Serpo
13th July 2010, 07:42 PM
Gold: Rushing The Line!
http://www.321gold.com/editorials/thomson_s/thomson_s_071310.html
Stewart Thomson
email: s2p3t4@sympatico.ca
July 13, 2010
1. First, my subscribers are probably the largest group of GDXJ shareholders. If I told everyone last week that "it's gonna crash, it's 2008, sell everything!" I probably could have tanked the GDXJ down to the $15 area, maybe even to $10. Of course, I didn't say that. I said buy.
2. I termed July 1st 2010 "Black Thursday". Tuesday, July 6th was another black day. Those two days were marked by massive selling across the board, in both the gold and fund communities. I was inundated with various email "analysis" showing me why gold was going down and how wrong I was to buy as it fell. Question: How important does that analysis seem this morning, how wrong am I now?
3. This situation reminds me greatly of past bottoms in the market. Putting in a final low is a process, not an event. The level of negativity last week was extreme. The COT report released on Friday July 9th did not cover the comex gold market trading for July 7th. The report ended July 6th, and July 7th was the 1185 low.
4. As it was, the banksters booked profit on about 35,000 gold contract shorts, and went long another 10,000, while the funds and gold community bailed on about 37,000 longs, an act of madness, and added about 10,000 shorts into the lows. Again, the gold-bailing and shorting actions of the gold and fund community into that sell-off must be defined as Madness.
5. We'll never know exactly what transpired on July 7th, because the COT reports are a weekly report, not a daily report. Regardless, I'm only 99.9999% sure that the banksters bought even more longs into 1185, as I did, and covered even more shorts, while the gold and fund communities booked more losses and added huge fresh short positions at the exact bottom.
6. I made a "herculean" effort to keep my people on the gold buy, and I urged everyone in the gold community to do the same. Money flows talk, and bullcrap walks. The reality of what was done can't be talked away. Broken parabola dreams were front and centre in the gold items bonfire. The selling of gold ends when those doing it stop, and not before.
7. A picture speaks a thousand words. The story of gold in the short term is the story on this chart. Gold July 13
8. This is a chart covering the past 2 weeks of gold trading action, and there is a head and shoulders bottom with a double head. You want to be a seller of gold if it rises thru 1215, and a buyer if the pattern implodes and 1185 is taken out. Everything else is meaningless. Throw all analysis in the garbage as price either rises above 1215 or falls under 1185, and simply act professionally with your buy and sell orders.
9. It's not a question of IF price moves above 1215 or below 1185, it's a question of when, and time is drawing closer. Have your garbage can very close to your gold buy and sell buttons, so as the crackerjack box analysis pours out to chase price as it moves past either 1215 or 1185, you equally quickly throw all that analysis in the garbage can, and take professional gold soldier action in the market, either buying weakness or selling strength, without exception.
10. This is 2010. Not 2008. Not 1929. 2010 is about the success or failure of QE, quantitative easing. I believe the year ends with the failure of QE, and by definition Dr. Ben Bernanke then opens his toolbox and pulls out his gold revaluation tool.
11. The question you need to ask yourself is whether you think ramped up QE can solve a major currency crisis, a crisis that could involve multiple major currencies. What assets, specifically, will be bought to pump liquidity into the system, and to what end? Does buying some more Fannie Mae stock solve such a currency crisis? Maybe the Enron and Nortel caskets can be opened up, and "QE Enron/Nortel" solves a global currency crisis, or maybe not.
12. Let me elaborate further: Banks don't want to lend money, and solid businesses don't want to borrow anything, despite record low interest rates. Flooding the system with liquidity won't raise asset prices if there is no pickup in the velocity of money.
13. The mission of the Fed and the US Treasury is to raise asset prices and devalue the dollar. If QE can't do it, do you think that means prices have to fall? No. It's like the mother who says to the child who won't eat their vegetables, "look I offered you candy if you would eat the vegetable. Now the games are over, now I'm just going to make you eat it." Mother then grabs you by the hair and sticks your face in your plate and forces you to eat your vegetables. [Editor's note: Hmmmmmm, reminds me of my 'babies,' Tamsin & Samara - yikes, almost four decades ago - and their sprouts, LOL]
14. Likewise, if the QE carrot won't entice banks and businesses to raise home prices thru a spend and lend scheme (although Dr. Bernanke never does elaborate on exactly how we get house prices to the sky while other prices fall), then Dr. Ben together with another leading member of the Pinocchio family, Tim Geithner, will MAKE those prices higher with an accounting move called gold revaluation. The other name for it is dollar devaluation. It mechanically makes prices higher, and impoverishes creditors and team paper money, but that's a minor side effect in the eyes of the banksters.
15. Who says the gold swapped into the BIS is gold price negative? What if that pile of gold is used to revalue gold higher against a major paper money currency? Is that gold-negative? Is this like when the central bank managers sold the taxpayers' gold to the banksters in the 1990s, and everyone said the selling was gold-negative? What happened then?
16. Answer: The taxpayers were roasted while the banksters made billions, as gold soared after the selling was completed. Those billions could become trillions, depending on the amount of paper money that needs to be devalued to reverse the asset price destruction death spiral.
