The suspense is painful… like being trapped in some kind of interminable Vulcan Death Grip, or something…
- Western paper traders won't bid up the paper (spot unallocated, GLD shares, futures, forwards, options, XAUUSD longs, swaps, leases, whatever) gold $price, while their technical analysis tells them gold's in a bear market and headed for the S bend (or even just circling the bowl).
- Others buy physical, and they much prefer to do that on price weakness… but if the strength seems sustained then they seem to buy a little anyway, perhaps grudgingly, but certainly less so (at least by weight, if not $cost).
- The mines can't feed more physical through the system reserves stream, while the $price is too weak and their costs to bring to market haven't fallen at least as hard.
- something to make the paper traders think "gold" has escaped from the bear, so that (a) the Eastern physical buyers drain less weight from the system reserves, and (b) the miners can increase the physical coming through the market (i.e.: to see the quiet run on the fractionally-reserved gold banking system's reserves stopped, even reversed).
- the physical system reserves will finally fall below a critical level, and the system will break when the next call comes for allocation or delivery.
Ultimately, either the price "goes up enough from here" to keep the wheels on the present system, meaning the physical bullion and paper derivative prices of gold continue trading in lock step because the markets perceive them as fungible, or the wheels fall off because the physical reserves, underpinning confidence in the fungibility across all these various products, were stripped out at bargain basement prices by unsophisticated-but-savvy value seekers. Leaving, quite obviously to all, only the prospect of cash settlement for all of these paper derivative products… yes, including fully-paid-up spot unallocated credits in the bullion bankers' books and XAUwhatever longs in the, somewhat huge, forex market.
Will the market then proceed to bid up the price of these paper derivative products, in lock step with the price of physical bullion? Or are they more likely to avoid the foul-smelling paper that they find trying to make its way back through the S bend, while instead embracing the real deal?
Will the market then proceed to bid up the price of these paper derivative products, in lock step with the price of physical bullion? Or are they more likely to avoid the foul-smelling paper that they find trying to make its way back through the S bend, while instead embracing the real deal?
Hey! … Freegold team sucks!!
… yeah, whatever…
10 comments:
"Will the market then proceed to bid up the price of these paper
derivative products, in lock step with the price of physical bullion? Or
are they more likely to avoid the foul-smelling paper that they find
trying to make its way back through the S bend, while instead embracing
the real deal?"
When the paper gold market can't ensure that key global participants-major oil producers-can't source the required physical, there will be a revaluation. Paper gold markets will be left at the launch pad as will their future-no pun intended- viability as trading vehicles. Do you have a different view?
No, I completely agree!
Will everyone else? I think it will be clear for all to see, but only after it's too late.
"Others buy physical, and they much prefer to do that on price weakness…
but if the strength seems sustained then they seem to buy a little
anyway, perhaps grudgingly, but certainly less so"
I like to ask, to whom you refer to, when saying "others buy physical". And my next much more important question in that context is: "being sold by whom"? Those commercial sellers are not hedged?
And why do you assume that the total weight of that physical flow, you are talking about concerning physical buyers, can/is not be covered by the miners (plus Cash4Gold dealers)?
See, I really struggle with the certainty of that particular assumptions of yours.
And another assumption you have (at least what I read in between your lines) is, that you think, that anybody holding future/derivative papers has any kind of interest in the physical at all. They hold paper because they want paper, just like you. Let's face it: YOU HOLD PHYSICAL, BECAUSE AT THE END OF THE DAY YOU WANT PAPER, JUST LIKE THEM, BUT GREEDY AS YOU ARE, YOU EXPECT TO GET MORE PAPER WHEN HOLDING THE PHYSICAL. Come on, start to be honest to yourself.
Greets, AD
P.S. yeah, FG team sucks, due to replacement of facts by assumptions to fit the picture !!!111 :P
Yes, sophisticated financial players don't want to get weighed down with physical when they can be light and nimble with paper and still achieve the hedge against currency risk that they desire.
If mines can't sell for profit, they won't dig and bring to market.
As shrimp-with-heirlooms sell off their last pieces and they get shipped off to others who want to pile them up higher and higher, this well also runs dry.
I don't want tons of paper that I can pile up and swim in, or shrink wrap in plastic and store in a safe deposit box, thanks - I'd much rather have stuff please. It is quite likely I will need to at some point go via paper though, if some day I choose to swap my stuff for someone else's stuff… and they don't happen to want what I can offer.
"...last pieces...this well also runs dry"
how you figure that there will be a drought? Especially the mines have to compete against each other and against the "heirlooms sellers" (who probably dont really care or are forced, (see below)).
"It is quite likely I will need to at some point go via paper though, if
some day I choose to swap my stuff for someone else's stuff… and they
don't happen to want what I can offer."
jep, so your gold will be accepted at G4C without further questions and will be directly bitting for fiat and turned into paper gold - G4C short, some "financial player" long. Exactly, just like today. Upps, no, it will not be be accepted by C4G, because you are waiting for the "revelation" when there is no more paper market, will be really interesting who will be buying your gold.
You wrote "when I will need to sell through paper", at what price? I tell you, you are forced to accept what is being offered, when you want/need paper on a rainy day of e.g. retirement, just like the heirloom sellers today.
Greets, AD
go back to your church services
http://www.youtube.com/watch?v=TBjEUyOw_00
Hi DP,
I've been meaning to say - Great job with this boutique blog! You've put in a heck of an effort since '09.
According to my observations, in a nominal/trading sense, nobody (that I know of) seems to be quite sure what the POG is likely to do next. In a simpleton way of thinking, the *expected* price action might have been to double the previous nominal high, retrace by 50% to retest the previous high thereabouts and then launched higher.
The longer it takes, the higher it goes.
*
Btw, were you interested in financial stuff prior 2008?
It seems '08 was a bit of a 'big bang' that spawned constellations of 'metalbugs' that have coelesced into galactic islands/neighbourhoods of loosely connected financial thought, floating off into the deepness of
space(space being those generally disinterested in goings on).
Who knows *when* that big crunch arrives...hopefully with a golden ticket to the restaurant at the 'end' of it, the food wont disappoint..
*
Metaphysical and astronomical pontificating *off* now ;)
Cheers!
Hi WW,
Yes, my blogs have become increasingly 'niche' over time. Now I tend to just write for myself and I consider it a bonus if anyone else turns up and likes it.
Each week I get an email with some stats about how many people have visited the site, but I noticed a couple of days ago that if I log in to my stats provider's site to look at the details for some reason, something has been wrong somewhere for a few months and I can only see data up to that point in time. Whatever. Maybe I'll look at fixing it sometime. (Yeah, or maybe never?)
No, I wasn't interested in the monetary system or anything finance, much before 2008. I, like most people I think, was far too busy doing my job to think beyond the superficial immediate level about what I was doing it for.
If you're hoping for me to tell you what I think POG will do next… sorry for the disappointment! ;D
Cheers!
DP :-)
Not disappointed at all! I've learned (then forgot sum..?) quite a bit from your comments. So, thanks :D
That makes me very happy - thanks. ;-)
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