heinz,(and all)
I am not a goldbug per se either, though I frequent the gold traders sites, my main interest is precious metals equities because of their rapid movements, allowing for quick and substantial profits (and also losses, but these do not interest me, VBG). As I here noted before, even in this evident bear market for the gold stocks, being nimble on TA support and resistance levels for these stocks can net a nice return. But also, in frequenting Goldbugdom, I must admit to being gradually convinced that some of their points have merit. One of which you mentioned, the gold market is so small in comparison to other equities, it is easily manipulated.
There is indeed a gold carry trade and substantial gold leasing by central banks, which gives them a return on what the modern markets consider "dead money".
Without getting too conspiratorial, let me note what Les Horowitz noted in his post #13339, that the view that wages are inflationary is coming into doubt and it is now considered that inflation may more likely be the cause of higher wages than vice versa. Also Alan Greespans philosophy of inflation has as one of its tenets, as he himself has noted, that it is the perception of inflation that is a precursor to inflation itself. Mr Greenspan has oft noted that he carefully monitors the price of gold and I must ask for what other reason but the perception of inflation, for which the POG is a well known precursor. Furthermore, what was it that gave the markets some pause in the last few weeks, but fear of inflation.
There are just too many dominoes lined up that I cannot see in real time, but know exist, for me to doubt who hit the first one, when I see the last one landing "kerplunk" on the POG's rise, as in last Friday and the Bank of England announcement.
In that little market unpleasantness of last Sept/Oct, why was it that the POG and gold stocks made such a nice rally while the stockmarket dove, after gold and gold stocks had been driven down into multi decade lows, just the month before. Could it be those that had shorted it there, such as possibly LCTM (other hedge funds?), having gotten into trouble themselves, lost control and had to cover? The horse got free from the bridle and took the reins in its teeth. Till Greenspan slammed the barn door shut with the interest rate cuts in October, saving the equities markets and cutting off the gold rally.
Now was this negative effect on the gold rally because the uncertainty about market stability (from Russia and LCTM) was relieved or because inflation fears were reduced, or both?
I do not know how much manipulation there is in the gold market but obviously I suspect at least some and possibly much. When the needs of the many (stock markets) weigh so mightily against the needs of the few (gold/silver equities), the temptation that such manipulation might be a virtuous act, may indeed be simply too great.
Best Regards,
Roebear |
