Wednesday, May 03, 2006

 

'Gold Cartel Imploding As We Speak': Grandich

Market Watch has todays trading numbers. "Gold futures notched a fourth winning session on Wednesday to close at their highest level in almost 26 years, but prices gained just over $1 an ounce, their smallest one-day gain since mid-March. On Wednesday, crude prices fell as much as $2 per barrel and strong U.S. economic data triggered some recovery in the U.S. dollar."

"June-dated gold futures closed up $1.10 at $668.50 an ounce on the New York Mercantile Exchange, off their early high of $679.80 an ounce. Prices briefly traded as low as $660 during the session."

"Gold 'simply felt 'heavy' at the top,' said Jon Nadler, an investment products analyst at bullion dealers Kitco.com, referring to a brief pullback to a low of $660 Wednesday. He pointed out that the earlier pullback from the day's peak likely started in the silver pits. July silver dropped 41.5 cents, or 2.9%, to close at $13.795 an ounce Wednesday after trading as high as $14.42."

"But support is at $648 for gold, so there's "nothing special about $655-$658 here," said Nadler. 'Twenty bucks' range is no big deal given where we are in the market.'"

"Peter Grandich said gold has also gained recently as speculators, who had expected a correction from its current lofty levels, rushed to cover short positions. 'The least talked about reason for gold's dramatic rise is the past shorting and manipulation of it by a group or groups who have been desperately trying to cover,' he said. 'The gold 'cartel' is imploding as we speak.'"

"July platinum rose $1.30 to $1,186.70 an ounce after a record $1,198, and June palladium closed down $4 at $382.35 an ounce. Rhodium last traded at $4765/oz, just off the metal's recent high of $4800/oz, which was rhodium's highest level since May 1991. In July 1990, rhodium climbed to an all-time high of $7000/oz."

Comments:
Grandich is always a colorful guy. He touches on something that has me puzzled; in previous gold bull markets that I have lived through, the central banks always stepped in to snuff it out. Either through repeated, concerted warnings of dumping reserves or actual market positioning. But this time the CB's aren't saying or doing anything that I've heard about.

I realize they have a lot on their plate, but not even a rumor?
 
Could be they're no longer in a position to do anything, even credibly threaten?
 
I'd love to hear stories of the shorts getting burned and for how much.
 
How far can the stock market crash be? When comments from a ditzy woman on CNBC can shake the markets, I think the central banks have lost control. Can't afford too many more "misinterpretations". Any rumors could be catastrophic if they gain traction.

I'm guessing that from here on out all the Fed governors will only be using prepared remarks, and handing out a glossary with definitions of all the words used.
 
If you look at inflation adjusted numbers the current gold price can't really be considered out of line. I wouldn't expect central banks to be even thinking about gold right now. Stocks and housing are completely out of line compared to historical averages and most reasonable valuation models.
 
Would it make difference that they're marketing the stuff this time around? I don't believe there were silver and gold eagles last time around.
 
This is what I think is happening.

The central banks realize that they have sold, maybe, too much gold, and they're finding out that the US dollar is becoming unstable, like some other currencies. See, the game is to see which currency depreciates faster than others. In fiat currency regimes, it seems that the unit of currency ALWAYS goes to zero, as in the Dow Jones Industrial Average can no longer buy ANY gold because the dollar that the financial markets are based on has gone to ZERO value from where it started out. The US dollar has lost over 9% of its value, so the central banks are, in fact, not only limiting sales of gold (Washington Agreement), but also buying gold back in order to diversify out of the US dollars and other currencies that are losing value.

Central banks can no longer step into the silver markets because THEY HAVE NONE, compared to the past!

Stephanie Ellison
 
The U.S. Mint had a huge reserve of silver when it began coining silver eagles in 1986. Typical government bureaucrats, they thought they would never run out or they would be retired before it became a problem. I have been hearing rumors and reading articles that the mint was running low as early as 2003. Ever since the statehood quarters came out in 1999 the Mint has been producing many more silver proof sets and silver commemorative dollars as well. Coin collecting has really taken off these last 7 years and the mint needs more silver. They have had to buy some on the open market to feed their huge demand, I'm sure this has something to do with the rising price of silver.
 
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