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Posts Tagged ‘collective’

Gold, Lead, Nonferrous Metal, Silver, Tin

May 7, 2012

Gold: a problem of perception

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US BondsA friend of mine, who was struggling with the idea of buying gold, lamented that gold only had any value if someone else perceived it to. Yes that’s true. As it is for everything, whether you’re talking about a share of Apple stock or a 1977 Chevy Malibu.

But perception is of particular concern for gold. To understand why the dollar price of gold languishes from time to time, you really have to step back and take a look at the larger picture. Understand that we now live in a world where almost every trader and investor today has lived their entire adult lives in a global system of fiat money. That almost every living person who has a degree in economics, finance, or business, has spent years having the false ideas of Keynesian promises drilled into their collective consciousness. That generations of the public have been told – and believe – that central banks notes are the ultimate arbiter of value for everything. /> /> Combine this overwhelming consensus with the emotional need for humans to have approval from the herd, and you are left with an incredibly powerful system of perception. One which will not change easily.

However, the reality is simply this: you cannot continue to accumulate debt forever. Eventually something must give way. Our public leaders are not only unprepared to deal with this, but most will not even acknowledge it as a possibility.

Take Nobel Prize winning economist Paul Krugman. In his recent Bloomberg debate with Ron Paul (see video below), he was asked, with the current debt to GDP number around 100%, how much more debt would he be willing to incur in order to stimulate the economy?  His answer was that he would be comfortable with an immediate increase in debt to GDP to 130%.

But how can this go on ad infinitum? Can an individual live beyond his means forever by accumulating credit card debt or is there eventually a day of reckoning?  How is it any different for a government? Yes there is the additional wrinkle that they can print new money to pay for things, but there are limits to that as well. Then what?

Krugman and his Keynesian ilk would have you believe that we will grow into our debt. Jump start the economy with some additional debt and soon enough additional tax revenues will be flowing in to cover it. Unfortunately that doesn’t happen. If that were the case, how did we get to 100% debt to GDP in the first place? How do we have any debt at all? By any metric you care to look at, the total debt of the United States continues to grow beyond its ability to pay for it.

Yes the current perception will not change easily. There are simply too many who profit from it to let it go without a fight. The role of economics in modern society is not to spread understanding and offer solutions, but rather to obfuscate truth. The role of economic policy in politics is to convince the majority to support programs that are contrary to their own self interest.

The harsh lesson of life is that you are on your own and always have been. You simply cannot blindly follow those who are presented as experts. You must become your own expert. You must ask the tough questions and put emotion aside as you analyze the answers – remembering that the truth is often not what you want to hear.

Gold, Silver, Tin

October 20, 2011

Large Commercials take bullish gold and silver positions

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Over past fifteen years or so, I have watched the Large Commercials (LCs), as they are known to futures markets traders, change their positions in gold and silver with uncanny accuracy.  The LCs have not always been on the right side of the markets, but they have been right often enough to profit handsomely from their positions.  Critics of LC positioning call it manipulating, and there are good arguments that they are right.

One of the best analysts of the LCs’ positions is Gene Arensberg, who publishes Got Gold Report.  From the latest Got Gold Report:

In the five reporting weeks just since September 6, as the price of gold fell as much as nearly $350 at one point, before snapping back up to settle a net $213.19 or 11.4% lower (as measured on Tuesdays, from $1,874.87 to $1,661.68) the combined commercial traders have covered or offset an eye-opening 59,236 contracts or 26% of their collective net short positioning.  Indeed last week’s COT report (Oct 4), showing 164,751 contracts of LCNS was the lowest net short stand by the commercial traders since the post 2008-crash positioning of April, 2009.

We find it enormously interesting and instructive that in the 10-weeks since August 2, as the price of gold launched from the $1,650s up to the $1,900s, then careened lower in panic and liquidation to as low as the $1,530s and has now returned almost exactly to where it was in August – actually slightly higher than then – as gold apparently pulled a blow-off top, the largest, best funded and presumably the best informed traders the CFTC classes as commercial have very, very strongly reduced their collective net short positioning for gold futures. (From 287,634 contracts net short August 2 to 168,478 lots on Tuesday, Oct 11. A reduction of a whopping 119,156 contracts or 41%!)

