John Ward November 4, 2014 ECONOMIES MARKETS & COMMODITIES: Upside down back to front and every which way up

ECONOMIES, MARKETS & COMMODITIES: Upside down, back to front and every which way up

As the EU slashes the eurozone growth forecast (but seems convinced Ireland can buck the trend) we see the price of oil falling further still, and Japanese QE driving markets higher, while the gold price continues to fall.

Everything is an illusion, nothing is real, and everything is connected.

Commoditiies like oil and gold shouldn’t plunge at the same time.

When the world is having every growth forecast slashed, markets should not be going higher and gold should not be falling in price.

Oil prices are falling at the rate they are to stuff Moscow, and reduce ISIS income.

Gold prices are being destroyed to discourage the flight of investment from stock markets and banks.

It’s a mug’s game if you do, and a mug’s game if you don’t.

Time to invest in Russian bonds?

30Comments

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1

Bertie Bear on November 7, 2014 at 10:39 am

Cris

many thanks

it just seemed too much of a coincidence

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2

Cris on November 6, 2014 at 5:04 pm

Don’t know the answer to that one Bertie. Apologies.

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3

icit2 on November 5, 2014 at 3:28 pm

John, After coming to your site for approx two years or so ‘Frivolous’ is for the cheeky bastards AEP whoever they are as a few others share the same initials, which is as laughable as the unknown who are certainly not funny, lol.

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4

John Ward – At Last! Britain Leads The Entire Civilised World In Multi-Billion Pound Adventure: – 5 November 2014 | Lucas 2012 Infos on November 5, 2014 at 2:58 pm

[…] Yesterday at The Slog: Global fisco-economic data says upple dibble downall biggle boomell fickle fa… […]

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5

KJH on November 5, 2014 at 1:59 pm

+1

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6

Bertie Bear on November 5, 2014 at 12:19 pm

Cris.
Did the Swiss National Bank in 2000 come off its gold backing of its money and sell its gold for the same reason?

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7

the ghost on November 5, 2014 at 11:00 am

Thanks Cris

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8

AT LAST! Britain leads the entire civilised world in multi-billion Pound adventure: | The Slog. on November 5, 2014 at 8:19 am

[…] Yesterday at The Slog: Global fisco-economic data says upple dibble downall biggle boomell fickle fa… […]

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9

Cris on November 5, 2014 at 7:19 am

Thanks to my friend at Charteris for this…..

“WHY IS GOLD FALLING WHEN THE MARKET IS DOMINATED BY BUYERS?

Last week Gold fell to a 4 year low despite anecdotal reports of large scale buying across the World, namely:

1. China is buying enormous amounts of Gold; recent reports point to annual demand of over 2000 Tonnes pa – this level of Gold demand by one country alone is unprecedented and virtually takes out the entire global mine output.

2. India is also buying back large quantities. Import duties levied in 2013 cut back the established routes of Indian demand (although much was smuggled in) to a point when the Indian Jewellery Industry desperately needed to restock inventory. This is now occurring with annual demand back to the 800 Tonne level.

3. Central Banks are net buyers; Russia keeps buying Gold despite problems with the Rouble and low Oil price – Russia is thought to have added 40 Tonnes in recent weeks. No major Central Bank is on record as having sold any Gold in recent weeks however.

4. Sales of Gold and Silver coins are booming all over the world.

5. Is Gold that weak anyway? The predominant cycle is the 10-10.5 year cycle that tends to bottom in year 2 or 3 of the decade. Gold priced in Yen, Sterling, Euros, AUD, and CAD did hit its low point in 2013. It is only the USD price that is still consistently hitting new lows due to the strength of the greenback. Gold, however, is a Global entity not a US one and it’s cycles should be calculated using a basket of currencies: the current fallout look more like US Dollar strength not Gold weakness.

Who then is selling Gold in the face of this enormous buying?

For every buyer there has to be a seller – so who could possibly be selling Gold of the magnitude required to feed this, particularly from Asia, voracious appetite? Some traders point to some sort of official supply source conspiracy aimed at manipulating the price and using the current regulatory probe in the London Gold fix as evidence of this. However, manipulation (if it even occurs, and even if it does it would be a half hour phenomenon) is not the same as price suppression aimed at altering the long term price of Gold. The conspiracy theorists have never been able to adequately explain why the Authorities would be interested in artificially altering the price of Gold,or why they would go to all the bother to mount an operation of this magnitude. Furthermore following a huge Central Bank Gold sales that took place between 2000 and 2008 (all declared and transparent) many of these Central Banks that took part in this exercise now have very little Gold left to sell.

