May

26

Upside down openVis a vis yesterday's down open of 3%, capping a nice 200 point continuous decline in a month.

It is interesting to reflect (in retrospect) that when Collab and I got our first job 11 years ago at street.com the managing editor was not interested in anything about our employment or anything else except that we be pc and not mention Galton but kept up a steady stream of questions to me: "there's a rumor going around that you were caught short in gold and that you're being squeezed and that's why it's going up (then about 280), and wondering if you'd care to comment on a "need to know basis." One hadn't traded gold for years at the time having called it a day after they banned buying to bail the members out who were short against the Texans . But one was reminded of that by the rumor "the large man was selling" and putting pressure on the market on the down side with tetrapods (and doubtless flexions) piling in also yesterday at the open (though in the opposite direction). If the "large man" was in play, why it's like "Morse is back" and trolley and canal are ready to go through the roof.

Anatoly Veltman writes:

It is indeed interesting to recall the Sep 1999 Ashanti mine hedge default, their bankers covering from $255 all the way to a split second buying frenzy near $330 in the Comex pit, all in one week! They then took over a year to slowly deteriorate back to $255 double-bottom. We'll be readying for a mirror analogue, anticipating $1250 area futures double-top May 2010 

Rocky Humbert asks:

Anatoly, I would be most interested in understanding your reasoning why you believe that we have (in gold) the Nasdaq analog of March, 2000 — as opposed to the Nasdaq equivalent of Autumn of 1999 (or earlier); noting that in that Nasdaq blow-off, that asset was paper securities which could be, and were, issued endlessly, whereas in this market, the asset is a comparatively limited supply of metal that is valued at only 1% of the total global financial market…

And more specifically, can anyone identify any contemporary broad-based asset "bubble" which ended without central bank tightening– as a necessary (but not sufficient) condition? And if not, why should this time different? Stay safe and don't jeopardize your health.

Sushil Kedia suggests:

Why could there not be another interim situation in between what Anatoly is suggesting and what Rocky is thinking:

Gold goes to 1000 as well as 1400 within calendar 2010?

The safety trade can witness the largest volatility it has produced in this decade. As currencies are displaying signs of sloshing much wider than in the last decade while common conversations of most getting trashed abound, why should the expected to be super currency for ages, i.e. gold be spared of a widening range of outcomes?

Anatoly Veltman replies:

 Yes Sushil, current news-items certainly make the price of this most useless commodity on the planet volatile: Panicky Greeks Paying Over $1,700 Per Ounce For Physical Gold By Patrick A. Heller on May 25th, 2010

The fear running through the Greek populace is that the nation's government may default on some of its debts. Since 1965, the Greek government has imposed restrictions on trading British Sovereign gold coins (gold content .2354 oz). Despite those restrictions, the Bank of Greece reports that it is selling an average of more than 700 coins per day to worried Greeks. In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office. Bank officials estimate that at least 100,000 other coins changed hands on the black market. The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold! Prices paid on the black market are reckoned to be even higher. A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds


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