If the secular bull market in gold is over, my question is " why
is it over ". The central banks are not done creating money out of
thin air. It may be over, but why.
I thought about this a bunch today. I'll preface by saying
I believe in a good conspiracy theory; I am also bearishly biased.
Anyway, I'll stick to at least some facts. The only
decent correction in the last ten years for gold happened in 2008,
at the very start of the financial crisis (July and August 2008).
I've heard it explained (by other conspiracy theorists), that in
the lead up to Lehman, highly leveraged, large entities (Lehman and
others) were on their way down and raising liquidity (selling
assets to meet margin calls). Of course Lehman was in and out
of the news that summer, but the death spiral only came after Gold
had plunged 20% or so. We've now had the panic sell in gold,
and combine this with the bizarre panicked action of buying US
treasuries AND large cap US stocks and something stinks.
Maybe in China, maybe in Europe, but somebody is hurting and
offloading their gold. Maybe I'm crazy for believing this,
but Europe has not been solved (just papered over), and that will
only work until there is a massive de-leveraging event. Is it
imminent? We'll soon find out. My opinion on China is
that they are doomed beyond belief. If you haven't seen the
60 minutes article about their housing bubble, it is a must
view.
Kalinm, maybe we don't have to go as far as a conspiracy theory
for the reason.
Consider these three paragraphs and especially the last sentence
from the WSJ today:
Some investors cited the situation surrounding Cyprus as another
reason behind gold's fall. A draft document addressing how Cyprus
will fund its bailout proposed that the country's central bank sell
$522 million of its gold reserves.
Central banks have supported the gold market in the past
several years as net buyers of the metal. Traders and analysts say
the talk about Cyprus potentially having to sell its gold has
reawakened fears that other central banks could follow suit.
The news about Cyprus "gets people to wonder: Will there be
central-bank liquidation of gold when other countries get into
trouble?" said Adam Klopfenstein, senior market strategist with
Archer Financial Services in Chicago. "Selling gold might be the
new caveat for any future [bailout] deals."
With respect to China, if they saw imminent trouble, they
would buy more than they already are, not sell. It is illegal
for producers in China [and in Russia, by the way] to export it.
They must sell to the central bank, albeit at market prices.
That is an indication of how badly they want to build
reserves.
I think in a country like China or even Russia for that matter,
laws don't matter, lol even in the U.S. if you got some cash you
can pay your way out, just like the bankers have.
Thanks for that. I think I read something on zerohedge
about that, but usually dismiss about 50% of their writings as
"sort of" true. That silver chart comparison I just put up
blows my mind.
I agree that piece on the China residential real estate was
unbelievable....the amount of money that is going to be lost by the
people in China who keep buying these places with no one to live in
them or pay the overhead is going to be over the top....
Title: Gold bull market If the
Posted by randy on 12th of Apr 2013 at 04:45 pm
If the secular bull market in gold is over, my question is " why is it over ". The central banks are not done creating money out of thin air. It may be over, but why.
because the US Dollar is in a bull market....
Posted by morton13 on 12th of Apr 2013 at 05:01 pm
I agree with that Lee,
Posted by kalinm on 12th of Apr 2013 at 05:03 pm
I agree with that Lee, but what makes this sell off today weirder is that the dollar was down on the day. Talk about bizarre.
Title: Take my opinion with
Posted by kalinm on 12th of Apr 2013 at 05:00 pm
I thought about this a bunch today. I'll preface by saying I believe in a good conspiracy theory; I am also bearishly biased. Anyway, I'll stick to at least some facts. The only decent correction in the last ten years for gold happened in 2008, at the very start of the financial crisis (July and August 2008). I've heard it explained (by other conspiracy theorists), that in the lead up to Lehman, highly leveraged, large entities (Lehman and others) were on their way down and raising liquidity (selling assets to meet margin calls). Of course Lehman was in and out of the news that summer, but the death spiral only came after Gold had plunged 20% or so. We've now had the panic sell in gold, and combine this with the bizarre panicked action of buying US treasuries AND large cap US stocks and something stinks. Maybe in China, maybe in Europe, but somebody is hurting and offloading their gold. Maybe I'm crazy for believing this, but Europe has not been solved (just papered over), and that will only work until there is a massive de-leveraging event. Is it imminent? We'll soon find out. My opinion on China is that they are doomed beyond belief. If you haven't seen the 60 minutes article about their housing bubble, it is a must view.
Kalinm, maybe we don't have
Posted by johan on 12th of Apr 2013 at 05:35 pm
Kalinm, maybe we don't have to go as far as a conspiracy theory for the reason.
Consider these three paragraphs and especially the last sentence from the WSJ today:
Some investors cited the situation surrounding Cyprus as another reason behind gold's fall. A draft document addressing how Cyprus will fund its bailout proposed that the country's central bank sell $522 million of its gold reserves.
Central banks have supported the gold market in the past several years as net buyers of the metal. Traders and analysts say the talk about Cyprus potentially having to sell its gold has reawakened fears that other central banks could follow suit.
The news about Cyprus "gets people to wonder: Will there be central-bank liquidation of gold when other countries get into trouble?" said Adam Klopfenstein, senior market strategist with Archer Financial Services in Chicago. "Selling gold might be the new caveat for any future [bailout] deals."
Now consider that Italy has what, 2500 tonnes?
Or, how about this opinion on Reuters yesterday:
http://www.reuters.com/article/2013/04/11/us-cyprus-bailout-gold-idUSBRE93917M20130411
With respect to China, if they saw imminent trouble, they would buy more than they already are, not sell. It is illegal for producers in China [and in Russia, by the way] to export it. They must sell to the central bank, albeit at market prices. That is an indication of how badly they want to build reserves.
I think in a country
Posted by himsa on 12th of Apr 2013 at 05:39 pm
I think in a country like China or even Russia for that matter, laws don't matter, lol even in the U.S. if you got some cash you can pay your way out, just like the bankers have.
Thanks for that. I think
Posted by kalinm on 12th of Apr 2013 at 05:37 pm
Thanks for that. I think I read something on zerohedge about that, but usually dismiss about 50% of their writings as "sort of" true. That silver chart comparison I just put up blows my mind.
Yes, that's quite a chart.
Posted by johan on 12th of Apr 2013 at 05:45 pm
Yes, that's quite a chart. In particular, if it plays out it will yield an excellent buying opportunity later in the year!
60 Minutes Piece
Posted by ronjuan on 12th of Apr 2013 at 05:14 pm
I agree that piece on the China residential real estate was unbelievable....the amount of money that is going to be lost by the people in China who keep buying these places with no one to live in them or pay the overhead is going to be over the top....
because Goldman Sachs said so
Posted by wowten on 12th of Apr 2013 at 04:49 pm
because Goldman Sachs said so
I hate Goldman Sachs
Posted by sbwoman on 12th of Apr 2013 at 04:51 pm
I hate Goldman Sachs