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GOLD: What's Behind the Massive Selloff?

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Posted by Mark O'Byrne via Wealth Wire

on Thursday, 29 November 2012 17:35

gold marketsAfter a 3.5 Million Ounce Selloff, Gold recovered somewhat overnight in Asia and again today in Europe despite the sharp selling seen on the COMEX yesterday.

As ever, it is very difficult to pinpoint exactly why gold and all precious metals fell in price. Interestingly, oil fell by even more - NYMEX crude was down by 1% and was down by more than 1.7% at one stage.

The CME Group, which operates the U.S. COMEX gold futures market, said Wednesday's plunge in gold was not the consequence of a "fat finger" or a human error. The trading wasn’t even fast enough to trigger a pause on Globex, said CME.   

One thing that we can say for certain was that there was massive, concentrated selling as the New York stock markets opened with some 35,000 lots sold which is equivalent to 3.5 million ounces and saw the price fall from $1,735/oz to $1,711/oz between 0825 and 0830 EST.

One sell order alone was believed to be 24 tonnes or 770,000 troy ounces.  Incredibly there was 35% daily volume in just 60 seconds. 

The selling, like all peculiar, counter intuitive, sharp sell offs in recent months, was COMEX driven with COMEX contracts slammed leading to further stop loss selling.

The selling may have been by speculative players on the COMEX. It may have been algo or computer trading driven or tech selling – although this is less likely.

It would be naive to completely discount the possibility that a bullion bank, short the gold and silver markets, may have been trying to protect their large concentrated short positions. The CFTC data shows some bullion banks continue to have massive concentrated short positions - which are still being investigated.

Informed commentators questioned the nature of the selling as a large institutional COMEX trading entity would normally gradually sell a position of this size in order to maximise profit.

Other speculation was that because of the wholesale liquidation of all precious metals and some other commodities, the selling may have come from a fund forced to sell a range of speculative positions after the SAC Wells notice. 

Futures and options expiration may have also played a role, according to some analysts.

The robustness of gold overnight and recovery this morning is encouraging as normally one would expect to see follow through selling after such a sharp move lower.

The gold mining stocks indices were also higher yesterday which suggests that some precious metal market participants see the move as another mere blip in the precious metal bull markets.

The fundamentals driving the gold market remain very sound with broad based demand - store of wealth, investor, institutional and central bank - continuing to be seen globally.

There have not been very significant increases in open interest on the COMEX and there is no mania on trading floors and universal bullishness.  

Indeed, this is far from the case today. There continues to be little or no positive coverage of the precious metals in the non specialist financial media. 

While ETF holdings are at record highs - the increase in holdings has been tentative and gradual with no huge jump in demand which would be associated by a market top.

The shoeshine girls and boys have been selling large amounts of gold jewellery in the international phenomenon that is 'cash for gold.'

Meanwhile figures for mints, refiners and bullion dealers in last quarter show retail investor interest is tepid at best.   

*Post courtesy of Mark O'Byrne at GoldCore. His daily ‘Market Updates’ are quoted and reported on in the international financial press on a daily basis. Read more at Gold Core.

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We break down complex topics like inflation, debt and monetary policy, and explain why understanding each is critical to preserving wealth.

We cover trends in silver and gold, and the role of precious metals in any investor's portfolio. ButWealth Wire is not limited to coverage of the current raging precious metals bull market...

Our writers report on everything from emerging markets, growth stocks and the U.S. economy to energy, tech, and income investing and macro economics in their daily analysis.

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Currency

Hyperinflation and Complete Collapse

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Posted by Nick Barisheff

on Thursday, 22 November 2012 09:21

“There’s never been a fiat currency in history that didn’t end in hyperinflation and complete collapse” says Asset manager Nick Barisheff .   Barisheff thinks that Treasury Secretary Tim Geithner’s most recent call to have an “unlimited debt ceiling” for the U.S. was“just telling the truth.”  That’s essentially what we have now with“open-ended” money printing by the Fed.  Barisheff adds, “All it’s doing is postponing a problem . . . it makes it bigger and eventually it blows up.”  Forget about remedies for the economy, it’s too late.  Barisheff says, “We’ve passed the point of this getting fixed.”  Barisheff thinks if the Fed’s gold holdings are ever audited, there will be a “gigantic short-covering rally . . . multiple bankruptcies . . . and a massive loss of confidence” in the dollar because much of the gold is gone or leased out.  Barisheff thinks the gold price could be “easily double” right now.  That’s because Barisheff believes, “What’s kept the price down is the artificial leased gold going onto the markets.”  Join Greg Hunter as he goes One-on-One with Nick Barisheff, CEO of the $650 million Bullion Management Group.  

Ed Note: Look at these staggering statistics that define the problem: The Joint Committee on Taxation found that raising the tax on millionaires  to 30% federal (the so-called Buffet Rule) would raise a mere $5 billion a year.

Worse, if the Democrats passed all of their tax increase wish list - Congress's Joint Committee on Taxation concluded the best case scenario (if no one changes their behaviour) - would raise $82 billion.....or just 7% of the current deficit!!!!

    



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Currency

The Stunning Dow / Gold Ratio

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Posted by Chart of the Day

on Wednesday, 21 November 2012 04:22

For some perspective on the long-term performance of the stock market, today's chart presents the Dow priced in another global currency -- gold (i.e. the Dow / gold ratio). For example, it currently takes less than a mere 7.5 ounces of gold to 'buy the Dow' which is considerably less than the 44.8 ounces it took back in 1999. Priced in gold, the Dow has been in a massive 12-year bear market. The current downtrend channel is the third of this bear market. While this latest channel is the least steep of the three, the Dow priced in gold has just failed to punch through resistance for the fourth time.