In case it isn’t just as obvious to readers as it is to us, let us state it differently. Since August 2 the price of gold, with all its gyrations up and down, is nearly net flat, but the collective bets by commercial traders that gold will fall in price are now much smaller than then. If we can assign a confidence level to the commercial traders by their positioning in gold futures on the COMEX, we would have to say that as of this past Tuesday they are a lot less confident that the price of gold will fall looking ahead.

As I read gold price chart and analyze the action, I see a period of consolidation.  My analysis, of course, is not unique.  Other better analysts see the same consolidation.  Still, I am encouraged to see Gene Arensberg’s analysis of the LCs’ positioning in gold.

Arensberg’s work can be found at  He also reviews the LCs’ position in silver.  Subscription options are explained on the site.

For silver investors, this will be of interest: Special GGR Excerpt – Silver COT Most Bullish in Eight Years.

Gold, Nonferrous Metal, Silver, Tin

August 2, 2011

Gold and the QE3 ship – Are both about to sail?

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David Banister-

Back in Mid-May of this year we had a big rally in the Dollar and Gold was correcting hard.  There was a bit of Dollar Bull hysteria at the time which I felt was quite unfounded.  I wrote an article entitled, “The Dollar Bull Monkey Dance Will Soon End Badly, QE3 Next?”  You see, the collective herd psychology at that time, just a short ten weeks ago, was that Gold would drop hard at the end of QE2, and The Dollar would of course rally as high as 82, maybe more against the weighted index.

The dollar has dropped hard since mid-May as I expected and Gold has continued to rally as well.  I had forecasted $1627 for Gold back when we were under $1,500 and last Friday we closed at $1627 on the nose!  During the mid-May time, most disagreed with my QE3 forecast, and probably still do but I think the ships is soon leaving port.  This could blast Gold up to a target of $1805 on the high end and certainly into the low 1700’s to the $1730 per ounce range.

Gold has had a powerful  5 wave rally (Elliott Wave Theory)  since the October 2008 lows of $681 per ounce, and certainly one could argue that a correction would make sense fairly soon.  However, the fundamentals for Gold are only getting stronger as we have inflation climbing at an 8-9% real rate and interest rates continuing to drop.  This is creating a “negative” real interest rate environment amidst a continuing weaker US dollar.  Hence it is hard fundamentally to argue against Gold at this time, creating difficulty in forecasting the intermediate highs and lows.

With that said, assuming QE3 or some form takes place soon then my $1805 target is quite likely to be hit before we can look for any meaningful correction in the precious metal complex. With the ISM manufacturing index turning down sharply as reported this morning and other economic indicators and GDP report rolling over, a QE3 ship horn is likely to sound soon.  Below is my latest chart dated July 22nd with Gold at $1599 at the time, outlining the likely interim moves in Gold using my crowd behavioral methodology that I employ at my forecasting service.

The combination of crowd behavior and fundamental analysis often delivers stunningly accurate forecasts in advance on the SP 500, Gold and Silver at TMTF.  Consider signing up for our regular updates and use our 72 hour coupon code at

Gold, Silver, Tin

August 1, 2011

Gold is a port in the debt storm

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Clearly a reckless Federal government is good for gold – or more accurately – our collective can kickers in Washington DC are very bad for the dollar. Take a look at the very telling graph below.

gold debt limit

Contrary to the disinformation campaign of Wall Street, and their Federal Reserve sponsored economists, gold is not a bubble. Central banks are now net buyers of gold, and not because of tradition, as Mr. Bernanke would have you believe.

They are buying gold because it is the foundation of the global monetary system. It is the only form of money that can extinguish debt. Paper money that is piled up in foreign reserves is simply an IOU that may or may not be good in the future. Gold held in foreign reserves has no such counterparty risk.

The bottom line is that we are heading into a period where the seemingly endless expansion of paper, be it debt instruments or fiat currencies, can no longer be sustained. Short term machinations aside, the relative value of gold will continue to increase until the unsustainable levels of debt have been cleared from the system.

Gold recognizes the fact that our debt levels have past the point of no return. The current “debates” over the debt ceiling in the US and bailouts for the PIIGS in Europe are just noise. In the coming storm of debt destruction, wealth will continue to seek safe harbor in the form of gold.