Editorial
Why Gold Sells Off and What Will Happen Next ...
Reuters just published an interesting article that makes the following point: "As the Dow struggled over the past few weeks, gold has confounded market watchers by tracking equities, even as the European debt crisis escalated. U.S. December gold futures fell $3.80 to $1,716.40 an ounce."
This brings up an interesting question. I will try to answer it in this essay. Two weeks ago, the Dow Jones Industrial average was up marginally and so was the price of gold. This past week the Dow lost some 300 points and gold sold off as well. Yes, it would seem that now "gold tracks stocks."
Further, we are informed that there is a "rush to safety" when the stock market runs down. People sell off both equities and gold for the "safe-harbor" of US notes and bonds.
This is a kind of dominant social theme, in my view: Gold is now to be portrayed (by Reuters and other elite-controlled media) as just another investable commodity like IBM or Exxon. But this ignores some important points. I researched them to make sure of my conclusions.
Start at the beginning, then. The powers that be HATE gold. Money Power is derived from the central bank printing press. The idea that people on their own can go out and dig up money out of the earth means that the people STILL have the opportunity to better themselves independently of the power elite.
This is very hard to tolerate if you are trying to set up a regime to rule the world, as the Anglosphere elite apparently wants to do. If people can still get wealthy independently then you don't have TOTAL control. And total control is what Money Power seeks, or so it surely seems.
For this reason, the powers-that-be do everything they can to manipulate and squash the price of gold. This is why fiat money bulls are likely longer by years and decades than precious metals bulls. The elites drag out the fiat bull markets as long as they can.
The last big precious metals bull market was in the 1970s, and it lasted about ten years. Then came the fiat leg that lasted about TWENTY years. Two-to-one. This precious metals bull market started right around 2000. I knew it, too, and so did many others.
Gold has been going up throughout the 2000s. Of course, the stock market has been going up as well, and that has obscured the gold bull market that we are in. Because of this, many in the mainstream media can avoid talking about business cycles and simply talk about gold being "in a bubble."
This is not so. The early 2000s were marked by tremendous monetary stimulation, with more to come. This is what happens when equity markets blow off. To begin with, central banks print money and inflate the stock market until the boom turns to a bust.
But you can't keep doing this. Eventually, the market distortions become too damaging. There is a limit after all, and we have reached it. Right around the turn of the century, the bust was enormous and the resultant stimulation only made it worse. The cycle had turned and gold (and silver) was on its way up.
Because the cycle had turned, the resultant stimulation was bound to fail, and it did. This failure is referred to as the "mortgage crisis" or "housing bust." It began in America but soon spread throughout the world.
People have attributed the housing bust to many things, including deregulation. But when one steps back and looks at the larger picture, the reality becomes evident. The Austrians are correct. In the modern era, economies are driven by central bank inflation. First a boom and then a bust. Had nothing to do with re-regulation or anything. Purely a banking phenomenon at its heart.
Here at the Daily Bell we've explained numerous times that this is likely the "final" bust. The dollar reserve system is probably dead. It died when the Fed had to print at least US$16 trillion to support crony banks and financial firms throughout the world during the height of the 2008 crisis.
The powers-that-be don't want to admit this, of course. Even in this Internet era, they're hiding their manipulations as best they can. Even as they try to replace the current financial system with a world currency, they are struggling to maintain the present system.
To do this, they confuse the issue. They certainly don't want to speak about the golden bull, because then they would have to speak about the business cycle and they don't want to do that, either, because THEN they would have to explain how central banks DRIVE this ruinous and horrible cycle.
So they make up stories. The latest story is that gold is not just another investable asset like a stock and indeed tracks the stock market. These last two weeks are being held up, once more, as proof positive.
Of course, to some degree this is true. Institutions have begun to buy gold and they do buy and sell gold the way they buy and sell stocks. But the idea that the average investor sells his or her gold when the stock market goes down (in order to buy Treasuries) is ludicrous. Doesn't happen.
Gold tracked the Dow in the 1970s, too. I checked. The Dow and gold prices rose and fell together, roughly anyway. That's because the big institutions were likely buying gold then, too.
But in 1979 and 1980 something else happened. The gold market went vertical. Look it up for yourself. The verticality is astonishing. From about US$400 to US$800, and then right back down again. This is what will likely happen during the last phase of THIS golden bull. But we are not there yet. Wait.
People say that the 1980s were anomalous because of the great inflation and because the Hunt Brothers tried to corner the silver market. That's what caused the verticality too. But this is nonsense as well. Because of the central banking business cycle, this golden bull will end the same way as the one in the 1970s, if it is not interrupted. It almost has to.
