Sunday, 22 November 2009

Gold Again: And It's Still Impressive

A few weeks ago I wrote that, from my utterly non-insider's viewpoint the gold breakout looked impressive. A commenter agreed. Turned out it was the Indian government buying a whole heap for their reserves.

Since then it's soared away (leaving a few notable casualties in its wake) and is apparently forming a ... wait for it ... a
Swiss Stair. This, according to my diligent google-researches, is taken to imply that (as I surmised before) some heavy-duty players are intent on buying in large quantities, and the market knows it.

So - now you know too! Click image to be blown away ...

(long gold meself; do yer own DD etc)


ND

26 comments:

Steven_L said...

New Years resolution - listen to Nick more!

Houdini said...

Well when we send billions to India to fund their education programmes, it does make sense for them to take advantage and put their own money away in gold doesn't it?

What does it say about our Government though?

electro-kevin said...

Beast of Clerkenwell converted everything he had into gold before this started. Mightily prescient of him.

I believe that inflation is well and truly alive, though in disguise.

Fuel, energy, travel costs all going up. But what about the shopping basket ?

The Sun carried an interesting report on page 47 which came as no surprise to me:

Ten pack of Coors beer still at £8.09 - but 275ml instaed of 300.

Milk chocolate digestives same price but reduced from 20 per pack to 18 ... pizzas shrinking by 20g but staying at the same price ... Hartley's jam reduced by 10g at the same price ...Birds Eye chicken chargrills reduced by 12g but staying at £2... Terry's Segsation chocolate orange reduced by 200g ... and wagon wheels ! They used to be as big as your face ! Now the size of a 2 pence piece ! Too many examples to list.

Plus Guido frequently reminds us the the BofE pension scheme is geared towards inflation.

Steven_L said...

I've noticed this too EK. Crates of Becks, Stella etc are down from 24 to 20 bottles and now to 18. Xmas 2007 I bought 60 bottles of Becks for £20 from ASDA, be interesting to see what the best loss-leader on premium lager is this year.

Minced beef seems to have nearly doubled in a couple of years and premium sausages are 2 packs for a fiver when you used to get 3 packs.

I've noticed a steady rise in the price of tinned curry (up about 30% in a year I reckon).

It used to be easier to see the kind of inflation you described, as most foodstuffs had to be prepacked in prescribed quantities, most of that law has been removed now, I wonder if they should update their CPI methodology to compensate?

Bill Quango MP said...

Its the price of chocolate EK.

http://www.dailymail.co.uk/news/article-1215682/Worst-cocoa-shortage-40-years-fuels-chocolate-price-rise-fears.html

Cocoa prices have risen 7%+ since 2006 already but 2009 the rise is so steep that you see these 'cuts' to size and quantity.It will last all year.

Had it all lined up for a friday fun but R5 beat me to it.
{rename the new smaller chocolate bar.
Wagon Wheel - Wheelbarrow wheel
Lion Bar - Kitten bar
Twix - ix etc.}

electro-kevin said...

How can we afford to have an obesity epidemic ? I don't understand how there are people so morbidly obese that it is patently obvious that they can't be working. How does that figure ???

Sometimes it is impossible to buy a Mars or a bag of crisps in standard sizes - they are all giant sized.

I mean to stick half in my bag, I really do, but always end up eating the lot in one go. I've put on a stone this year ... and my credit card bill has returned.

electro-kevin said...

The misses has been calling me the Pilbury Dough Boy and poking my waist every time I walk by - and going "Oooh ! It's the Pilbury Dough Boy !"

Next time she does it I'm taking her for a walk in the forest with a shotgun and a shovel.

Anonymous said...

But consider if this conspiracy is only a loose coalition, and maybe the takedown got a little out of hand. There is little honor among thieves after all.

What if China got strung along in a mercantilist dollar-peg setup where they got upfront manufacturing and knowhow (Clinton) in exchange for building dollar reserves and funding treasury needs? And what if they weren't informed of the inevitable losses they would need to take when the dollar dilution ripped the faces of their profits? Add insult to injury as they attempted to hedge and moved to AU, they found they were delivered salted (Tungsten) bars? (and recently found some culprits)

Assay offices now globally busy. Could be up to a million ingots. Timescale, - early to mid 90's. Paper trails being audited.

Rothschilds left LBMA in 2004. What did they know?