We are left with only one plausible source that is capable (and stupid enough) to take on the combined buying power of China, India and Russia – namely the US Hedge Fund Industry through a combination of short Gold futures & short physical Gold borrowed from Central Banks. This explanation fits perfectly with the algorithmic type of Gold selling that has been hitting the markets as soon as New York starts trading. Surely, one might think that these short positions would be too big for even the large Hedge Funds; Let’s think back to the start of the great mega Gold bull market in 1999/2000 and the collapse of LTCM (Long Term Capital Management). When LTCM went bust it was running a Gold carry trade that involved:

1) Borrowing Gold
b) Selling Gold and
c) Buying US Treasuries with the money raised from the sale of Gold

The size of the LTCM short position in Gold was 7,500 tonnes (3 years global mine output) an amount that displayed a mind boggling recklessness in terms of risk relative to the size and liquidity of the market. This position, which had to be unwound following the collapse of LTCM (in other words the Gold had to be bought back). The sheer size of the trade posed a systemic risk to the entire financial system and involved co-ordinated policy by the world’s leading Central Banks to “assist” the Fed in jobbing their way out of the mess they had been dumped with. The UK’s assistance in this matter was the infamous sale by the Blair Government of 300 Tonnes – half the Bank of England’s holding (but a mere 5% of the short position that needed to be bought back).
It beggars belief that the US regulators have allowed history to repeat itself but it is the only explanation as to how all this mega buying has not pushed up the price as no other significant sellers have been identified. It is simply not possible that a repeat of the LTCM bailout could happen again as none of the Central Banks that “assisted” the Fed before have enough Gold left to sell. If this is the case then Gold at some stage will undergo a huge upward move (as happed post LTCM) as these short positions have to be bought back – either by the Hedge Fund(s) concerned or as with LTCM the liquidator which in that case was the Fed due to the sheer size of the short positions involved. The upward potential is truly scary as the Russian and Chinese are long term holders and will not be sellers at anything like current prices.
Chart wise – even the US Dollar price chart is not necessarily as bearish as some are making out. If the Dollar price of Gold breaks up above $1200 area in the next few days it will point to a “falling wedge” chart pattern. For the record, a falling wedge is the most bullish of all chart patterns as it is formed by lower lows which when reversed deliver a sucker-punch (‘sucker’ being the operative word) to any short sellers. The opposite is a rising wedge which is the most bearish of all the chart patterns and is made up of higher highs.
Lastly; a word on the Gold Miners which have taken a pounding in recent weeks – unlike the Physical Gold market which is dominated by Asians trading in the mining shares are dominated by North American Investors who only focus on the US Dollar price. October is also the month that US Institutions traditionally undertake tax loss selling – the Miners were also weak last October for the same reason. In terms of relative cheapness to ALL other financial assets these currently show up as about the cheapest of all. The brave Investor stands to make an awful lot of money in these assets if and when this all unwinds.”

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10

OAH on November 4, 2014 at 9:53 pm

oil, gold, silver. jap yen, euro, pound, Can dollar, Oz dollar, emerging markets currencies…..

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11

captain custard on November 4, 2014 at 7:26 pm

aep writes qe has saves the world. aep thinks qe is a good thing. aep has a column to sell. aep is full of shit.

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12

farmerbraun on November 4, 2014 at 6:37 pm

Bill , can you slide me a list of the things that the dollar is strengthening against? I don’t get it.

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13

John Ward – Economies, Markets & Commodities: Upside Down, Back To Front And Every Which Way Up – 4 November 2014 | Lucas 2012 Infos on November 4, 2014 at 6:33 pm

[…] http://www.hat4uk.wordpress.com / link to original article […]

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14

Bill Casso on November 4, 2014 at 6:04 pm

The prices are tied to the strengthening dollar……Doh!

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15

Nick Riley on November 4, 2014 at 5:48 pm

Oh dear, so you are not just an NVE but a frivolus NVE to boot!

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16

Rowan on November 4, 2014 at 5:39 pm

Sadly, history shows that gold will be confiscated by governments when things get really bad. Possibly silver too.
Similarly, if you stock up on non-perishables you will be accused of hoarding at some point and be forced to give it all up.

Investments that a government can’t easily take away from you:
Local craftsmen and local shops
Community services run by the community
No debt
Good deeds and favours owed to you
Community currencies
Community power generation not linked to the grid

The bestest place to put your money is in your community so it has a hope of surviving what is to come.
The worstest place is anywhere a bank or government can take it from you.

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17

Impoverished Psychologist on November 4, 2014 at 5:33 pm

There is no point in trying to win any sort of debate with AEP I think he is some kind of gestalt entity – a conflation of various hard line economists that be switched from mode to mode depending on what concept the Sark men want to push this week.

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18

John Ward on November 4, 2014 at 5:18 pm

Dear All
Just been accused by AEP on Twitter of being frivolous. About an economic construct that is laughable.