Why? Because the powers-that-be may keep printing money and keep inflating in support of this horrible fiat money system until the bitter end. They may FORCE a blow-off of the golden bull, just the way they forced one in 1980.
"But the verticality was due to market manipulation," some will object. Of COURSE there was market manipulation. If it hadn't been the Hunt Brothers it would have been something else. Blow-offs FEATURE market manipulations.
Here's my bottom-line point, from an investment standpoint. During the 1970s, people could have been fooled by the way stock markets and gold markets acted. They might have seen the parallelism and simply concluded that gold was just another commodity or that it was acting like stock.
This would prove to be a major miscalculation. Bull markets always come to a head in the modern era, thanks to central banking, which always turns a common cold into pneumonia.
That's how you should think of this market, by the way. The market has a quiet fever right now, but before the power elite is through poisoning this business cycle, that fever will have become a raging, out of control sickness. There is no telling how far the price of gold may travel.
Of course, when prices go so high, people start buying paper gold, which they are already starting to do. This is where the losses come. Ask Gerald Celente, who chose not to simply buy physical gold (in this instance) and was playing the futures market as way to do so. He lost his account, apparently, when MF Global went bust.
And this is another point. This same horrible central bank-inspired business cycle inevitably causes an uptick in "financial fraud." It's inevitable. Then elites and their associates and enablers use the resultant bust to pass MORE laws and MORE regulations, further consolidating state power in support of their damnable central banking racket.
So don't be fooled by all this talk about gold tracking the Dow. It did in the 1970s, too. Right until it went vertical. People who held gold then in many forms – and got out – made fortunes.
Easy enough, then. Just hold gold until it goes to US$5,000 and sell. Not so fast. Today, thanks to what we call the Internet Reformation, too many savvy people understand what I have just explained. And the elites who control central banking know it, too. I have a hard time believing that the powers-that-be will let gold go to US$5,000 (or wherever it would ordinarily end up).
Something else will intervene. A war. A deliberate promotional campaign against Wall Street and "speculators." A terrible, expanding Depression that will cause the confiscation of gold and the creation of a new worldwide money standard. Or perhaps all three at once.
People who own gold and silver will no doubt be rewarded (at least to some degree) before any of this (potentially) takes place. But one needs to be careful now! We are entering another leg of the cycle, in my view. To ignore the possibilities is to be blind to the reality of modern history. The last time this sort of blow-off took place was in the 1930s. Look what happened then.
You remember, don't you? The New York Fed illegally printed money and FDR covered it up with his "bank holidays." The power elite of the day used every promotional trick they could to shift the blame. They pointed fingers at "Wall Street," arrested thousands, destroyed companies, passed Draconian new regulations (that only prolonged the recession and further institutionalized the Fed), confiscated gold and then – finally – when nothing else worked, started a world war.
That's my take on it anyway. Call me a conspiracy theorist. That's OK. To me, it's all directed history and more in tune with reality theory.
And it's happening again ...
l 
|
You must be a site member to submit suggested edits or post feedback. In addition to submitting edit suggestions and posting feedback, your Free Membership to The Daily Bell gives you access to our Member Zone where you will discover a plethora of other member benefits. Want to learn more? click here |
|||||
|
|
||||
 |
Posted by Thomas Molitor on 11/20/11 02:21 PM
Don't sweat the correction in gold.
Click to view link
 |
Posted by Bluebird on 11/20/11 11:20 AM
Mr. Bischoff,
Please bear with me as I try to understand you more. The USD is the reserve currency set to oil. What happens if/when oil will no longer accept the USD? If the USD collapses, or becomes worthless, will people be able to use gold as currency or to barter with, in your opinion? If you purchase gold with your paper currency, are you giving strength to the USD? If/ when the USD collapses, will the US government confiscate it from us? SHOULD you buy/hold physical gold to keep you in the rough times ahead? I know I have given you some hard times, but I really am trying to understand.
@Wrusssr, thank you for your clear/helpful post.
|
Posted by Wrusssr on 11/20/11 04:38 AM
Another outstanding article, Anthony. Thank you.
For anyone thinking about purchasing metal for the first time, some general rules of thumb:
Silver or gold eagles are a good buy if your independent dealer has them in stock. You can look dealers up on line. Call them first until you find one that has them. If not in your town, try the next one nearest.