20121121

Quote of the Day
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium." - Murray N. Rothbard

Events of the Day
November 22, 2012 - Thanksgiving Day

Stocks of the Day
Find out which stocks investors are focused on with the most active stocks today.
Which stocks are making big money? Find out with the biggest stock gainers today.
What are the largest companies? Find out with the largest companies by market cap.
Which stocks are the biggest dividend payers? Find out with the highest dividend paying stocks.

<a href="http://www.chartoftheday.com/">Chart of the Day</a>

Notes:
Where's the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron's recommended charts of Chart of the Day Plus.

 



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Currency

CDN Dollar/Housing/Economy on The Edge

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Posted by Jack Crooks - Black Swan Capital

on Tuesday, 13 November 2012 13:17

Does a 91% bullish reading makes sense for the Canadian dollar?

According to the latest Commitment of Traders Report for November 6th, speculators are positioned 91% long Canadian dollar futures (or short USD/CAD in the spot market); that is down 1% from the reading on October 39th. Does that seem high to you?

Screen Shot 2012-11-13 at 12.06.51 PM

 



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Currency

BIG Trouble.....

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Posted by Peter Schiff - Euro Pacific Capital

on Monday, 12 November 2012 18:57

fall-off-cliffExtend and Pretend

Now that President Obama has been re-elected, the media is finally free to focus on something besides the clueless undecided voters in Ohio, Florida, and Colorado. The brightest and shiniest object that has attracted its attention is the "fiscal cliff" that we are expected to drive over at the end of the year unless Congress and the President can agree to turn the wheel or apply the brakes.

Fresh from his victory, the President took time today to let the nation know how he proposes to avoid the cliff: to raise taxes on those Americans who make more than $250,000 per year. He made clear that no one making less than that will be asked to pay any more. The two percent of taxpayers that the President is targeting earn 24.1% of all income and pay 43.6% (as of 2008) of all personal federal income taxes. Sounds like a fair share to me. But the four or five percent tax increases on those earners that are being proposed would only yield around $30 to $40 billion per year in added revenue, a drop in the federal bucket. Even if they were to double the amount that they pay our deficit would only be cut by about one third (even if those increases did not trigger an economic slowdown).

So what exactly is this looming menace, and why is it so dangerous? Stripped of its rhetorically charged language the fiscal cliff is simply a legal trigger that will trim the deficit in 2013 by automatically implementing spending cuts and tax increases. In other words, the government will spend less, and more of what it does spend will be paid for with taxes rather than debt. Isn't this exactly what both parties, and the public, more or less want? The fiscal cliff means that the federal budget deficit will be immediately cut in half, shrinking to approximately $641 billion in 2013 from the approximately $1.1 trillion in 2012. What is so terrible about that? I would argue that there is a greater danger in avoiding the cliff than driving over it.

If you recall, the cliff was created by a deal last year when Congress couldn't find ways to trim the deficit in exchange for raising the debt ceiling. When they failed to reach an agreement, Congress knew they had to raise the debt ceiling anyway. The resulting Budget Control Act of 2011, signed in August of that year, offered the pretense that they were dealing with our long-term fiscal crisis and not simply raising the debt ceiling with no strings attached. This was done not only to appease some House Republicans, who had threatened to vote against a debt ceiling increase, but to satisfy the bond rating agencies that had threatened a down-grade if Congress failed to act.

Now the focus turns to how Congress will dismantle the structure it created just 16 months ago. There can be little doubt that they will as economists are assuring politicians that driving over the fiscal cliff will immediately bring on a recession. The expiration of the Bush era tax cuts for all taxpayers will cost Americans an estimated $423 billion in 2013 alone. Hundreds of billions of across the board spending cuts, including the military, have been delineated. No politician would allow that to happen.

It is amazing that members of Congress can keep a straight face as they claim to want to address our long-term deficit problem while simultaneously working to avoid any substantive action. No doubt an agreement will be reached that will replace the looming fiscal cliff with another one farther down the road (which they can easily dismantle before we actually reach the precipice). Will the rating agencies buy this bill of goods a second time? If we lack the political courage to go over this fiscal cliff, why should anyone think we will be able to stomach going over the next one? Especially since each time we delay going over the cliff, we simply increase its future size, making it that much harder to actually go over it.

Many currently believe last year's S&P downgrade resulted from the same congressional dysfunction that resulted in the fiscal cliff agreement. The truth is that the downgrade would probably have been much greater, and more rating agencies would have likely joined S&P in taking action, had it not been for the fiscal cliff agreement. If further downgrades fail to be issued when the lame duck Congress inevitably comes up with another can kicking deal, then the agencies themselves could lose any remaining credibility. In my opinion, the only explanation for inaction by the rating agencies would be for fear of regulatory retaliation by a vindictive U.S government.

I do not think it is a coincidence that while the banks are suffering a regulatory backlash as a result of their perceived culpability for the mortgage crisis, the credit rating agencies have been relatively untouched. But the credit agencies played a key role in catalyzing the mortgage crisis by giving questionable ratings to the mortgage backed securities. My guess is the government simply does not want to open up that can of worms as similar mistakes are being made with respect to the agencies' ratings of government debt.

The truth is that regardless of what you call it, going over the fiscal cliff is not the problem, it is part of the solution. Our leaders should construct a cliff that is actually large enough to restore fiscal balance before a real disaster occurs. That disaster will take the form of a dollar and/or sovereign debt crisis that will make this fiscal cliff look like an ant hill. 



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