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19

Skirmish on November 4, 2014 at 5:03 pm

Does not an oil price decline lead to lower petrol/diesel costs which then feed through to everything else in the economy. With inflation as low as it is there surely has to be the possibility that the UK could be looking at deflation soon, just as in the Eurozone.

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20

kfc1404 on November 4, 2014 at 5:01 pm

Paul Singer Slams The Fake World: “Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers”
http://www.zerohedge.com/news/2014-11-04/paul-singer-slams-fake-world-fake-growth-fake-money-fake-jobs-fake-stability-fake-in

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21

Nhoj on November 4, 2014 at 4:24 pm

An Admiral and a boating accident?
I would forget about the submarine and take the loss.

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22

OAH on November 4, 2014 at 4:10 pm

And Royal Dutch Shell

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23

william on November 4, 2014 at 3:57 pm

Time to invest in uk blue chips, actually. The monetary nonsense of QE ,used to finance half HMG’s unfundable annual borrowing requirement will come to a sudden end when Carney puts up interest rates just before 7 May[ to show who is in charge} and the next coalition government are read the riot act by the Treasury. At long last there will be CUTS, combined with falling house prices, an economic slowdown and rising unemployment. BG, Centrica,AZ, BSkyB, are all good value,as are {for the brave!} Tesco and StanChart.

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24

RouterAl on November 4, 2014 at 3:52 pm

You should be here in Scotland the NO campaigners are jumping up and down for joy , as oil hits $82 or so and delight in telling us the independent Scotland would have been a disaster , and forgetting just what this is doing to Georgy boys calculations, o never mind that little detail, nor the 4 new fields we have just discovered since the 18th.
The Saudi’s (my old employer Saudi Aramco) are cutting production, not quite as bad as 1999 when it hit $9.30 a barrel, boy did the sh** hit the fan out there back then, hell I almost got sent home, but that’s not a good sign.
Hell we have just sold McVities to the Turks, there goes my dark chocolate digestives. Is there anything left we have not sold off. That’s it we are done for, the Turks for god’s sake, is nothing sacred to these city morons.

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25

Admiral C.Loughrey Esq on November 4, 2014 at 3:20 pm

Sadly, mine is at the bottom of a lake after an unfortunate boating accident. ;)

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26

sdbast on November 4, 2014 at 3:11 pm

Reblogged this on sdbast.

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27

Impoverished Psychologist on November 4, 2014 at 3:07 pm

Quite so…. if you can’t hold it in your hand and you can’t defend it against confiscation – it is not yours.. not nowadays.

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28

Impoverished Psychologist on November 4, 2014 at 3:05 pm

There is no longer a ‘winning’ play, not for us average Joe types anyway. You could invest in the stock market, but personally I would find it impossible to act totally counter intuitively and just pile in because it is highly likely there will be more QE from one government or another – injecting more liquidity to drive prices on and on and on.

Gold is probably the only show left in town, sadly you’ll probably have to put up with a loss on your investment but better a loss than a complete wipe out.

The action of the BoJ shows that there are no longer any alternatives, they’ll just keep printing until printing doesn’t work any longer, too much false money has been injected into the system and we are now effectively in hyper inflation but with the direct street level effects masked.

The dollar hegemony has to keep rolling down the road, absorbing real capital, hard assets and productive labour as it does so leaving behind in its wake only a string of ephemeral computer digits.

The problem for this hegemonic system is that it is now pretty overt, you only have to look at the Ukraine to see what the game is. The same dynamic played out with the Asian tiger economy pump and dump in the 1990’s – The dollars wash in like a tsunami, the assets are liquidated and then the tide washes away again leaving only destruction and misery behind. Of course that time it wasn’t us and all we saw was a lot of angry asians and burning shops. Now it is our turn.

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29

Admiral C.Loughrey Esq on November 4, 2014 at 3:02 pm

And BTW the above applies to Silver just as much, this is as good a time as any to get something so valuable at such a knock-down price. AG particularly.

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30

Admiral C.Loughrey Esq on November 4, 2014 at 2:55 pm

I often repeat this but anyway:

1) If you have invested in paper gold then you own paper, not gold. You are in it for the day to day trade (vs robots…good luck) so just short the shit out of it because, for now, TPTB are doing all they can to make it go down for the reasons John is stating. Perhaps with the easy profits you could protect yourself by buying insurance against this kind of central bank insanity, which leads us to…

2) Buy actual physical gold, kept in your own hands, to protect yourself from the multiple disastrous consequences of what has happened to the world over the last few years. Currencies will not survive in their current form, nor will anyone’s paper wealth. Money (as in metal) always has and always will. It’s a question of protection, not paper profits. It may take years, or it may take a week, that’s the only variable, but it is going to happen. It’s never “different this time”. And when it does, you’ll be better prepared to survive, and hopefully thrive, than most.

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