You might lose a conspiratorial partner quick with just a such a backstab. China may know its going down, but it has the power to blow open the lies, games, counterfeits that has backed the USA/UK illusion. If they hit AU hard, offloading their $$$, taking delivery always, and demanding assayed physical--The end of the liquidity funnel could blow the global lid off.

Then China closes borders, works on autarky, has all the science-engineering-production-natural resources to make the middle Kingdom #1 again.

UK, Europe and USA would be smoking craters of social insurrection.

Yikes!

Replaces tin foil hat.

Anonymous said...

I believe the derivatives on table 19 of BIS could be VERY destructive if the gold scenario plays out,

Interest rate swaps, gold derivatives............ etc

Fiat is based on trust, only that.

Anonymous said...

http://www.ft.com/cms/s/0/f4f9a4f0-d791-11de-b578-00144feabdc0.html?nclick_check=1

Steven_L said...

I love the comments that come out of the woodwork whenever anyone writes about gold.

All that's missing are the Alex Jones fans telling us to buy lead and cereal flour.

Anonymous said...

A very intelligent comment, Steven. Thank you kindly.

Nick,

An old thesis, but it should help the understanding. Compare the derivatives levels mentioned in the article, to the current derivative levels

Contained in The latest BIS issue of table 19

Note the interest rate derivatives, which probably assume very low rates in the west for at least the next 18 months. A sudden default, increase in Libor, increase in Ted spread, etc,, and BOOM! once again. Why the goons insist on walking this tightrope, I can't figure.

Note the levels of Gold derivatives. In a sane world, an alleged "free market", why would there be a need for gold derivatives?

Aggrieved nations, with just cause, are shaking the supports of the tightropes.

The entire derivatives scene speaks of an ending fiat regime, requiring more and more intellectual/financial fraud to sustain it. Table 19 is the Mona Lisa.
Keynes is a turd.

Anonymous said...

PS.
Interest rate swaps have bonds embedded in them, creating an implied, but false, market demand for bonds, effectively lowering interest rates falsely.

The whole scene stinks.

Interest rates in the West, when compared to TRUE RATES of inflation, (not gov't lies) have been too low for decades, and negative for significant periods.

This has caused significant errors in the allocation of capital, (housing) and in turn increased levels of leverage (more derivatives) in order to generate returns. They have allowed gov'ts to borrow and spend without financial/economic sanction and created a global asymmetrical concentration of debt.

The guilty parties, and they can be named, should be hung, and let our children and grandchildren view their cadavers and learn from the errors of these turds.

Budgie said...

Anon 8:55am said: "Fiat is based on trust, only that."

Gold is fiat too.

You can't eat gold, travel in gold or live in gold. To get food another person has to be willing accept your gold in return. And, historically, this exchange rate varies (as we have seen with the Brown Bottom). There is nothing intrinsic about gold.

That does not stop gold going up from here. Considering the recent behaviour of our fantastically inept governments, it would not surprise me.

a novice writes... said...

So, if all this is based on trust and that trust could appear to be waning in light of possible gold fraud, does this mean that eventually a new material(s) will be used to back a currency? e.g. Uranium or some other element that may be used for the production of energy and therefore goods / services?

It seems to me that whilst gold has been an element of choice for a long time, in more recent history, it has been other materials such as coal, oil and gas have been the real "materials" to have as it allows production of goods / services. You can use gold to produce goods, but you can still make the same goods with other materials e.g. electrical components.

Is somewhere like Australia actually the next place to be with it's reserves of potential energy producing materials and therefore the Aussie dollar is the currency to hold?

*just a bit of fun speculation*
Would it actually be worth Western govts allowing the devaluation of gold once other Countries had bought enough of it and usurping it with a.n.other material given their current state of debt?

Anonymous said...

Nick,

More Reading here for better understanding

Budgie, dear...

You are blinkered.
Travel the world... Kruggers accepted as money anywhere, same with Sovs, Maples, libertys, at the going rate.

Banks freely exchange, even in China.
UK banks? no! Even Barclays, a member of the LBMA doesn't deal.

Tells the story that I am trying to tell, don't you think?

Western govs/banks/sheeple, do not understand.

You have been brainwashed by western mind games.

Steven_L said...

Somehow I trust the tenner in my wallet more than these conspiracy theories, and thankfully so does the checkout girl at Tesco :)

Budgie said...

"Travel the world... Kruggers accepted as money anywhere, same with Sovs, Maples, libertys, at the going rate."

Yes. At the going rate. Which varies over time. Where did I say that was not the case?

