Tag Archives: gold
Soros: Gold In Bubble; But Keep Stimulus Going…..
Always nice to see people talk out of both sides of their mouth.
Here is currency speculator George Soros (ex of legendary hedge-fund Quantum) at the World Economic Forum at Davos:
“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”
So far so good. Mis-price money (cheap interest rates) and people don’t want to keep their savings in it. They want it in something that isn’t subject to mis-pricing (so they hope) – hence gold.
But then Soros shows how disingenuous he’s being by adding this:
“I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.”
That is, he’s suggesting running more deficits and keeping the money spigot going, just the thing that’s caused the gold price to rise.
So how do we understand this?
Gold is due for a technical correction, but it’s also probably responding to deflation in the general economy. It’s not going down that fast, because a lot of people are also buying it speculatively.
That’s the tug of war.
Meanwhile, who know what Soros’ holdings are and who knows what his motivations are in making such contradictory statements.
But anyone who takes these sorts of pronouncements as any kind of lead for their own investments/speculations, should be prepared to part fairly soon from their money.
David Tice On King World News: Trouble Ahead….
David Tice on Eric King’s King World News, December 23, 2009
- This is not another inventory recession; this is unprecedented
- There’s trouble all over the globe – Europe, China, Japan..
- Hunker down, cut back expenditures, get out of stocks, own gold
- Look for deflation followed by competitive currency devaluation, then inflation.
Lanka Needs Soros Like A Hole In The Head
“In 1992, Soros earned the epithet “the man who broke the Bank of England” by demanding the Bank to raise its interest rates or to float the currency (so that he could make more money). The Bank did neither. He retaliated by selling “short” more than $10 billion worth of pound sterling, forcing the Bank of England to depreciate the pound: Soros amassed an estimated US$ 1.1 billion in the process. Continue reading
GATA Sues Federal Reserve For Records On Gold Manipulation
From the website of the Gold Anti-Trust Action Committee, the leading activist against gold price manipulation in the market:
“GATA today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank’s records of its surreptitious market intervention to suppress the monetary metal’s price.”
For some of my warnings of gold price manipulation, see the following:
“Was the IMF Involved in Gold Price Manipulation?” Dissident Voice, June, 2006
“Hanky-Panky at the Counting House,” Dissident Voice, June 6, 2006
Gold Sinks Further, Dollar Surges..
We will need to see a few more days of supporting action, but as of now, it looks like gold might be beginning the long-awaited correction.
How deep that will go is anyone´s guess, though the recent central bank buying is supposed to lay a floor for it above $1000. Now, normally I wouldn´t bet the house on that, but I´ve come to see that pronouncements from insider analysts (at GS) are no longer just market analysis to be weighed. They are announcements about the course of action the banking cartel is going to be supporting.
The trigger for this? I think it´s that upbeat jobs number, which is probably taking some speculative money out of gold …especially as gold is technically very overbought and institutional buyers want to lock in profits before the year end.
Dubai is more important than most commentators think, even Marc Faber. They say the numbers involved are too small.
But, as I blogged earlier, they´re not seeing the contagion possible.
Here´s what they´re discounting:
1 We don´t know what the numbers from Dubai really are. We can´t be absolutely sure. They keep changing them. $125 billion (the highest figure I´v heard) may not be enormous in a global context, but we don´t know how its tied up with investments and where. A firesale of Dubai Worlds real estate could have unsettling effects all over the world.
2. Dubai has an impact on the property market, not just in Dubai, but in London and New York where Dubai Worlds has holdings, and also in India, where real estate and employment could take a hit.
3. Banks have leveraged exposure through derivatives, beyond what they are admitting in public.
4. These are banks that are already broke, for all purposes.
5. When the banks involved are not themselves broke, they are backed by governments that are broke, or near-broke.
6. The government with likely the most exposure is Britain. Britain is on the verge of sovereign default.
7. This happens just as the second down-leg in real estate is unfolding, and along with it the just-as- leveraged commercial real estate market (see the recent zero hedge post on an ongoing CRE failure in Chicago), where there´s little pressure for the Feds to step in.
8. This happens after a 10-month run up in the stock market in what is essentially a bear rally, according to many experts.
9. This happens when the government has escalated an unpopular war in Afghanistan, calling for more troop commitments and more money
10. This happens after massive further government commitments in health care and other social spending.
Would the dollar move up just on the back of an employment number that was widely acknowledged to be misleading? I don´t know.
Do I know if gold will sink below $1000? No.
But CB (central banks of India etc.) buying is said to have set the floor. Me, I think that was a bit of help given by the RBI (CB of India, Sri Lanka, etc.) to the IMF, seat of power of the globalists. Even the IMF admitted it got lucky.