Eagles are 99.99 pure and are a U.S. Mint standard easily recognized worldwide by merchants and individuals alike. Silver comes 20, one-ounce silver coins to a roll, 25 rolls to a box, 500 ounces to the box. Ask the dealer on the phone how much a case, roll, or coins will cost the day you plan to make your purchase. They seldom accept credit cards or checks. Cash, certified bank checks, or electronic transfers are usually okay. Ask first, though.
Never prepay a dealer to order gold or sliver for you. Not in the times we're in.
When you buy silver, let's say, from a reputable independent dealer and the market is trading around $35 oz, expect to pay 2-3 points higher. If you sell it back to the same dealer, they probably will offer 2-3 points lower than the market selling price that day. Gold will have higher/lower bumps because of its price. The COMEX normally sets the selling price for the metals.
When you purchase, do not purchase more than $9,999 at a time. If you do, it's reported to Washington and goes into a data base. You could be a drug dealer or terrorist, don't cha know? Meaning they know where to come looking if there's a confiscation.
If you're under, the transaction paperwork stays local.
The next day you can come back and buy $9,999 more. The banks tried to get this purchase reporting rule changed to $600 for any commodity purchase in a day, and had it slipped into the health care spaghetti bill. The independents rose up against this bureaucratic nightmare and had it repealed. With a $600 reporting trigger for any commodity purchase, Washington data miners could easily map metal location for a confiscation. They were on the road to improving their 22% confiscation rate from the last depression with their $600 reporting requirement, in my opinion.
Should the price of gold/sliver go down, hold onto it, and pass it on to your kids or family unless you have to sell. It will never go to zero, which the dollar, long-term, is already flirting with. Whatever cash you put into gold/silver will never be completely lost. It's a solid way of hedging this fiat chaos.
Always take delivery of your gold/silver upon completion of your transaction.
.
|
Posted by gapper787 on 11/20/11 12:33 AM
Not so easily on the lead. Those who prepare by storing gold almost always store food and guns as well. No free money for the sub-set of society
 |
Posted by Bischoff on 11/19/11 11:37 PM
Gold, as a commodity to be traded on precious metals markets, is a false concept. To talk about the "price" of gold is falacious, as well.
The quotation of a "gold price" in terms of USD has the effect of setting the "USD" up as the standard of value. Yet, being monetized debt, the "USD" is merely paper currency, or fiat money. Gold, and only gold, is real "Money". Real money has no "price". Gold is the "standard of value" against which everything else is measured, not the "USD".
Instead of quoting "Gold" in terms of "USD", but quoting the "USD" in ounces of "Gold", immediately makes clear the inverse relationship between gold and the "USD".
Why should people hold gold. There is one reason, and one reason only, as their savings.
At this time, when no redeemable currency exists anywhere in the world, savers are forced to use their income to "purchase" their savings (gold).
Before 1971, they could "exchange" their income for a fixed amount of gold (savings). After 1971, with Nixon's suspension of USD redemption for gold, the value of currencies started to float on FX markets. It was at that time that the world's first "gold market" opened in Toronto, Canada.
"Smart" savers knew that gold was not "just another commodity". They understood that gold is a commodity with constant marginal utility, which makes it "Money". They turned their "USDs" into gold at the rate quoted on the precious metals markets after 1971. To date, the "smart" savers have accumulated 130,000 tons of gold which is stored in vaults all over the world.
Keeping physical gold as savings earns no interest. Prior to 1933, savers in the U.S. could buy "gold bonds" for a fixed interest return, or they could take a risk by investing their savings in equities for a higher return. From 1933 until 1975, "income" in the U.S. could not be turned into savings (gold).
The activities of the PPT in the equities markets, and the recent scandal in the commodity markets caused by the Obama administration and MF Global, has robbed these markets of all credibility. The bond market has long been a scandal, as the "front running" of the Fed has made a farce of the interest rate policy of the FOMC.
To further speak of any direct relationship between the equity, commodity and bond markets and the value of Gold, is misleading. The "price" of gold is deliberately manipulated to make the USD appear more valuable, and to discourage the accumulation of gold by "average" savers. Who knows how many "naked" gold contracts are floating around in the "gold markets"... ??? It might pay to get an answer from Gerald Celente... ..
The mistake Gerald Celente made is to consider gold to be "just another commodity". It is one thing to engage in this sort of trading, understanding what gold is, and trying to gain from the manipulation of the gold price. It is quite another thing to assume that the "gold market" is a commodity market in which to hedge or speculate. It is not.