"Banks freely exchange, even in China. UK banks? no! Even Barclays, a member of the LBMA doesn't deal."

Don't be dim. You can buy gold bullion coins in the UK anytime you want. As I have done.

"Tells the story that I am trying to tell, don't you think?"

No. Because you miss my (only) point which is that gold because of its intrinsic (relative) uselessness is itself fiat.

"Western govs/banks/sheeple, do not understand. You have been brainwashed by western mind games."

I am not them. I understand that gold can be useful as a currency. But you do not understand that gold is not magic, and always relies on other people's willingness to accept it. Gold 'value' varies - always - because of this. This is the definition of a fiat currency.

Elby The Beserk said...

Buy gold


http://beforeitsnews.com/story/0000000000000499

... or Tungsten?

Nick Drew said...

@11:30 amIn a sane world, an alleged "free market", why would there be a need for gold derivatives?

well, extractive industries often need forwards for vanilla hedging, as do some retailers

as for options (a) they often follow as a matter of course when there is sufficient liquidity in the forwards, if only as a leveraged speculative vehicle (b) sometimes those in need of a hedge can't put up the collateral for a swap (which is what they'd ideally like) so they are left with buying options

but the main holders of the options (according to one of your links) are not entities that couldn't get a swap

so ... (?)

Anonymous said...

Budgie...

You fell into the trap of fiat thinking.

"At the going rate" was the trap.

Gold is the universal currency, that's why failing fiat currencies try to suppress it.

Gold, Left alone, and reflected therefor in each local currency,... that is its "going rate". The local currency moves up or down against the universal gold. That's why you increasingly see graphs of gold price in all major currencies.

That's the flaw in your thinking that invalidates your comments.


You can't eat £, travel in £ or live in £. To get food another person has to be willing accept your £ in return. And, historically, this exchange rate varies (as we have seen with the Brown Bottom). There is nothing intrinsic about £.

Why do you think the Bof E is QE?
Because other nations won't accept the £ as debt! Precisely your argument.
They don't trust it.
Why do you think central banks have become net purchasers of bullion again?
Because they DO trust it.

Knock Knock!

Fiat, and trust.....all that backs a fiat currency is the ability of the issuing gov't to honour that fiat, basically by its ability to tax its own population. Yes it can "print money" to pay debts, but printing is only borrowing from the future, creating the hidden tax of inflation. When you borrow to pay debts you are in a downward spiral, the debt interest eventually overcomes the ability to pay. Increasing debt in a fiat system creates less and less GDP per unit injected as shown in this graph

Nick.

Yes, a junior producer can finance his capital for forward production by selling it forward. This is partly how the major bullion bank shorts have been able to finance/justify their short positions....production was sold forward at low prices, ..... the junior producer walked into the bullion bank financing trap. The company becomes hollowed-out, has to constantly issue debt, etc, etc. If you google Barrick Gold Hedge Book, JPM, Court Case etc, you will find an explanation. Barrick has just taken a $6B hit to partially get rid of that problem. The key to this scam was always to keep the junior away from legitimate sources of funds, easily done in the '90s, and 2000, when gold prices, via suppression, were low. Now, with higher prices, legitimate financiers will step up. In the law suit brought by shareholders against Barrick, Barrick argued immunity since it was acting as agent for JPM, AKA the Fed in the gold suppression scheme, and was acting in the national interest. Go figure. Makes all the shouts of "conspiracy nut" sound rather stupid, don't you think?

Steven

The tenner in your pocket may well be trusted by Tesco, but it will buy less and less.

Remember Iceland. An 80% devaluation, overnight.

If you had held gold over that night, instead of Icelandic currency, you would be able to convert it back to Icelandic currency the following morning for 5 times its value the previous day, in Icelandic currency. As I said to budgie, it is the global figure that is the gold price. National currencies vary against it.
Since ratings agencies, IMF, and OECD, are all warning about UK debt levels, it may be prudent to buy bullion coins, as Budgie says, you can buy them in the UK. They are better than £ in this instance.

Sheesh.

Steven_L said...

The funds I'm in have a good mix of worldwide equity exposure, a few shorts, inflation linked gilts, foreign government bonds and gold. Although by far the best performer is the Minerva position tipped here by CU :)

All in gold = eggs all in one basket. Thanks for the advice, but I won't be clearing out my ISA and heading down the coin shop anytime soon.

I wish I had gone with Nick on that gold breakout on my cfd account, I thought about it, but I wasn't in the mood to lose a few hundred dollars if it dipped again and I got stopped out.

