Skip to comments.BARRON'S: Two Gigantic, Suspicious Sales Of Gold On Friday That Caused The Price To Plunge
Posted on 05/19/2013 10:03:56 AM PDT by blam
BARRON'S: There Were Two Gigantic, Suspicious Sales Of Gold On Friday That Caused The Price To Plunge
May 19, 2013, 10:34 AM
Gold went down the toilet again on Friday, and is now close to revisiting its April lows.
This gold weakness is causing a lot of consternation to fans of it who don't understand how the precious metal can keep falling, when central banks around the world continue to press down on the gas pedal.
A lot of gold bugs think the price is being manipulated somehow, or that there's some divergence between what's going on in "paper" gold (gold prices that are tied to ETFs) and what's going on in physical gold (people buying ingots or jewelery)
Randall W. Forsyth at Barron's fans the flames of goldbug conspiracy theorists a bit this weekend, arguing that there have been suspicious sales in gold seen on the exchanges (probably driven by the ETFs).
These improbable moves have made gold bugs suspicious, which isn't unusual. Folks who own gold do so because they don't trust the status quo, especially when it comes to government-issued paper money. But just because you're paranoid doesn't mean somebody isn't out to get you. They point to bursts of selling on Friday, April 12, which resulted in prices plunging by more than 5%, and to dumping that resumed the following Monday in Asia, early in the day when markets are illiquid. That culminated in a 9% collapse by the time the New York market had settled. But a seller who wanted to unload a large position at the optimal price would have done precisely the oppositeliquidate as discreetly as possible. Instead, sellers dumped the equivalent of more than 300 tons of the metal in staccato-like blasts during
(Excerpt) Read more at businessinsider.com ...
Video re the bad news for gold junkies!
It’s not so bad....I was able to pick up a few tons on the cheap..
The “paper” gold market is much bigger than the physical gold market. You can make as much “paper” gold as you want, as long as no one comes to the window to cash in the “paper” gold for physical gold.
This is the only explanation. The laws of supply and demand dictate that gold should be going much, much higher. I suspect that it will, eventually, but not until those who are manipulating the market buy in at a purposely depressed level.
This is really strange stuff. Makes me glad my tangibles are in silver bought back before 1995 for resale.
Not low enough for me to buy again. If the price dips below $1000/once, I will consider it.
I sold what little gold I had when it was around $1600/once. I held on to some silver though. I bought the silver at $13/once, so it would have been nice to have sold it at it high price, but I am still ahead of the game.
I think Gold is being replaced by political power as the arbiter or wealth...gold has just become a placeholder and a means to that end..
(Ahem, where is Toba?)
Actually, you can't. Exchange-traded ETF's are regulated in the same way other securities are, except the business has no moving parts, so it's extremely easy to audit. Here's an explanation of how GLD works.
Something happen to gold prices Friday? I didn’t read anything...
Can 0bama order gold from the reserves to sell? I’m serious, can he? What is there to stop him?
I think that 1,250 or so would be the buy point now. The gold bugs are ready to pounce.
Eventually, GLD should be near worthless as the physical stocks backing it dry up. Conversely, the premium that sellers can charge for the physical will rise as supply diminishes.
We will then have a better idea of the true value of physical.
He could, but that’s one area of the country’s destruction he is probably happier to leave to the experts at the Federal Reserve.
It goes up, it goes down. Elevators, the stock market, and gold. I have no sympathy for anyone who is crying over the latest plunge. You can’t eat gold. You have to convert it to money to buy bread.
In a crisis everyone will be looking to convert gold to money, and so the ratio gold/dollars will drop.
The reason why it dropped is that rampant inflation didn’t happen (because the economy is in the dumps) and all the hype ads predicting 20,000 were lies.
Actually, if the price of GLD falls faster than that of physical gold, the ETF's managers buy GLD shares and finance that by selling their physical stocks of gold, thereby increasing the supply to retail buyers. The point of this activity is to increase GLD's share price so as to bring it in line with that of physical gold.