Will that bit of market manipulation to the upside be enough to stave off the deflationary effect of develeraging asset derivatives?
I don´t know, but I suspect it won´t.
I’m anticipating a rush into the dollar like we had in 2008…maybe not as strongly…
maybe gold will sop up some of the rush this time. I think that´s what the CB´s are hoping will happen.
But again, one can´t be sure, for the simple reason no one knows how much more bad debt there is and where it is.
Gold Down On Biggest Volume In History..
“The exchange-traded fund, SPDR Gold Shares, that holds gold bullion was down 5% Friday afternoon on record trading volume as the gold price fell. More than 70 million shares have traded hands with an hour of trading to go. It’s the highest volume in its history. The gold ETF was launched in late 2004 and has assets of more than $40 billion”
China Warns of Gold Bubble
The Telegraph reports that China warns of a gold bubble:
“Experts say that China is putting a floor under the gold price but does not chase rallies once they are under way.
There is also a double-edged twist to news that Barrick Gold, the world’s biggest gold mining company, has closed the final 3m ounces of its notorious hedge book ahead of schedule. While the move is a bet that prices will continue to rise, it also means that Barrick has been a big buyer of gold lately. These purchases have now stopped. One of the key drivers behind the spike this autumn has been removed.”
This article is one of the few out there that takes into account the time lag between an announcement and an action. Many of the events that reporters tout as proof that the gold price will spike much higher right way are actually events that have taken place in the past – for eg., purchases at lower prices – or are hedges that have a more complex function than the usual retail investor has in mind, with the siren call of “gold´s going to the moon, jump in now or you´ve lost it forever” sounding in his ears.
Take trader John Paulson´gold purchase. It took place in January, apparently. And remember that it was a position taken by his hedge-fund, with his clients money. Paulson gets his fee no matter how that trade turns out long term, and if his fee is a percentage of the assets under management, a purchase when the price is high is better than one at rock bottom, even if his clients´profits are not maximized that way. (sorry: thoughtless blunder there)
Notice finally that Paulson´s own fortune is in gold to a much lesser extent – only about $250 million of his reported $6 billion net worth. That comes to about 4% of his assets….(Correction: that´s 6.8 billion and less than 4%)
Not an earth shaking proportion by any means.
So, what gives?
Paulson Has More Gold Than Australia…
Or Argentina, or Brazil, or Thailand, or Ireland…or..
Check out EconomPic for a nice chart.
Speculation Drives Metal Prices
Geologist Brent Cook at Mineweb explores the speculative frenzy behind metal prices:
“Now I do not know if Paul’s [Van Eeden] thesis on gold is accurate or not: if it is it could still take many years to play out. Likewise, I do not know how or when the base metal prices will re-equilibrate to the reality of end demand-whatever that is. What is obvious is that gold and now base metals have become speculative investments that in addition to being bought as hedges against inflation and a falling US dollar are the latest get rich quick scheme. The end result is that absent the faith that metals and markets are all headed higher, we here at Exploration Insights are finding it difficult, although not impossible, to find value in junior mining and exploration companies.
Hot money on the other hand is not.
Over the past few months we have witnessed bought-deal equity financings for individual mid- to junior tier gold companies in the 10’s to 100’s of million dollars. These are being bought at nearly the absolute 52-week highs by funds that I know have not looked into the mining, metallurgical, social or political intricacies that make or break a mine. This fearless hot money jumping into the sector worries me. It always precedes a market bubble and correction: sometimes serious, sometimes temporary- sometimes by weeks, sometimes by years.
Adding to the absence of fear and proper due diligence in the market, my recent discussions with corporate financiers confirm that both large and mid-sized gold companies are being offered substantial unsolicited bought-deal financings-no questions asked. At the same time, some of the very same companies being offered the quick money are being hit with heavy selling when a fund manager becomes “concerned” because there has been no news for a couple of weeks or gold backed off $15.
Hand in hand with heavy fund demand for new metals investment ideas most of the major research firms have increased their commodity price assumptions to reflect the “new reality”. The primary advantage afforded by the commodity price revisions is that previously overvalued mining companies can instantly become “Buys”. Recall that the last major upward revisions from many of these same research firms came as the new reality of higher prices set in 2008.
The problem is that greed is driving the market and so any small hiccup or change in sentiment and the hot money tends to bolt. As last year taught us (remember last year?) when the fast money going in is the liquidity, there ain’t no liquidity getting out.
I remain cautious and somewhat concerned by what appears to be hot and fickle money jumping into a sector that is apparently taking its cue from pig farmers”.