If you want to make some cash from gold, set up one of these mail order firms that buy scrap at rubbish prices, you'd be surprised how many people send off their trinkets to a stranger with a flashy website.

Budgie said...

Anon 5:35pm

Maybe I'm not explaining it clearly enough, but you keep missing the point I'm making.

Of course the £ is fiat currency - who said it wasn't? Not me.

Your claim that gold is constant (as though it has some intrinsic steady universal worth) is false. As is easily seen by what gold will buy in terms of, say, food over the last decade. This has fluctuated considerably.

As with any other investment sometimes it is wise to own gold, at other times foolish.

Even a gold based currency can experience inflation. By importing gold stolen from the Incas etc the Spanish debased their own gold currency.

There is nothing magic about gold - it is just as much a fiat currency as paper or conch shells.

Maybe it is not my explanations that are wanting, maybe you are just too gullible for internet conspiracies.

Anonymous said...

Budgie,

Maybe it is not my explanations that are wanting, maybe you are just too gullible for internet conspiracies.

And maybe you are too quick to call everyone elses opinion an internet conspiracy theory.

Former Treasury Secretary, Prof Lawrence Summers, currently part of Obamas economic team, (gawd help us), when he was a prof, wrote a paper covering "Gibsons Paradox"

In summary, Gibsons Paradox explained the historic inverse relationship between gold and real interest rates and he suggested that central banks could achieve their holy grail, complete control over interest rates, if they gained complete control over their nemesis, the price of gold. "Suppression" is indeed the best single-word summary for what Summers' paper had in mind for gold.

Rick Santelli mentioned it last night on CNBC, you can watch it Here

Now think about what is happening in the world.
Interest rates throughout the west are almost zero, and will remain so for months if not years.
REAL inflation in the west, varying country to country, is very positive, probably 5%+ in the UK now, therefor TRUE interest rates are wildly negative.
Now consider the QE levels and the debauched currencies in the west, that are depreciating against other currencies. That fact explains part of the fluctuations in currency vs currency. Remember also that there has been NO TRUE increase in GDP in the west for probably a decade, it is an illusion built on increasing debt, and you begin, (maybe, :-), ) to understand the rise in gold prices, currently in most currencies, soon, in all currencies.

I have given you enough links to explain the gold price suppression as fact, and the reasons. Maybe you didn't read them.

Table 19 of the BIS contains, amongst other things, the various methods in total. These methods have increasingly been required to suppress interest rates and gold, as the gold exchanges suppression methods have gradually been exposed, and exploited by REAL buyers.

I mentioned earlier that falsely suppressed interest rates had created a gross mis-allocation of capital throughout the west, which resulted in the hollowing out of our manufacturing industries, praised at the time by all numb-nut politicians. In fact, theoretically, under any deficit fiat currency, this HAS to be the eventual result of the initial fraudulent manipulation of interest rates in order to create favourable economic illusions.

The conspiracy is not "internet", it has been created by corrupt politicians, and bankers, anxious to maintain the unstable status quo, rather than address the global wage arbitrage in a positive manner.

Those who shout "conspiracy theorist" are those who have been conned for decades by this charade, who haven't got the intellectual ability to see through it.

Gold is increasingly doing what it should do. If the always short bullion banks have to cover, wheee heee!

Yes it will overshoot and correct, but it is a long way away.

Budgie said...

Anon 11:58am: Yet another of your long winded and tedious conspiracy theorist comments which misses the fundamental point. Indeed paper currencies like the £ and $ are fiat - we all know this.

But gold as a currency also depends on people's trust in its 'value' at any one time. So gold too is a fiat currency.

If you do not think gold is fiat what is this magic absolute value of gold that never varies? And where do you get that figure from? You cannot answer these questions because gold does not have an absolute value. There is nothing magic about gold.

Anonymous said...

Budgie.

I have deliberately decided to disregard your fundamental point because it is facile and childish, and makes you look thus.

It is almost as if you want me to insult you.

Instead, I would suggest you use google to find the attributes that a "thing" would need to be called currency, or money.

You will see what fills the bill.

I don't see central banks standing in line to buy shells, or beads, or diamonds, for that matter. I don't see hedge funds doing likewise either! Wonder what it is that they know?

6000 years and billions of people seem to disagree with you. Try to convince them to use toilet paper, or falling leaves, or what-ever, as currency, why don't you?

Or would you prefer sparkly glass beads, like the folks who sold Manhattan Island.

Good bye.