Posted on 09/24/2011 8:24:30 AM PDT by blam
Here Are The Real Reasons Why Gold And Silver Plunged
Mike "Mish" Shedlock, Global Economic Trend Analysis
Sep. 24, 2011, 7:28 AM
Many people have asked me to comment on the plunge in gold and silver. First let's take a look at the wrong answer: Case Closed: CME Hikes Gold, Silver, Copper Margins
And there you have it: CME just hiked gold margins by 21%, silver by 16% and copper by 18%. Mystery solved. Sorry Tyler, wrong answer.
Four Reasons for Metals Plunge
* Fed did far less than expected
* Mutual fund redemptions
* Margin calls at hedge funds
* China growth story fading
1. Fed Did Far Less than Expected
The Fed did not do what everyone thought, which is to say something far more than "Operation Twist".
As noted in advance, I explained why the Fed wouldn't do more than Operation Twist, in Six Things the Fed May Announce Tomorrow (But Likely Won't); Would Any of Them Matter? Gaming the Reaction.
In short, the Fed did not print, or even threaten to print. Moreover the Fed committed to a strategy not through the end of this year, but all the way through June of 2012. Perhaps the Fed does more in the interim, perhaps not.
For those expecting drama, the Fed's non-action was decidedly bearish for commodities in general, even gold.
2. Mutual Fund Redemptions
Mutual fund cash levels are at or near record lows. In general, mutual funds were not prepared for the market selloff and sell orders came in. Rather than sell garbage like Bank of America at $6, mutual funds unloaded stuff like gold, taking profits.
3. Margin Calls at Hedge Funds
Hedge funds unloaded gold and silver for the same reasons as mutual funds,
(snip)
(Excerpt) Read more at businessinsider.com ...
http://www.thetechnicaltraders.com/ETF-trading-videos/index.html
As world economic stability deteriorates even further, physical markets could disengage from the paper markets.
So you think that there is an instant repricing of gold relative to Dollars?
Gold is priced in Dollars, so why would there be? Is there a forex in gold?
That is the weakness of your point.
So you think that there is an instant repricing of gold relative to Dollars?
Anyone in the market would be a fool to fail to pay attention to the dollar value, lest they be abusively arbitraged by anyone with a brain.
Yes, they will have to flee the dollar too, gold is the logical choice.
Gold isn’t a currency, it is a commodity priced and valued in dollars.
this is the original source link for your link
That was good.
I'm afraid they may be signaling the same thing that gold and silver are signaling - the last or next to last plunge before we dive into a massive depression followed by massive fiat devaluation. That's something the folks in the 30's didn't have to deal with, among other things in their favor - like living in an agrarian society.
Nowadays we get our food from the store and the ability for half the population to buy it, from the government.
“These guys are missing another reason, the metals are priced in dollars. With everyone fleeing to dollars, of course the price relative to dollars is going to go down. This is the biggest factor and it isn’t going to last.”
Are you sure? Here is the chart of the change in gold price for Friday and the breakdown of change because of the dollar.
http://www.kitco.com/kitco-gold-index.html
As you can see, the change was mostly due to normal trading.
That is backwards, if the dollar gets stronger, you can buy more gold for less dollars ... in other words the price goes down.
Your link has the price going up not down even though dollars shot through the roof.
Yeah, I think there is going to be some major central bank manipulation of gold prices as currency becomes more worthless. So, in the short term (6 months to year), I am bearish on gold and silver. Unless, gold drops to $1200, I am buying ammo, food, and other barterable items. If we go the route of Argentina, my investments are good. If we go the route of the Wiemar Republic, my investments are outstanding. If a magical, unifying Reagan-like figure comes along and fixes everything, I didn’t buy gold and at an inflated price and I can still shoot the ammo and eat the food. Win-win.
Good point about everyone still fleeing to dollars. Even though, the dollar is sickly, it’s still doing better than the Euro, it’s main competitor for the moment. So, much of the weakness of our currency is hidden by this short-lived phenomenon.
Very interesting take, and I follow your logic. I especially like your Argentina - Weimer - Reagan scenario hedge strategy. I might follow it.
problem is...metals are sinking like a freeking boat anchor relative to the euro...not just to the dollar. so that theory is shot to hell...sorry charlie.
Profit-taking for the time-being. Unless the fiscal/debt situation improves in both the US and Europe. You can bet that precious metals will go back up again. I did say I thought gold was overvalued right now.
1: I went fishing today and it took me a while to reel some of them in.
2.I don't care about you. Only ME ME ME.(Just eat the worm goddamit)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.