Before the "USD" was destroyed by the compound interest factor, the Fed central bank could sell debt to service existing debt. It could use the proceeds from Treasury bond sales, along with taxpayers' money, to service the accumulated debt. This was possible until the interest on the accumulated debt grew to proportions which exceeded the size of the original debt. Thereafter, to sell debt to pay off existing debt only increased overall debt.
As sale of debt by the Fed diminishes, the Fed's "Quantitative Easing" is designed to cover the shortfall. "Quantitative Easing" however, is a potent inflation generator.
The "USD", while technically a defunct currency, still has value as the "world reserve currency". The world reserve currency is the currency used to pay a country's "Oil Bill". Because of U.S. constitutional government and the strength and reach of the U.S. military, the "USD" is still vested with some confidence.
The future of "gold" lies in its value as "Money". The value of the USD will be restored when it again can be redeemed for a fixed amount of gold. Until then, the "price" of gold should be evaluated very carefully before a "conclusion" in relation to anything else is drawn.
|
Posted by KyfhoMyoba on 11/19/11 11:37 PM
They wouldn't have someone else's silver. Aside from a small float/cushion, when you sell your ETF shares, the custodian sells metal into the market, and since you are buying the metal, in essence you are buying the metal from the ETF and taking it out of the market.
Each time the ETFs pull this stunt, they raise the margin requirements. Soon the leverage will be close to 1:1, and the tool won't work any more.
Clearly, there is collusion, but cannot be proven, only strongly inferred. The MF Global fiasco will/has dumped metal onto the market, see recent dips, but I see the market absorbing it quickly and hungering for more! ;)
|
Posted by truthbetold on 11/19/11 11:14 PM
Thanks for the encouragement and hope and enlightenment.
 |
Posted by schrodingers_pussie on 11/19/11 10:47 PM
@DB: "Ask Gerald Celente, who chose not to simply buy physical gold (in this instance) and was playing the futures market as way to do so. He lost his account, apparently, when MF Global went bust."
Put on the tinfoil hat -- all is not as it may seem in this nasty situation. There's too many details that suggest this may not be an ordinary embezzlement. Who has the money and where is Mr. Corzine? Click to view link
If you can spare an elf, maybe an investigation would be enlightening or at least entertaining. This smells a lot like a PE operation. The amount of money missing ($600 million) is small for this sort of thing (Madoff made off with 50 times that), but large enough to make a serious impact on many commodity account holders and cause the liquidation of many positions.
A possibly not unrelated issue is the upcoming December silver deliveries. JPM may have a problem there. And who is in the middle of the MF Global BK? None other than JPM and BofA.
 |
Posted by dotti on 11/19/11 09:40 PM
Excellent!
Thanks.
 |
Posted by dave jr on 11/19/11 09:34 PM
Most of it is in my head, but I made a few pages of drawings. My neighbor kept them, and I'm sure he still has them. If not, I can redraw them (as you'll need a little more detail anyway) and get them to you.
I'll look that book up, thanks!
|
Posted by dotti on 11/19/11 09:09 PM
I forgot to mention before. There is a book--I think the title is simply "Permaculture". It is full of amazing ideas.
|
Posted by dotti on 11/19/11 09:08 PM
"Sorry, hit the post button."
I thought you were messin' with me.
Are you willing to share the plans? We were thinking of doing the "hoop coop" that is posted online.
Have you read "Animal, Vegetable, Miracle" by Barbara Kingsolver? It describes her daughters enterprise with chickens. Your friend's daughter would love it. You'd enjoy the book, also. It's a great read.
It's also great that you're working with your neighbor on survival basics.
|
Posted by dotti on 11/19/11 09:02 PM
Sounds like that technology could be useful for lots of things.
Are there instructions for this online? I have a friend who is a true genius at technological things. He'd love it!
Hmmmm. How much for a hot shower. Is it winter or summer?
Sounds like you have the right idea.
Maybe the elves are catching a few winks. While the cat's away... .
|
Posted by dave jr on 11/19/11 09:02 PM
Cool, I have been working on plans for a non electric wood gasifying boiler. I am obsessed with efficiency as well as independence.
Are you using a cyclone?
|
Posted by dave jr on 11/19/11 08:54 PM
Sorry, hit the post button.
I don't have chickens yet either, but designed a coop for my neighbor, It laid waste to any plan we could find on the internet. We built it for less than $300 and there was less than a wastebasket full of scrap when finished. It has a capacity of 12 with eight laying boxes. He has eggs coming out his ears. He did it mainly for his daughter who is running with it. Many exotic breeds and multi-colored eggs.
