guidance to self going forward ... once a trend settles in and is believed in ... then ... finally leading on to a definitive crisis at the center ... etc etc left unmentioned
From: J
Sent: Thursday, June 14, 2012 8:53 AM
Subject: Re: Gold Gets Fresh Support From Central Bankers - Barrons.com
i figure:
1. europe has so far not tee-ed up any solutions that does not involve shuffling around of re-blended debt pool w/ partial and uneven default of private vs public capitals, even as the social wastrel spending continues in the big european states / uk while the little people of little states fall down and begin to line up at soup kitchens
what europe is doing is simply mopping around (not mopping up) a pile of shit from a blown diaper to spread the evil all around, making a bad situation worse.
although by and by the crap is being focused into a few entities, eventually, and then ready for the inevitable default singularity and the reset, per all 'successful' debt work outs
2. capitalists everywhere are (or should and must soon be) terrified, and have essentially stopped taking on new ventures, so unemployment rises even as the numbers are massaged down every which way everywhere by all officialdoms
3. under the conditions as described above, where private capital is scared and unwilling and withdrawing, and public undertakings are impelled at as full a throttle as politically feasible w/o tee-ing up even more tyranny, the conditions under heaven do not look promising and we should go easy on confidence
4. so, the european capital pool is messed up, even as the fiscal streams continue to bleed red toxin. as long as the bleeding is not stopped by prosperity growth or stopped by austerity deflation, the ills shall remain as is
5. growth requires competitive strength, austerity must be backed by socio-political will. forget about both needed factors spontaneously arising out of the populations.
6. and so, onward to mathematically compelled default and reset, but before so, the mother of all efforts to maintain entitlements.
7. recommendation: hold core gold position, trade around the edges, of gold, and going outward from gold center, all manner of goodies related to gold, and conditions that benefits from conditions bullish from gold, if only because we need to guard against diaper debt deflation (be in cash, and if cash, the best cash that has no counterparty) and anticipate pre-default paper cash dilution, as well as post-default hyper inflation.
buckle up, the ride shall be somewhat bumpy as the physicals gets taken up and the paper traders get exhausted from killing volatility and eventually retreats, leaving in wake even more volatility of the much smaller physical market.
cheers, j
From: S
Sent: Thursday, June 14, 2012 6:20 AM
Subject: Gold Gets Fresh Support From Central Bankers - Barrons.com
I find 2 data pts interesting
1) cbank buying of 10pct of global gold which doesn't mean gold goes higher
2) open interest fell by 28pct since sep 2011 which means hype on gold may have gone away, allowing gold to rise
-s
online.barrons.com
Big changes are afoot in the gold market. The short take: The new environment will favor long-term investors who buy and hold for years over speculators who try to trade day-to-day gyrations.
For one thing, central bankers are back buying gold. Think it's no big deal? The last time we saw the so-called official sector as such a consistent and major buyer was in 1965.
Central banks increased their gold hoards by 400 metric tons—each equal to almost 2,205 pounds—in the 12 months through March 31, up from 156 tons during the prior year, according to recent World Gold Council data.
The council "is now confident that central banks will continue to buy gold and has added official-sector purchases as a new element of gold demand," writes Austin Kiddle in a report for London-based bullion dealer Sharps Pixley.
The recent data cement the fact that central-bank buying is here to stay. This stands in stark contrast to large-scale selling from 1966 through 2007. The majority of those years saw massive dumping of the metal by central bankers, punctuated by a few years of modest buying.
After the end of World War II, central banks had to hoard gold because it was the center of the global financial system. But as the Bretton Woods system, which relied on gold, collapsed in the late 1960s, the bankers no longer needed so much bullion. The system died in 1971.
CENTRAL BANKS STARTED TO WARM to gold again during the 2008 financial crisis. The U.S. Federal Reserve began a campaign of money printing known as quantitative easing in 2008 to boost economic activity. In order to diversify away from greenbacks and other paper currency, central banks of emerging-market economies like Mexico started snapping up bullion. Central banks "will probably be continuous buyers of small volumes of gold for the foreseeable future," says Jeff Christian, founder of New York–based commodities consulting firm CPM Group. By small volumes, he means 311 to 374 metric tons a year, or about 10% of the global supply.
So will that drive prices higher? Maybe, maybe not, says Christian.
He says that central bankers will avoid buying any quantity that dramatically affects the price. They know that the market is tiny, compared with the $4 trillion-a-day foreign-exchange market. Still, consistent buying of 10% of annual supply can't but help keep the price elevated.
But that's only one big change. The second: Short-term speculators have fled the market. Open interest of managed futures funds, considered a good proxy for all speculators, has dropped a staggering 28% since the beginning of September, to approximately 203,224 contracts as of June 5.
"I think we'll see more volatility in gold because of the absence of speculators," says George Gero, a precious-metals strategist at RBC Capital Markets in New York. Speculators often damp volatility because they add liquidity to markets.
The price of the metal, which closed up 0.2% Friday at $1,590.10 a troy ounce, could make major moves in very short periods, says Gero. In simple terms, the moves will be too big and too rapid for many short-term speculators to deal with.
"The best way to play gold is as a long-term investor as a hedge against loss of purchasing power of paper money," says Gero.
SIMON CONSTABLE is host of The News Hub at WSJLive ( wsj.com). |
