Sunday, May 19, 2013

Gold Market Shenanigans

Gold is hovering around $1400/oz right now. This is the 30th "end of the gold bull" in the last 5 years. The financial media does not get it because they are neck deep in the credibility trap between media, finance and the governments of the West. The rest of the world (especially Russia, India and China) is buying gold whenever and from wherever they can. The central banks are buying insurance against the dollar in gold and planning for a new monetary system, so us little guys might as well copy them. This current drop in the price and lull has some weird features to it that might signal the formation of a base for the next big leg up.

This week's commitment of traders report was marked with gold around $1400. Money managers have the lowest number of long positions since 2008, and they are significantly lower than just this past fall when gold was several hundred dollars higher. In a weird mirroring of the money managers, actual gold producers have dropped their hedging down to the lowest level in years with only 2.7 mil oz hedged compared to 20 mil oz hedged in the fall. The last time they were hedge this low was in 2008. The end of 2008 saw the start of a multiyear bull that ran for a gain of over 125%. Asian demand is not being satisfied as only a little over 1 ton has been delivered to the Shanghai Gold Exchange, and dealers are raising premiums on bars. These things are happening with South African gold miners rattling the sword for higher wages and threatening strikes. If the central banks and Wall St banksters are trying to pull off a delay in the walk up of the price of gold, they have to be cognizant of the actual world outside them.

There might be another linked reason why the gold producers are not hedging with the COMEX. They may have lost faith in how the COMEX is run. This is a darker sign as it means the loss of faith in institutions has crept up from the little guy to large companies. Gold producers might be going directly to big buyers, like reserve heavy central banks, and cutting out the COMEX. Besides Asian individual demand, the Asian central banks are still buying, literally, tons of gold. If premiums are being hiked on bars in Asia, then producers are be able to write delivery contracts for a nice premium with big Asian and developing world central bank buyers. This is another example of the crisis of credibility and confidence that economic actors are enduring in our current banker dominated political regime. These gold shenanigans are designed to benefit our banks, but they forget that this is a worldwide market now. Policy is not in a vacuum.

Comment on the video below: I'm not sure $7,000/oz is the future, and honestly, I hope it doesn't come to pass as it would mean our elite leadership class would go full retard. I do think $4,000 is on the horizon in a couple years.

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