As everybody knows here, gold and silver prices are smashed during recent weeks. Just today gold dropped again. I'm failing to understand the logic of it. Many commentators say that because of the European troubles commodities lose their market price. Here's, for example, an article from Bloomberg: Oil Falls Below $95; Gold Gives Up Gains: Commodities at Close: If there is concern that "debt crisis is deepening" etc, then why do people abandon the only safe investments in times of crises, namely precious metals and other tangible assets and rush to buy USD? What's the logic behind this?
Dollar rallies when the Euro weakens and gold weakens against both. Strange isn't it? Definitely counter intuitive and has most gold advocates mystified at one time or another. You could speculate that there is some sort of unspoken agreement or understanding in the 'community' that moves massive amount of capital at a key stroke as to where 'home' or safe haven is. As long as they all tacitly have this agreement and no one panics or rats out then it is self fulfilling - No one will lose much money turning to the USD at times of 'risk off' because that's where everyone else will go. There's certainly no culture of consensus that gold is safe in times like this - amongst the establishment I mean. I don't understand it either though.
The only way, and I mean only, for gold and silver to have their day is when faith in the US dollar collapses. Until then, prepare to be punished frequently and hard as a stacker. Having said that, I do wonder if I began stacking too early. I could have used my money on other investments and then come into the PMs later. This whole "supply is drying up fast" line that the goldbugs tell us is just an exaggeration. The truth is that there is more than enough physical silver out there to meet current and future investment demands for quite some time.
^^^^^Thats your answer Syd. Actual commodities are not traded. Rather, they are bought on the futures market - a paper trade that is settled in cash. They are not real, rather a sbeculation that in the future the brice of that commodity will be worth more in USD than what it is now as consumbtion demand increases. Now if a sovereign crisis could result in falling future demand for commodities or economic uncertainty, then the the sbeculator could be stuck in the future with paper assets that are less valuable in USD than at bresent, so they decide to swab them for USD now. The USD is a tangible asset, it has value now. As obbosed to paper assets traded in futures markets - also known as gambling. Its like backing a horse in a race, you dont own the horse, but you are entering into a futures contract with a bookmaker. The bookmaker is offering contracts - odds - he is sbeculating on the future berformance of each horse in a given race. You can choose to barticibate in that market or not, if you do accebt the market odds, you become an owner of that horses future berformance. You are sbeculating. But unlike the futures market, once you enter into a contract with a bookie to buy a contract, you cant sell it to someone else. This is the way I see it, someone correct me if Im wrong.
Ok here's my theory. The fed has to print (QE) to finance the American empire. Some of this money goes to the banks cause of the ol' pals thing, but with a caveat that some of the money has go go into gold suppression to make inflation look better then it actually is. This gold suppression is achieved via silver shorts since GSR binds gold to silver (though fairly looses ala GSR 90). This suppression though breaks down by making the silver price unprofitable for miners to operate and since it is a consumed product inventory is an issue. So the banks to combat this by using some of the QE to invest in miners at a loss to make sure mining continues. So the Achilles heal of all these shenanigans is the miners who have to combat a lower then normal price for their commodity and trying to keep investors (the banks who short silver) happy with a decent ROI
You're all wrong Coz my Nona ran outta grandchildren to buy wedding gifts for - dont worry gold and silver will start going up again in a year or two when my eldest cousin's kids get old enough to marry...
I think this interpretation is a little negative, and I see it a little differently. I don't think it should be compared to bookies odds. The speculation is no different to buying physical - you are still fully exposed to price movements - ie. you still become the owner of that horses future performance. A futures contract is merely an agreement to trade a specified amount of a commodity or asset at a specified price, at a specified time in the future. To enter this agreement, you must put up an initial amount of cash margin, which is adjusted daily to reflect the moving price of the underlying physical. Thus, it merely serves to move the reference price of the trade (until expiry), allowing full exposure to the underlying physical using leverage (deposit), but not having to pay in full until later. (As opposed to having to buy the physical now and outlay the full cash price right now). It is the same as putting a deposit down to purchase the underlying product, or taking a deposit to sell the product. In retail, this is practiced all the time. A good example is when you order a new car, and put down a deposit at an agreed price, for delivery of the car at an agreed time say a month or two in the future. That is entering a futures contract.
Yes. But the boint of Syds question was why is the USD a safe house, when we all know that gold is the only true form of money and therefore it should be considered a safe haven. Because the futures contracts do not involve the sale of real fysical broducts. They are make believe, fairy dust, economic bornografy. Its not USD v real gold when talking about commodities trading, its USD v bieces of baber that have letters like gold, or wheat or oil written on them. Futures traders have to decide whether to buy bieces of baber with bictures of dead bresidents on them, or bieces of baber with words like gold on them. In good times they want to gamble the dead bresidents, in bad times hoard them.
^ This. You can't buy anything with a futures contract for frozen orange juice concentrate. You need to sell that paper for cash and then buy something else. A lot of people are spooked so they're just selling whatever they're holding and will sit on the cash until they see something worth spending it on.
Not true IMHO. A futures contract is defined by the sale of real physical products. It is no different to me buzzing a sales thread on this forum, then making a bank deposit with the promise of delivery of the physical once payment has cleared (at some time in the future), no matter what spot does in the mean time. The contracts will only become make believe when the first delivery is defaulted on (talking about metals). This is when you will see SHTF. False. A futures contract is a purchase of the underlying. Physical delivery is exercised unless you cancel the contract by purchasing/selling a covering position before the expiry date. Some futures, such as interest rate or index futures, are settled by cash payment based on the underlying reference rate.
lol. The utopian version of futures markets. That's not how JPM plays them. I do get the technical point though. I wonder what proportion of futures get settled for physical goods?
My point was that you can't buy oil or gold or shares in Facebook by handing over either a futures contract for frozen orange juice concentrate or an industrial fridge's worth of actual frozen orange juice concentrate.
the entire precious metals etf's combined only amount to 150-billion all the precious metals miners combined only have a market cap of 360-billion (from zerohedge) the precious metals space doesn't represent enough value (at current prices) to be an easy and liquid place to put capital it can't handle the volume of money one of the reasons the usa remains pre-eminent is simply the size of it's system, it can absorb very large sums of money very quickly
And this is what looks so strange to me. These traders supposedly believe in these pieces of paper with gold, or wheat or oil written on them, as if they were real gold, or wheat or oil. Then why do they ditch them at the first sign of troubles? I imagine myself being a trader with, say, $100 in my pocket. So, I bought all sorts of cool derivatives, made some profit and now I hear bad news from everywhere about debt problems, printing presses, clueless/short-sighted governments etc et.. So what do I do now: a) I keep buying pieces of paper with dead presidents, or b) I offload all the paper I have and buy commodities (eventually they are just different kind of paper, but I believe they're real commodities). Alternatively, if I believe that bad times are coming and I want to keep cash just in case, then why would I sell the ultimate cash of all times - gold - and buy paper cash, which is already so discredited?
Fiat isn't so discredited that you couldn't sell out of a falling gold market, park wealth in cash for a few months and then buy back in at a lower price.
