserve currency. Now, as the rest of the world's currencies lose favor, gold is rising as a more favorable alternative. We still have the dollar as a reserve currency, and probably right behind the dollar we have gold.

However, while gold may be the "ultimate currency," the dollar is the only currency accepted by margin clerks.

TGR: Is that what you meant in your June newsletter when you said the fact that gold that cannot be created at will—as dollars and euros are—is the most important factor in any secular bull market?

BL: Exactly. And it is the factor that has come to the fore.

TGR: What range are you forecasting for the gold price through the rest of this year and into next?

BL: The rest of this year looks very interesting. Once gold passed $1,000 again last fall, the breakout was so powerful and so similar to two previous breakouts during this bull market that Gold Newsletter began tracking the rally against them. Those breakouts occurred in 2005 and 2007, with a year of consolidation in between.

Our tracking made it appear that this rally would carry gold up somewhere between previous rallies' gains—which were around 75% and 57%—taking it to between $1,350 and $1,500. When the rally faltered in December and January, we thought the analogy might not hold, but then gold really got back on track this spring. Projecting this rally to the average length of those two previous rallies, we could get up to $1,400 by the end of this year. Even by the early fall.

TGR: Wow! And then do you see it going even higher than that in 2011?

BL: Another period of consolidation is very likely, but that's just looking at it from a technical standpoint, not in terms of fundamentals. It's very possible that we could see gold around $1,600 in 2011. But that's in current dollars. Based on the official CPI, gold would have to reach around $2,300 in today's dollars to equal its record price in 1980. However, the government has changed the CPI. People don't realize that in the 1980s and then again during the Clinton administration, the government jiggered the CPI to minimize reported inflation. Economists can argue whether these changes were justified, but the point is that they changed the unit of measurement.

If you look at the gold price measured in previous versions of the CPI, you're talking about far higher gold prices in current dollars. John Williams of Shadow Stats has gone back and recalculated what he calls the "Alternate CPI," which takes out the government's changes to the index. As it turns out, when you use the historical CPI that was actually in effect during the 1980s, that $850 gold price record in 1980 is equal to $7,576 in 2010 dollars.

TGR: Yikes! That's if we measured inflation by exactly the same methodology the U.S. Department of Commerce used in 1980. But that $850 level didn't hold for very long, did it?

BL: Oh, no. It gained a few hundred dollars in the span of a month to get to $850, and $850 actually just was a hyperbolic blow-off price. Even so, the current gold price has a long way to go before it even approaches such a blow-off stage.

http://www.theaureport.com/pub/na/6573

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

Today (Monday) we're getting a bit of 'buy the rumor, sell the news' effect, after the Chinese yuan revaluation was announced over the weekend. Gold's strong gains last Thursday and Friday may have been due to traders 'buying the rumor' of revaluation.

Meanwhile, the MSM can't resist a reflexive, backhanded slap at gold, even as it reports on an asset class that his risen for nine years straight:

... gold bugs, often dismissed as crackpots who hoard gold bars in the basement ... even some sober-minded Wall Street types developing a case of gold fever.

Gold bugs = crackpots. Banks = safe; basement = risky. Sober-minded buyers = gold fever (temporarily deprived of their senses). Etc.

It is a contrarian caution when the biased, braindead MSM takes note of gold. But at 'the' top, the NYT will praise gold investors as visionaries and geniuses, with sidebars telling its breathless readers how to buy gold, gold stocks and gold options on 20:1 margin. Omitted will be the disclaimer: 'This article is a paid advertorial by JP Morgan.'

As P.T. Barnum used to say, "This way to the egress!' Laughing

 

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Re: Uh-oh: Gold on the front page of Sunday's NYTimes

Farmer Brown,

I thought that cover was a gag!

I'd be more inclined to believe a frizzled old scientist with beady eyes and a smock declaring with raised fists "It's ALIIIIIIIIVE!"

The effort to paint America as a successfully returning Fonzie wth thumbs up and shades on, triumphant in it's clash with financial peril is, quite frankly, indicative of the quality of the Publication.

Newsweek = Tabloid.

Cheers,

Aaron

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