When GLD's price rises faster than the price of physical gold, the ETF's managers do the reverse - they issue new shares of GLD, depressing GLD's price and use the funds to buy up physical gold, thereby increasing the price of physical gold. The whole idea is for GLD's price to track physical gold all the time.
Right. Which means the laws are only enforced against people that Obama doesn't like. That's the main vulnerability -- you cannot assume the regulators are honest.
Dishonest regulators like staying out of prison. It's child's play for the next guy to figure out that an ETF with no significant moving parts is a fraud. A dishonest regulator would pick something like Madoff's fund, not a commodity ETF. Huge amounts of institutional (pension funds, mutual funds, foundations, hedge funds) money goes into GLD. They can't all be stupid, unlike Madoff's investors, most of whom were non-professionals like Kevin Bacon and so on.
Silver spot price was 23.40 the other day- is that a good buy?
I got some, and if it goes down I will get a bunch more- the last time they talked up silver it went from 24 to 48 in one week
The big risk with gold is that it is only a clear solution to yesterday’s problems — namely, inflationary devaluation and military invalidation of fiat currencies.
Regarding inflationary devaluation, for all that they have been spending their spare time on stimulus and stabilization of too-big-to-fail financial institutions, central banks very much retain their day job of minimizing inflation. The minute, the very second, the Fed, BOE, BOJ or ECB see core inflation start to creep up even to low-mid single digits, you would see all easing programs halted, and if that didn’t work, start to see short term rates start steadily crank up in 25 and soon 50 basis point increments. We’d be at 5% LIBOR and 8% 30 year conforming conventional mortgages well inside of two years.
It’s been nearly 70 years since a substantial reserve currency was militarily invalidated — the Japanese Yen and German Reischsmark — and even then military defeat and forced currency redenomination was a more of a rescue of holders of the prior currency, who had been primarily hurt by hyperinflationary fiscal parties of the prior regimes during World War II.
Gold has very clear value to people who can’t own significant amounts of reserve currency, and to people in the European periphery who are risk of forced redenomination or balance seizures. For an American? Very unclear what the value proposition is.
Gold could easily be headed for $1150 this year if money trapped inside Egypt (and Syria) keeps getting out via physical gold (which is immediately sold so that the holder then has a non-Egyptian currency).
Ditto for Central Banks who need to raise liquidity because their region is in a recession (e.g. Europe, Japan, et al).
Also, gold-hawkers used to claim that the urbanization of Asia would raise gold prices...but the status symbol for rural ex-pats who move to urban areas is now a job, not a stash of gold.
Different world. Many won’t adapt in time.
Every time gold goes down, it is the result of a conspiracy I tell ya!
In the 80s when gold and silver went through the roof, we were told we'd never see the old lows again. Sure enough, those old lows came back around in short order, figuratively.
Now here we are again, and gold and silver have fallen considerably. The investment companies keep hawking the stuff. They're beating the "it's a great opportunity" drums again. They're as loud as they have ever been.
In the late 80s Silver approached $45.00 per ounce, probably exceeded it a bit. Then it fell to under $5.00 an ounce. And all the way down, commodity investment houses said, "It's a great time to buy."
Lots of people bought $14.00 silver thinking the bottom had to be near. It wasn't. It would take two decades before that position could be liquidated for profit. And then what? Even if you sold at the top, you would only have made 125% of your initial investment in that 20 years.
Now that sounds like a fairly good return, but that means your initial investment was held captive for two decades, while you had to do without the funds.
I remain unconvinced that precious metals investment is that great an idea. Even if you're extremely lucky, the returns aren't 1000%, or anything close to it.
If you're extremely lucky, you may make 100% return on your investment. If you're like the rest of us, your return will be 47% of what you initially invested.
The US government reported that deficits would only come to about 640 billion for 2013.That’s a huge drop from 2012 during which the deficit was over 1 trillion. Two more years of those kinds of deficit reductions and the US budget will balance.
That kills the need US government spending out of control argument for gold price increases.
That on top of the USA delivered oil supply shocks totally kills the case for gold.
Soros trying to manipulate.
I know the way it is supposed to work, but evil men have a way of getting around the rules.
For instance, Obama, born in Kenya to British National father and underage mother is not eligible to be President. But...a second term for the imposter in the White House.
