Musings by Heinz primarily on gold and treasuries
Compiled by and thanks to ILD
Date: Tue Jun 07 2005 12:22
trotsky (IDT@London gold pool) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i believe it began in 1961 - the idea probably was in discussion a while before that.
the drain on its reserves began in earnest in 1965 ( i.e. that was the first year during which the pool didn't get as much gold back from its dip buying than it lost from its spike selling ) .
in 1967 the devaluation of the Pound caused a massive run on the pool's gold - it lost over 1,000 tons in a few week's time.
it finally gave up the ghost in '68 when France withdrew in the face of mounting US deficits as a result of the Vietnam war...in the end, the pool basically collapsed in chaos, as daily sales sky-rocketed from a few tons of gold to about 230 tons in a single trading day.
Fed Chairman McChesney famously announced that the gold/dollar peg would be 'defended to the last ingot' - a few short weeks before the pool's ultimate collapse ( initiated by, what else, a 'banking holdiday' in London ) . they closed the London gold market for two or three weeks...and then the 'two-tier' market began ( CB's still traded at the peg, everybody else traded at the market price ) .
note that at the time of the pool, gold was a MUCH larger percentage of CB reserves than it is today. not only that, they also held far more gold in absolute tonnage terms. i would say the CB's power to influence the market is much diminished since then - especially considering that the amount of fiat currency in circulation has grown about 20-fold ( rough estimate... ) since then.
Date: Tue Jun 07 2005 12:05
trotsky (spenser, 10:39) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
imo the bond market is signaling that the 'reflation' experiment of 2002/3 is destined to fail. it worries about an increasingly evident global economic slowdown ( recent data points: the Shanghai property bubble is bursting; Baltic Dry freight rate index is plunging; leading indicators in the US are in their 4th month of going down, while the manufacturing ISM is a hair above going into contraction mode, UK economy seems to be mired in recession already ) .
last but not least, and related to the above, the market probably senses that the real estate bubble ( which is a global bubble, and has begun to break in some places already ) is going to mean-revert ( which is the polite term for 'going down in flames' ) , which would further reinforce the worrisome trends noted above, and bring a flood of capital fleeing into government bonds.
certainly the bond market isn't strong because it thinks the Fed is such a good 'inflation fighter' ( it is after all the very engine of inflation ) .
Date: Tue Jun 07 2005 11:58
trotsky (frustrated@ECB to cut rates?) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
this seems in fact highly likely now - since even the hawkish chief economist Otmar Issing has begun to talk about the possibility of a rate cut.
Date: Tue Jun 07 2005 10:25
trotsky (by the by...) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
in the late 1960's and the entire 1970's, governments OPENLY tried to manipulate the price of gold...first via the London gold pool, and later via massive sales by the US treasury ( which basically sold down half of its reserves ) , Britain ( sold 800 tons ) and the IMF ( several IMF gold auctions took place, exact amounts i don't recall ) .
the result of all this manipulation designed to keep the gold price in 'check' was that it rose from $35/oz. to $850/oz. - which goes to show that even the most valiant market manipulation efforts are destined to fail.
so even if one believes that governments continue to attempt to manipulate the market ( it's certainly possible, even likely ) , this does NOT amount in any way, shape or form to 'control'.
i'd like to see it riddled how come that if 'control' must be assumed, the gold price is up some 70% from its late 2000 lows.
about the only thing one can say is that IF there have been attempts to manipulate the price with the objective of holding it down, the attempt has once again been a failure.
Date: Tue Jun 07 2005 10:16
trotsky (kapex) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
you're missing the point.
i put up those charts for a reason - namely to show that there can be no difference in the methods or the likelihood of success in making predictions about the gold market than any other of the exchange traded markets - and i picked two markets that have a historically very good correlation with gold as examples ( in fact, i could however even have put up a chart of lean hogs to illustrate my point ) .
in other words, whether you believe in the 'control' story or not, it should make no difference whatsoever in applying Elliott wave theory for gold market predictions.
if you disagree, explain to me in what way e.g. the copper market was more amenable to correct predicitons than the gold market - can it be seen on the chart?
Date: Tue Jun 07 2005 10:08
trotsky (Goldman downgrading pm sector) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
excellent! meanwhile, the XAU index options open interest p/c ratio has risen further to 1.15 as per yesterday...nearly all the put volume translated into open interest again.
at the same time we have record high speculative net long positions on the dollar ( the 'reason' for the downgrade was the dollar's recent show of strength. of course, for gold stocks it matters little what has happened 'recently'...the future seems a lot more important somehow. maybe we should inform GS that markets care about the future, not the past? they don't seem to know... ) .
Date: Tue Jun 07 2005 09:56
trotsky (frustrated@rate hikes) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
well, it could be, but in any event the horse has long left the barn, so shutting the barn door NOW is futile as well.
basically it's a typical case of market intervention producing undesirable results, which then are 'rectified' with more intervention, which will bring about more undesirable results in need of rectification...and so on ad infinitum.
Date: Tue Jun 07 2005 09:42
trotsky (kapex) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
" The prediction game as far as metals goes is anyones guess because of the control. "
this is an inherently contradictory statement. if the 'control' were an established fact, predicting the price trend would be very easy indeed.
meanwhile, a long term chart of gold doesn't look any different from long term charts of other commodities or currencies ( which suggests that all the markets continue to follow the same rule book ) :
gold:
tfc-charts.w2d.com
euro:
tfc-charts.w2d.com
copper:
tfc-charts.w2d.com
but i agree it's a great in-advance excuse in case a prediction doesn't work out. : )
Date: Tue Jun 07 2005 09:36
trotsky (more...) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"Greenspan said that the long-term yields may remain at current low levels and that investors should not automatically assume that it would mean what it meant in the past."
yebo, THIS TIME IT'S DIFFERENT!! NEW ERA!
Date: Tue Jun 07 2005 09:31
trotsky (P. Yorkie) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
and that's supposed to signify what exactly? that the Brits have discovered, that against all odds and in the face of truly overwhelming evidence to the contrary, that central economic planning actually DOES work, and Marx and Lenin were right all along?
Date: Tue Jun 07 2005 09:26
trotsky (@the 'conundrum') ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
""Explanations ranging from the glut of global savings to low inflation, both of which may spur bond buying, can't fully explain why yields on long-term notes are falling in the U.S. and worldwide, Greenspan said.""
that's because they are not, as he alleges, "explanations", but rather constitute SPIN. spin doesn't 'explain' anything, it is designed to deliberately obfuscate. what plunging long term rates worldwide mean should be clear even to the denser among the countless market observers.
the problem is not that nobody knows what it means, the problem is that they don't like the message, and thus nobody's prepared to enunciate the truth.
Date: Tue Jun 07 2005 09:22
trotsky (@Greenspan) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
snippet: " "The economic and financial world is changing in ways that we still do not fully comprehend," Greenspan concluded "
Greenspan's of course right about this...and inadvertently thereby admits the utter futility of central economic planning, which he is charged with. |
