The Commodity Massacre Is Back Today — Gold Tanks Again

TBI ^ | 5-1-2013 | Matthew Boesler

[DannyTN]

Still looks like “panic buying” to me. /s

Once again, I’m glad our currency isn’t tied to this shiny metal.

[DoughtyOne]

Interesting fact about the commodity dump about ten days ago, the dollar didn’t rebound on as commodities dipped. It held roughly static. Traditionally it would have been stronger.

That’s troubling to me. Our dollar is showing signs of weakness.

If business tanks and demand for commodities lessens, and the dollar tanks as well, there’s really no safe haven.

[Attention Surplus Disorder]

All markets are being driven by the yen and the reaction thereto at this point...in the short term.

I’m not averse to adding to gold here, but more often than not, these smashes are two-day affairs.

[DoughtyOne]

I remember the 80s, and folks saying traditional old lows would never be seen again. I’m leery of these commodities.

Your comments on the yen were probably spot on, since Japan seems to be coming out of it’s doldrums..., finally.

[Attention Surplus Disorder]

I believe the world is too connected for these competitive devaluations to do much good. They ultimately show up in goods inflation as other major currencies are forced to follow, to some extent, or to become non-competitive. Personally I do not believe anything Japan can do will affect anything except the prices of synthetic assets such as real estate and stocks. Things just move too fast these days. I do not think there is any meaningful escape for Japan.

There is no “never”....but there IS the cost of digging stuff out of the ground or growing it. Gold *could* be near (meaning..only slightly above) its cost of production, currently sussed at a tad over a grand/oz, but its appeal and tradability is now worldwide. Not meant as a piece of advocacy...Truly, if fuel costs fall dramatically in response to collapse in oil prices, then gold mining could get cheaper.

[DoughtyOne]

I believe the world is too connected for these competitive devaluations to do much good. They ultimately show up in goods inflation as other major currencies are forced to follow, to some extent, or to become non-competitive.

I agree with this.  Good point...

Personally I do not believe anything Japan can do will affect anything except the prices of synthetic assets such as real estate and stocks. Things just move too fast these days. I do not think there is any meaningful escape for Japan.

And you could be right.  There seems to be a wave of agreement that Japan has escaped it's doldrums, but I may be giving that too much credence.  And even if true, what does that mean globally?  Here it was my take Yen could be a currency of refuge.  I'm not of a mind to think the Chinese currency will ever be something I would want to own.  And of course, these are temporary refuges, changing as economies do.

There is no “never”....but there IS the cost of digging stuff out of the ground or growing it. Gold *could* be near (meaning..only slightly above) its cost of production, currently sussed at a tad over a grand/oz, but its appeal and tradability is now worldwide. Not meant as a piece of advocacy...Truly, if fuel costs fall dramatically in response to collapse in oil prices, then gold mining could get cheaper.

I think that's a good point too.  Commodities are somewhat self-regulating aren't they.  If the price drops too low, mines close, and open up when demand drives profititiblity.

[Attention Surplus Disorder]

“I think that’s a good point too. Commodities are somewhat self-regulating aren’t they. If the price drops too low, mines close, and open up when demand drives profititiblity.”

Yes, that’s a point the commod traders like to point out. There is an issue with this in terms of “time”. It takes YEARS to get a mine up and running, and it can take quite a while to get a shuttered mine up and running even if it’s already dug out of the ground and simply boarded up. Although the train tracks will still go there, the bulldozers still have to be re-bought and the equipment, if not sold off, has to be reinstalled. A NEW mine can take a heck of a long time to get producing. Including permitting from scratch it takes significant and sometimes agonizing time to start. Think about the time it takes to get an oil discovery pumping and you’ll get the picture. 5-7 years, sometimes. Different with corn or wheat and other ags (which I don’t trade and know nothing about)

[Jet Jaguar]

Goldbug ping.

[Zakeet]

Ordinarily, a story like this would be troubling ... but not now ... especially when you consider that:

1. A one percent drop is hardly a massacre.

2. The price of paper gold is down ... the price of physical gold is moving upward.

3. It is May Day and therefore, most of Europe is shut down ... many places in the Far East are wrapping up a three day holiday ... volume is light ... and it is therefore the perfect time for manipulators to strike.

4. Bank deposits were stolen in Cypress in recent weeks ... governments have made it known this is but the first of many forced conversions.

5. ABN AMRO notified their depositors that their metal was gone and that they would have to accept cash settlements ... Swiss banks are refusing to allow their customers to withdraw physical gold, using the excuse of anti-money laundering laws as cover.

6. The vaults at the J.P. Morgue are almost empty ... the LBMA is reportedly out of silver and almost out of gold ... the Comex inventories are down significantly as the numbers standing for delivery are soaring (in what is traditionally a small delivery month)

7. Queues are long for bullion worldwide ... demand is surging ... mints and refiners are working overtime ... lead times are getting longer.

8. Physical is selling at an ever-widening premium over spot ... up to $500 per ounce in Japan ... arbitragers are unable (or unwilling to part with physical) to close the gap ... indicating that the paper price no longer reflects the true price of the metal.

9. Barrick is postponing their Pascula-Lama project in Chile-Argentina indefinitely ... Kennecott's Bingham Canyon mine is out of production for at least two years ... huge sources of supplies that the market was counting on will not be available to soften price increases for some time, if ever.

10. People buying bullion are essentially converting their fiat currency ... backed by an insolvent government led by a gang of idiots with almost no understanding of basic finance and absolutely no spending discipline ... into another form of currency which has held its value throughout 5,000 years of recorded history.

Always remember, as so well stated by Richard Russell, "The markets always do what they're supposed to -- but never when."

[dennisw]

Your Federale Reserve buddies.....pushing on a string. Industrial and agricultural and mine (extraction) output used to make the USA strong with a vibrant economy and large well paid labor force. With a hollowed out economy (thanks to free trade) the Federale Reserve tries to simulate this via cheap money policies and QE to infinity and Obungu giving out ObamaFones and disability checks and funding green energy projects for his crony capitalist associates

[dennisw]

ping

[palmer]

The Fed has been making noises about stimulating tbe economy and avoiding the dreaded awful horrible close your eyes and cover the childrens’ eyes bogeyman of deflation. What they are actually doing is printing money and giving it to politicians to spend. We the sheeps still pay for some stuff like the Obamaphones on our own phone bill. But mostly the Fed is propping up Keynes rotting corpse.

[dennisw]

In our age of a fake economy dominated by Gov’t and Wall Street which basically contribute nothing to the real economy....What better money for them to exchange among themselves (AKA keeping score) than fake Federal Reserve money.

Sound money is for people with sound minds who have a sound organic economy. Even a fiat money regime can be sound enough... Until the leftist Govt loons and Wall Street/Bankster manipulators get to take charge of it and make it work for their benefit

[dennisw]

I kinda liked the mini-deflationary trough fall 2008-spring 2009 and felt beyond that. The first person who saw things thawing out was James Grant. I remember distinctly, March 2009 and no one believed him but he called it

SLW went to $2.91 and Sands (Adelson) went down to $5