And again, the 2nd Amendment automatically nullifies all gun laws. But...20,000+ gun laws.
And how about, the 5th Amendment enshrines our right to not be witnesses against ourselves. But...illegal enforcement of income taxes.
You get the idea.
Somebody is manipulating the market. Short supply should mean that the price goes up, not the other way around.
Interesting points. Thanks.
After the money's become worthless [not predicting that anytime soon, of course], that step will be eliminated.
I do agree, though, that people looking for investment returns from gold aren't to be pitied. Whether it's legal tender or not; it's still just money.
IMO it’ll be barely a good deal at $750/oz at most. A lot had a great time when it was on the rising bubble, but that’s over and it’s going to sink to the low 1000’s for sure.
Any you make a good point, in any real emergency people will be trying to dump gold like nuts and it’ll fall EXTREMELY fast. Everyone that stocks up on stuff thinks they’re the only one.. I don’t see it as a terribly good investment choice. Certainly not something to go all in on. Maybe 10% of your investments.
Frankly right now, I’m not sure what the heck is a good deal. Deflation does seem to be out there. Stocks are up and down, nothing has been ‘normal’ for over 10 years.
The debt of the American government is approaching $17 trillion and there is a fight brewing to allow it to increase further.
Yes that’s true.
If our government changed a few policies.
If it got our 40 million idle workers back to work.
If it held spending static.
We would be paying down the deficit at the tune of $500 billion to one trillion per year within three years.
It won’t, so we won’t.
Two excellent replies re the turmoil in gold.
We have this younger female relative, who is extremely smart, often cuts through the B$, and asks questions which might be obvious, but no one asks them.
Two summers ago, we visited her parents, and they informed me that she wanted to watch Fox Business with me. Which can be probably harder than oral PHD exams for Bus Adm.
I think I got a C with my answers in the first hour.
Then, there was a barrage of Gold Ads on tv including some former Watergate stars.
After these buy gold now because the $ will be worthless, came the best question of the day, month and since then.
Her question was simple but again to the core:
“If our dollars were so worthless and gold is so valuable now and in the future, why do the gold sellers want our $’s to buy their precious/valuable gold?”
I told her that I didn’t know and asked her why?
She said, “Something stinks and someone may be lying! If our $’s are so worthless now and later, why would a sane person sell their precious gold for worthless $’s!”
Thanks Grampa Dave, and that is an interesting question isn’t it.
For all the carping about the dollar though, it’s still a very respected currency. Where else are you going to go?
If the U. S. goes, there isn’t a currency on the planet that would be worth a darn.
Thanks for your comments below. They might give us a hint to who might be happy selling gold/silver for our ‘loser’ $’s.
“For all the carping about the dollar though, its still a very respected currency. Where else are you going to go?
If the U. S. goes, there isnt a currency on the planet that would be worth a darn.”
It seems that whenever there is a potential or real financial crisis in Europe or Asia, there is a rush into our bonds and certain financial markets like ETF’s for bonds, and the new high dividend/low votality ETF’s. The later have been excellent to own this past year and in particular YTD. Besides producing excellent dividends, far better than most bonds. Many of these high dividend/low votality ETF’s have YTD $ increase from 10 to 15% YTD.
So, who owns the gold seller outfits wanting the ‘loser$’s’ or their gold/silver?
It could have been until the past year, a good deal for someone swapping foreign currencies losing their value into $’s, then buying gold/silver and then selling it for $’s based on the increases in Gold/Silver Values. That profit goes out the window when Gold/Silver prices tank as they have. Any foreign banks trying to hedge on their devaluing currencies would have gladly taken $’s for any gold/silver they had bought until the last year or so.
Thanks Grampa Dave. I agree with your comments.
Just Google Silver Price chart, and you will probably get several places to track the ups and downs of several over a number of years. These days $23.40 is fairly low, but look at a long term chart before you make your guess.
Toba is in Indonesia, Sumatra I think. It is a giant caldera about 18 by 65 miles in size, with a lake. SHould show up on a map.
Yup. My point was that the area within that circle was completely covered in deep ash.