I would want my chickens to free range, but first have to solve my coyote problem, that keeps taking chunks out of my dog.
 |
Posted by zebblanc on 11/19/11 08:47 PM
The elves are going to shut us down for getting off subject, but the following advances the concept of barter. PM is the ultimate barter item . . . but . . .
I am converting an old pickup to burn wood gas (WWII "technology") and will tee off its gas producer to run my genset, which powers the well. I store 500 hundred gallons of propane to run the genset now, and the other utilities, including the hot water heater.
So one of my barters will be hot showers! A shower for one neighbor's eggs and another for herbal remedies from a friend who is a Native American healer.
How many silver dimes will you give me for a hot shower after you have not had one for a week or two?
|
Posted by dave jr on 11/19/11 08:46 PM
My abilities are in art, which is not much of a survival skill.
My primary survival skill/ability would probably be in forming relationships. I love helping people--cooperative efforts--working together to solve a problem. When we make a stand, we won't be standing all alone.
I don't have my chickens yet. I need a little more time before the sky falls.
Thanks for your posts. Keep up the good work!!!
|
Posted by dotti on 11/19/11 08:32 PM
Sounds like you are developing survival skills. Good for you.
My abilities are in art, which is not much of a survival skill.
My primary survival skill/ability would probably be in forming relationships. I love helping people--cooperative efforts--working together to solve a problem. When we make a stand, we won't be standing all alone.
I don't have my chickens yet. I need a little more time before the sky falls.
Thanks for your posts. Keep up the good work!!!
|
Posted by dotti on 11/19/11 08:19 PM
Okay. Let's see if I understand this.
Silver first. JPM is able to manipulate the price of silver down with the cooperation of the CFTC. Is there collusion here or is it all above board? When the margin requirements are raised, specs are flushed out of the markets, their positions liquidated. BTW, did you note the discourse earlier regarding MF Global? If Gerald Celente's experience was multiplied it could cause lots of gold/silver to go on the market.
I remember reading about the bullion banks leasing gold and selling it into the market. Rates were ludicrous. Of course, in those days people colleced interest on savings. The good ol' days.
Is JPM even trying to cover on the dips? It seems they are not. Will they get away with this forever? Talk about the fox guarding the hen house. Makes me want to liquidaate my few shares of SLV. At least they wouldn't have my shares of silver to kick around anymore.
But. Wait. They'd have someone else's silver--whoever purchased my shares.
I am reading that there is systemic risk in the global banking system. Couldn't happen to a nicer bunch of folks.
Thanks for your thoughts on this topic. It smells, but it's the world we have to deal in--at least right now.
|
Posted by KyfhoMyoba on 11/19/11 07:59 PM
JP Morgan Chase is the custodian for SLV (Silver ETF) and HSBC is custodian for GLD (gold ETF). It is my opinion, as well as that of the Gold Anti-Trust Action Committee (GATA) that these two entities are manipulating the prices of these two metals downwards in the following manner:
For 364 days out of the year, if you looked at the big stack of metal in the vaults of these institutions, you might see a sign that would say, "This is the metal that covers our short position in this metal on the NYMEX." For the other day out of the year that the ETF custodian gets audited, they would turn the sign around so that it says, "This is the metal that belongs to the investors of the ETF that we are custodians of."
You may (rightly) ask, "How does this manipulate the price?" When one takes a position(buys a contract to buy or sell) in the commodities market, normally, one must post FRNs as margin, in case the market moves against ones position. This rule is waived for those short sellers that actually possess the metal, usually mines, but in this case, the JP Morgan Chase, and HSBC. When the price of the metal starts to rise, the large banks pressure the Commodities Futures Trading Commission to increase margin requirements. JPMC doesn't have to put up more FRNs, the longs can't cover and are out of the market. This is how you see situations like Feb '09 when the paper price of silver was dropping but was nowhere to be found in any coin shops. JP Morgan Chase has the largest short position in silver, the gold short position I believe is unknown, but probably HSBC.
Also, back when gold was 400 FRNs/oz the FED would loan gold to the large banks at ridiculous low rates like 1/4 or 1/8 % for 15 years, with the option to renew annually at the banks discretion indefinitely. The bank would then sell the gold at spot, and loan the FRNs at prime. Nice little spread. JPMC is underwater on this kind of transaction ALONE to the tune of $100 billion. Every increase in the gold price puts them further in the hole. Of course, they can put off paying the piper for as long as they want, or until they go belly up from some other dumb-ass stupid deal they made. ;)
|
|
