Posted on 04/16/2013 6:08:57 AM PDT by blam
Gold And Silver Crash - Don't Be An Idiot
Karl Denninger
April 15, 2013
Don't do it folks.
There's no "reflation" trade. Nor is this "manipulation."
There is one thing to watch, and that is if the physical commodity at real, no-BS volume sources de-couples from the futures price. This is a nightmare scenario as it posits the imminent destruction of the capital market structure, since futures are allegedly deliverables.
That is, if I own a gold mine and know I can dig gold out of the ground for $1,200 an ounce "all-in" I will short whatever I'm sure I can deliver over the next year or two into the market so long as the price is over that amount, as it guarantees my profit.
I'm not interested as a miner in speculating on the price. I make my money digging the stuff out of the ground -- doing real work and getting paid in real money. I am singularly uninterested in the speculative fervor or the "gold bug hard money" mania; it means nothing to me at all.
If this relationship changes then -- and only then -- do you get panicky. But then you get panicky about everything, because as soon as you lose the fungible nature of financial products with their underlying assets the market is telling you that the electronic representation of all such assets are about to be marked down dramatically and quite possibly to zero.
The reason is simple -- that fungible nature of cash and financial price means that as soon as one moves there is money to be made by arbitraging the two. If the price of "cash" gold is higher than that of "futures market" gold you buy the futures and notice it for delivery, locking in a guaranteed profit because you can immediately sell it at a profit. Likewise, if the other happens you short the futures and buy the physical, and you pocket the difference when you deliver the gold against the contract. So long as this relationship holds all claims of "market failure" or any sort of conspiracy nonsense are crap.
Today, here and now, despite all the screaming from various people who are trying to fend off the margin clerk such claims are unsupported as there is no such spread of material consequence and thus are utter crap.
Instead, what you're being told today (and have been for a while, if you have been watching the charts, particularly for copper) is that central bank "money printing" doesn't work.
That is, all of that "QE"ing and "printing" has done is inflate financial asset prices in the expectation of actual economic growth. But now, five years into this garbage, we are seeing that exactly as I predicted it has factually done nothing for the broader economy, such as the jobs market, which means that the central banks have done is blown another bubble!
You just heard a "pop."
Ignore it at your own peril.
You probably heard what Milton Friedman had to say. That historically silver has been the coinage for everyday transactions while gold is for bankers making settlements with other bankers and for large commercial transactions. During a future SHTF and chaos using 90% silver and USG one ounce silver is better than using gold coins which will attract too much attention to you, your family and where you live. Using silver will also attract unwanted attention but not as much
Using 1964 dimes is probably safest.
There’s no doubt that the Fed is glad to see its toady financial firms clean up in these swings. The market psychology prior to Easter (just after Cyprus) was bullish and a lot of longs went on margin. It was a perfect time to 1) smash the longs 2) make money and 3) buy another year for the Fed to inflate. Only #3 really matters.
They rule on a monthly, yearly short term basis so just another year another year is their mantra to do their fiat money mischief. No long term outlook so #3 is the biggest reason while the ChiComs and Russia and their friends have a longer term view so will scoop up physical gold cheap now. They should send thank you notes to JPM and The federal Reserve Bank
Using 1964 dimes is probably safest>>>>>>>> will be very in demand to make change in a SHTF scenario. You can see how if you buy ten 1/10 oz US gold coins this will cost you about 33% more than a single one ounce US gold coin
I have heard hints that Mulligan Mint is going to mint 1/10th oz silver for the same premium as full oz coins.
Yes, that’s a big deal.
Will Mulligans be 90% silver? Because 100% silver wears when circulated. Right now all 100% gold and 100% silver coins and bars should only be sold/exchanged with their plastic covers on
90% silver wears too when circulated...obviously
The pre-65 US currency was 90% silver.
Eagles, etc, are “worse” being 99.9% silver.
I was assuming that the mulligans would be 99.9%.
Just checked, they are .999 “paradimes”. Due out in May.
http://mulliganmint.com/production/silver/
The last of these dimes that I bought were bought from a guy at a flea market...he was asking $2.60 each and let me have all he had for $2.30 each.
I prefer junk silver and have half dollar and one dollar coins too.
In gold, I have a few Krugerrands I bought back in the early 90's.
The LBMA has reacted in desperation, conspiring to sell 500 tons of paper, fake, not-real, naked-short, IOU gold on Friday in a deliberate attempt to shake Gold loose from weak hands and to discourage physical redemption.
Eastern hemisphere central banks are going to buy the hell out of this paper intervention. The Gold is going east. Westerners with unallocated Gold are going to be left with a pile of worthless paper.
And if the LBMA actually defaults then the world is going to change overnight. We'll see a zero on the end of the prices of Gold and Silver.
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