Posted on 03/12/2009 10:20:49 PM PDT by Professional
This linked article kind of explains what I'm referring to.
Doing some research last night, I stumbled across something quite interesting. Something I never knew existed, Central Bank Gold Agreement came up as a discussion about gold prices.
Apparently, 15 mostly European nations signed a pact in 1999, then renewed the deal in 2004. This agreement limits the central banks of those countries ability to sell their gold reserves. Back in 1999 this was meant to stabilize the price of gold, which was unusually low.
I personally find this very interesting, as a finance professional, because it is an artificial element to the natural supply demand equation. Essentially, they are in a way, hoarding gold with the intent of keeping the price high, if not at least from being low.
Now, here is where it gets interesting. This agreement is set to expire in September. Considering how high gold prices are, and how much these central banks are spending, would it not be prudent to sell off gold? And since you suspect another nation might just do that, at your financial and political expense, what makes you think they are not all motivated to act?
After finding this, I've searched high and low for more information. Surprisingly, wikipedia has nada, zippo, zilch. And if you do a web search via google or yahoo the only mentions are in gold sales pushing related websites. The ONLY mentions are that the agreement will probably/hopefully be renewed, or some wild spin tale of the like that is gold BULLISH. Reality says, that if EVERYONE is bullish, the opposite must really be the outcome.
Following the gold charts, it appears that it is resting close to a support line, that if broken, could mean a very large fall in price.
The bubble of gold in my opinion is about to burst, much like the oil bubble burst in late last year. At 147 here last summer, i said it would crash, and would hit 20 very soon. I got lots of guff on that... 2 yrs ago, I compared the chinese stock bubble to the nasdaq of 1999, and sure enough, kaboom. Look it up, I assure you both are true. I'm not trying to brag, but my opinions should not be dismissed as unfounded or simple guesses. I'm willing to back my thoughts with rational facts.
Our stock market now, is more than likely on the verge of an up move not seen since early 80s, or 1975. I'd think that many gold investors might realize that they need to change assets as well, providing a real motive for leaving gold.
Our stock market, and the world for that matter, were manipulated primarily via the removal of the uptick rule and mark to market accounting laws. This week, both are essentially being dealt with, causing the market to rise nearly 700 points. IMHO, the bear market may very well have died today.
I welcome your thoughts, and debate. If anyone can provide more details, neutral please, on CBGA and CBGA II, I'd love to read more.
“people will hate gold so much”
Now that is gratuitous, we’ve seen two major bubbles burst in the last 9 years, in the last ten the market has been down erasing massive amounts of wealth in that time, and yet, people still participate in the market...if there is a dollar to be made feelings are put aside rather quickly...lol!
Not true. The computer you're using right now to read this has a small but significant gold content in the PC boards. It's used because a) it's an excellent conductor, b) it doesn't corrode, and c) it can be drawn very fine. This makes it suitable for use in PC components.
thoughts?
“The bubble of gold”? Is this satire?
Scripture indicates that gold will drop in price...just not when. It talks about buying a loaf of bread with a bag of gold...so all commodities seem to have their own ends.
Satire? Is that satire?
I think i’ve more than explained my case on why I think gold is a bubble about ready to burst.
If you want to debate my thoughts, or correct anything that is factually incorrect, by all means. Actually, that is the entire point of this post. I’m trying to evaluate my opinion based upon input.
You think only 2 bubbles burst in the last 9 yrs.
Tech, nasdaq, steel, treasuries 2003, oil, real estate, financial stocks, international stocks, emerging market stocks, builder stocks, hedge funds, china...
Actually, I’m sure I’ve missed a few.
Your point about mines, isn’t it funny that at high prices, they aren’t rushing out to mine more?
I also find FCX, Freeport McMoran Copper and Gold, trading at these levels to be a head scratcher? Why is the share price so low, when they mine the stuff? Stock is at 37 down from 127?
I assume the reason why gold isn’t spiking higher, or reacting like it did in the past, is that today there are better things to manipulate, like oil. In the case of oil, it actually was a fabric necessity of the global economy.
Take away a mans oil, he can’t drive. Take away a mans orange juice he can’t have a screwdriver. Take away a mans wheat, he cannot make a big mac, but if you take away a mans gold, he just can’t have a cheap grille. How pressing is that?
