Wednesday, October 2, 2013

Me Writing About Gold With a Tinfoil Hat On

So...yesterday gold changed its 13xx jacket for the psychologically important 12xx jacket. And, what a day to have done it. Even amidst a "government shutdown" markets are up, the dollar down. and  still PMs are down. Golds' daily cycle was dead faster than it could mean anything upon breaking through the 1290/oz mark... thanks to the all to predictable pre-market dump which we have all grown accustomed to walking up too. Its up above the 1300 level today, much to my surprise. It seems that most days after a break through an important level we will see a day or two more of falling prices. These last 2 days have really hammered it home for me, gold is in a strong side-ways move (which I suppose is better than down).

Whenever this happens, the interwebs (at least the parts of it associated with gold) chime up with the calls of manipulation. Honestly, I'm sure it is being manipulated but by whom, and exactly how much, I cannot say. Lets embark on a little conjecture for a moment. Conjecture which, I would like to make clear, has no clear point nor agenda and are only musings on the mantras which are commonly spoken following any major price drop.

"Its the Feds!!"..."They don't want us to invest in gold, but rather their worthless fiat paper!!". I mean, I'm pretty sure that's right just based on the fact that they are doing more "investing" in the American dollar than anyone else. That being said, the USD is not measured against gold but rather other currencies...or, perhaps more accurate, other currencies are measured against the USD. But, lets just go with the argument for a moment. Strangely enough, although currencies are not measured against gold, foreign banks (so I have heard) like reserve currencies based on a number of things but, at least partially, a currency backed by something. So...what would happen if the Fed managed to manipulate the gold down to $1000/oz, which would cause huge demand in the East. This, coupled with the Wests' apparent lack of appetite for gold as an investment would send gold out east (Yes...this is already happening). It seems counter intuitive to devalue gold, send it east, and allow Eastern nations to back their currency with all the gold the west is throwing to the curb when you are, supposedly, manipulating the gold price to prop up the dollar? It would make a lot more sense, to me anyways (I know very little) if they were manipulating it down, scaring people away from gold, picking up a bunch of gold at bottom rates to re-stock the vaults and actually back their currency with lots of cheap gold. Then, slowly release it into the market at a rate lower than demand and run it up to whatever they saw fit. I mean...didn't that kind of already happen once. At least time you can make money and its not flat out illegal to own gold. 

I know...I just said that the USD is not measured agains't Gold, and then I kind said it is...but their not the same thing.

I suppose, as well, you could make the argument that investors are turning away from gold because, from a western investment stand-point, it hasn't really been doing what it is "supposed" to do; acting as a hedge or harbor. I suppose, you could make the argument that its because of all dat manipulaton, but GLD, in my opinion, is a very good indicator of western sentiment/interest in the form of demand, which, as the chart shows, is falling.

I enjoy a good dose of healthy conspiratorial speculation as much as the next guy but I don't really have an opinion or strong belief either way. If you stuck my in a room and played Justin Bieber records until I gave an opinion I would say that its big players setting themselves up for big gains who are responsible for the all so transparent early morning dumps. That they have recently tried to get it back down to the 1179 level and start from there, but they couldn't, or haven't been able to yet. Beyond that, I think the sentiment just isn't there.


  1. tl;dr

    Try this on for size:

    Gold is "manipulated" by commodity traders who see weakness and puke a few thousand contracts to trip stops and make retail dump.

    Then after the tumble down stops, they buy back and close out at a big leveraged profit.

    A puke into the thin electronic market is simply the best way to get a big bang for your buck. An instantaneous dump of 2,000 contracts smashing thru the bids while China's off on holiday is not poor execution, it's purposeful and often very successful.

    And it's not JP Morgan or the lizard people, it's just commodity traders seeing which side is weak.

    All it accomplishes from a supply-demand standpoint is shake some more physical out of Whitey's weak hands.

  2. Yea, It's what I have been thinking. I had imagined though that there was an effort to get the price down to a certain level, while making money on the intermediate swings up and down.

    I wrote this more as a satirical joke based on the stuff I read when ever gold goes through one of the "2000 contract dumps".