Comments on: Looking for a Turn in Gold from $1140

By: Bob Wo

Bob Wo — Fri, 30 Jul 2010 11:11:25 +0000

I just read a very interesting article that suggests the bullion banks orchestrated the recent sudden drop in the gold price a day prior to gold options expiry, thus saving their buddies from having to pay out on multi-$millions of ‘in-the-money’ call options. Looking back a few months, this seems a regular occurrence – any views on this..?

By: FranSix

FranSix — Thu, 29 Jul 2010 00:28:32 +0000

Something people might have missed in 2003, simply because they weren’t looking for it, were negative repo rates.
Now considering that swap agreements are repos and that ‘failures to deliver,’ a common knowledge term without ambiguity, there must be moribund pile of failures to deliver out there that need clearing, so the solution is to agree on swaps.
The banks will now have a way of clearing a vast pile of derivatives should interest rates go into the negative and a policy on negative interest rates on repos or a sojourn of the discount rate into the negative is coming.

http://www.ny.frb.org/research/current_issues/ci10-5/ci10-5.html

Now, gold leases are often in the negative, so if rates go below lease rates, then this means a collapse in the face value of leases while the gold price goes higher. I would speculate that swap arrangements are being conducted right now, and that clearing of years of accumulation of failures to deliver is about to commence.

By: BJ

BJ — Wed, 28 Jul 2010 18:35:28 +0000

Rick, Your 1140.10 appears in my work, to be significant support, perhaps rivaling Feb 5, 2010,weekly close of 1058.00.
As Ed Hart,use to say,we shall know…”In the fullness of time!”
Keep up your good work. BJ

By: Keith

Keith — Wed, 28 Jul 2010 18:03:04 +0000

Gary, [Has anyone mentioned the scare over inflation lately?]

Nope, not really. Which means we are ripe for some unexpected rise in prices. Besides, I wouldn’t say there is no inflation out there. It’s showing up in the stock market imo.

By: gary leibowitz

gary leibowitz — Wed, 28 Jul 2010 17:51:12 +0000

Talking about a wedge the SP500 looking real good for a breakout/down from a recent wedge.

Miomentum should buid from this breakout.

If the market falls hard from here, not expected by most analysts, I wonder just how well Gold reacts. I am still in the camp that says gold will fall hard once equities rolls over.

Has anyone mentioned the scare over inflation lately? I find it strange how so many people accept a protracted low inflation envireonment given it’s 18 months after the debacle. I would love to hear the discussion 18 months ago from the very same analysts that accept this trend as a new bull run. I would bet they all thought inflation would be a problem right around now. i also would bet they all thought we would have a heated economy from all that stimulus.

Maybe I am jaded but I still say we are in a dangerous position.

By: Benjamin

Benjamin — Wed, 28 Jul 2010 12:35:33 +0000

Before you short gold, you might want to look and this…

http://news.goldseek.com/GoldSeek/1280211300.php

And here is the link to the blog post that Fekete refers to…

http://fofoa.blogspot.com/2010/07/red-alert-gold-backwardation.html

Summary of my analysis: If you can only lend it at a loss, might as well sell it, right?

By: S David

S David — Wed, 28 Jul 2010 00:52:18 +0000

I have come to rely on your HP’s, Rick, but a breakdown from an ascending wedge on the weekly chart extending back to March of 2008 shouldn’t be taken lightly.

I’ll be a buyer at the levels you suggest. I’ll short it to death if it fails.