Let’s review why gold is not in a bubble:
- Nothing can be in a bubble unless it is well past the previous inflation-adjusted all-time high
- Gold regularly drops up to ten percent in three days or less and once dropped more than twenty percent nearly without a break in 2008. Bubble price action goes one way.
- In every case, gold “corrections” have taken weeks and months to recover. Bubble price action is exponential — not a grinding, grudging “recovery”.
- It is almost a commodity, yet supply is not readily available. That’s a supply shortage, not a bubble.
- Boiler-room companies (i.e. cash4gold) are begging the masses to sell to them, not to buy from them
- CNBC is still bashing goldbugs instead of worshipping them
- We haven’t seen a TIME or Business Week magazine cover with a cartoony John Q. Public engaging in borderline-sexual acts with Lady Liberty from the Saint Gaudens Double Eagle
- Nobody you know, knows what Lady Liberty from the Saint Gaudens Double Eagle looks like
- Hollywood hasn’t yet made gold-related TV shows, movies, etc.
Not funny at all. They're just about going out of business because they can't borrow any money from the wrecked banking system. Share dilution has become exponential.
I'm no expert on economics but I see nothing to persuade me that this recession will improve and that Obama and the Democrats will be able to turn the economy around much less have the desire to do so.
I think that gold will dip then stabilize and rise. I don't know that it will rise to present levels.
We will have to see how many emergencies this country encounters for Obama to mangle. God forbid there's a real crisis to deal with on his watch.
bookmark
Then, your guess on the new bottom for gold? $450?
I’ve followed thoughts like yours for some years, and would jump again at the $550. point.
I can’t think inflation coming will let it go much lower than half of what it is now.
bubble elements in play
greed, fear, fraud, tv, regulatory, inflow, wall street product, consumer sentiment, irrational behavior, this time is different.
I have a list 30 long, to measure bubbles. The bear market bubble in stocks has a check mark on all 30. Like the nasdaq bubble burst, it is an unusual regulatory element that is going to kill it. Namely uptick and m2m.
Just my thoughts.
Well, I’d say I’d find it appealing later, when markets come back, and life comes back to normal. For two reasons..
One, the world today can’t find any reverse correlation. All global equity markets are trading in tandem, that is a problem. Bonds don’t help either, unless they are treasuries. Even high quality bonds got smoked in this bear market. Asset allocation did NOT work this time.
Gold can at least claim reverse correlation to bonds and stocks, making it valuable in that sense.
My second reason to consider, is that we might be in a cycle like the 70s, where there were 4 major boom bust cycles, that kept whipsawing folks. That finally ended after the carter/reagan/volker recession of 82.
I highly suspect, that our next downturn will happen as we approch former highs, and clients want off the crazy roller coaster ride, and the few buyers of today take trading profits. There might also be another recession or major problem with this administration doing as much stupid stuff as possible.
Jim Cramer recently suggested buying gold. Interesting strategy too, buy now, and when it goes down, and when it goes down again, and when it goes down again...
Now, Jimmy, see, he’s not that stupid, he’s an old Hedge Fund guy. And numero uno hedgie is soros. But, see, Soros strategy is to buy a little now, and buy more and more as it goes UP, not down. Soros has a more than proven track record of making money both honestly, and dishonestly.
Cramer is on the take, and he has always reminded me of Dan Dorfman who used to be on CNBC in the mid 90s until he was canned for suspected pump and dump for pay, and insider trading. Look at Dorfmans bio at Wikipedia.
http://en.wikipedia.org/wiki/Dan_Dorfman
Cramer suggesting gold, is a major red flag, and the way he recommends it, is an insult to reasonable intelligence.
Cramer: I want you in gold (have your barf bag ready)
http://www.youtube.com/watch?v=yuABORMTMdQ
Market bubbles are great for bringing up diversification. People buy under the guise that they should, since it diversifies them. Buying at the bubble top, is very bad diversification form...
This deception is especially brilliant, since the duped buyer will think the strategy is working, because cramer said it would go down! Duh, duh, duh...
Cramer suggest intentionally buying gold as it falls? When typical super trader advice is as follows...
* “THOU SHALL NEVER FIGHT THE TREND”
Ignore this instruction at your peril, never catch a falling knife. Let it hit the floor, and then buy on the way up. Never buy on the way down, you never know where down is, where down stops. You only buy on the way up.
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