17. With a quadrillion dollars of paper money in OTC derivatives outstanding (with approx $300-$500 trillion of it likely worthless and hidden), I would suggest there's a "fair bit" of paper money devaluation required, a fair bit of gold price revaluation required. There are two sides to every trade. The one you're told about 500 times a day by the media, and the other side, the winning side. In this case there's the swapper and the swappee, so to speak. Are you sure those with the gold are on the losing side of the trade?
http://www.321gold.com/editorials/thomson_s/thomson_s_071310.html
Stewart Thomson
email: s2p3t4@sympatico.ca
July 13, 2010
1. First, my subscribers are probably the largest group of GDXJ shareholders. If I told everyone last week that "it's gonna crash, it's 2008, sell everything!" I probably could have tanked the GDXJ down to the $15 area, maybe even to $10. Of course, I didn't say that. I said buy.
2. I termed July 1st 2010 "Black Thursday". Tuesday, July 6th was another black day. Those two days were marked by massive selling across the board, in both the gold and fund communities. I was inundated with various email "analysis" showing me why gold was going down and how wrong I was to buy as it fell. Question: How important does that analysis seem this morning, how wrong am I now?
3. This situation reminds me greatly of past bottoms in the market. Putting in a final low is a process, not an event. The level of negativity last week was extreme. The COT report released on Friday July 9th did not cover the comex gold market trading for July 7th. The report ended July 6th, and July 7th was the 1185 low.
4. As it was, the banksters booked profit on about 35,000 gold contract shorts, and went long another 10,000, while the funds and gold community bailed on about 37,000 longs, an act of madness, and added about 10,000 shorts into the lows. Again, the gold-bailing and shorting actions of the gold and fund community into that sell-off must be defined as Madness.
5. We'll never know exactly what transpired on July 7th, because the COT reports are a weekly report, not a daily report. Regardless, I'm only 99.9999% sure that the banksters bought even more longs into 1185, as I did, and covered even more shorts, while the gold and fund communities booked more losses and added huge fresh short positions at the exact bottom.
6. I made a "herculean" effort to keep my people on the gold buy, and I urged everyone in the gold community to do the same. Money flows talk, and bullcrap walks. The reality of what was done can't be talked away. Broken parabola dreams were front and centre in the gold items bonfire. The selling of gold ends when those doing it stop, and not before.
7. A picture speaks a thousand words. The story of gold in the short term is the story on this chart. Gold July 13
8. This is a chart covering the past 2 weeks of gold trading action, and there is a head and shoulders bottom with a double head. You want to be a seller of gold if it rises thru 1215, and a buyer if the pattern implodes and 1185 is taken out. Everything else is meaningless. Throw all analysis in the garbage as price either rises above 1215 or falls under 1185, and simply act professionally with your buy and sell orders.
9. It's not a question of IF price moves above 1215 or below 1185, it's a question of when, and time is drawing closer. Have your garbage can very close to your gold buy and sell buttons, so as the crackerjack box analysis pours out to chase price as it moves past either 1215 or 1185, you equally quickly throw all that analysis in the garbage can, and take professional gold soldier action in the market, either buying weakness or selling strength, without exception.
10. This is 2010. Not 2008. Not 1929. 2010 is about the success or failure of QE, quantitative easing. I believe the year ends with the failure of QE, and by definition Dr. Ben Bernanke then opens his toolbox and pulls out his gold revaluation tool.
11. The question you need to ask yourself is whether you think ramped up QE can solve a major currency crisis, a crisis that could involve multiple major currencies. What assets, specifically, will be bought to pump liquidity into the system, and to what end? Does buying some more Fannie Mae stock solve such a currency crisis? Maybe the Enron and Nortel caskets can be opened up, and "QE Enron/Nortel" solves a global currency crisis, or maybe not.
12. Let me elaborate further: Banks don't want to lend money, and solid businesses don't want to borrow anything, despite record low interest rates. Flooding the system with liquidity won't raise asset prices if there is no pickup in the velocity of money.
13. The mission of the Fed and the US Treasury is to raise asset prices and devalue the dollar. If QE can't do it, do you think that means prices have to fall? No. It's like the mother who says to the child who won't eat their vegetables, "look I offered you candy if you would eat the vegetable. Now the games are over, now I'm just going to make you eat it." Mother then grabs you by the hair and sticks your face in your plate and forces you to eat your vegetables. [Editor's note: Hmmmmmm, reminds me of my 'babies,' Tamsin & Samara - yikes, almost four decades ago - and their sprouts, LOL]
14. Likewise, if the QE carrot won't entice banks and businesses to raise home prices thru a spend and lend scheme (although Dr. Bernanke never does elaborate on exactly how we get house prices to the sky while other prices fall), then Dr. Ben together with another leading member of the Pinocchio family, Tim Geithner, will MAKE those prices higher with an accounting move called gold revaluation. The other name for it is dollar devaluation. It mechanically makes prices higher, and impoverishes creditors and team paper money, but that's a minor side effect in the eyes of the banksters.
15. Who says the gold swapped into the BIS is gold price negative? What if that pile of gold is used to revalue gold higher against a major paper money currency? Is that gold-negative? Is this like when the central bank managers sold the taxpayers' gold to the banksters in the 1990s, and everyone said the selling was gold-negative? What happened then?
16. Answer: The taxpayers were roasted while the banksters made billions, as gold soared after the selling was completed. Those billions could become trillions, depending on the amount of paper money that needs to be devalued to reverse the asset price destruction death spiral.
17. With a quadrillion dollars of paper money in OTC derivatives outstanding (with approx $300-$500 trillion of it likely worthless and hidden), I would suggest there's a "fair bit" of paper money devaluation required, a fair bit of gold price revaluation required. There are two sides to every trade. The one you're told about 500 times a day by the media, and the other side, the winning side. In this case there's the swapper and the swappee, so to speak. Are you sure those with the gold are on the losing side of the trade?