Free Fall is a wonderful feeling. “The 2008 summer gold panic was a liquidation of paper that never translated into the physical deliveries to satisfy record demand. At the end of the day, the paper shorts represented by hedge funds, banks and their clients fell
into a bear trap of their own making. There was no physical with which to cover.
What will drive a further advance in gold? Let’s start with the implausible assumption that the
worst of the credit crunch had been already discounted when gold scaled $1000. Let’s also
assume, an even greater stretch, that the Paulson bailout succeeds in restarting the wheels of
lending and commerce. Finally, let’s toss in an end to the decline of asset prices and the
commencement of a bull market in equities. The unequivocal precondition for these felicitous
events would be the transformation of the dollar and other paper currencies as we know them.
The socialization of credit in the U.S. may well work the miracles as its proponents claim, but
not without stiff costs. We suspect that two inescapable costs will be inflation and negative real
interest rates as far as the eye can see. Both of these outcomes are friendly to gold. Neither is
likely to improve the credit rating of the dollar or increase the desire of non U.S. investors to
increase their holdings of U.S. treasuries.”
Link to Toqueville's site - they are a big investor in high potential juniors we mentioned from time to time such as TNR Gold Corp (TNR.v), Minera Andes (MAI.to), Canada Zinc Metals (CZX.v), amongst others.
All have metals in the ground - and have strong backers that can bring it to production / buyout stage. Watch for them.
The massive sell off continues today, with media and headlines confused about the cause - as even the supposed safe haven of commodities - Gold, Silver, and Copper are down large gaps.
Gold is currently back down below $900 with a $73 dollar drop. YES you read that correctly.
Silver is no exception at $9.80 - drastic drop from $11.50 earlier this week, but yet local bullions are out of supply??
Commodity Exchange and Gold ETF's fair to delivery gold in troubled times - the futures market is running amok with unregulated contract creation. A simple analogy for the readers of this site:
Supposed there was 100 barrels of oil produced a day, sells them at $10, and consumed the very same day in a town.
An oil producing company offers oil futures to hedge against their own bottomline - just incase demand drops they can at least sell it for $8 to cover their costs.
One day commodity traders come along and creates sophisticated pricing models to predict price of oil - and writes up contracts (futures) which are essentially promisory notes to purchase later at a certain price (up, or down) ... keep in mind this is all without the production of any more oil - just speculation.
Futures trade daily and ends up drastically alterring the perception of price of oil - resulting in spiking costs - as futures predicted price to go up even though production stayed roughly the same. all of a suddden - fiction crossed into reality - and traders buys 10 physical production barrels a day to hedge against their own predictions.
Now the supply fear is real. There is now only 90 barrel a day to go around when 100 was needed.
Actual price follows the futures model eventually in this case. See the scary trend here?
_______________
In other scary financial news - Russian's stock market has been halted indefinitely.
When is it opening again so you can get rid of your stocks to buy some food with the money?
We don't know.
How's that for a scare??
Russia Stocks Plunge, Trading Suspended
Russia halted stock and bond trading on Wednesday amid the worst market falls since the country's 1998 financial collapse and the Finance Ministry pledged a total of $60 billion of funds to help local banks.
Trading in shares, bonds and mutual funds on Russia's MICEX and RTS exchanges was suspended after less than two hours, preventing further selling on top of Tuesday's record-breaking falls.
Russia's two leading stock exchanges were forced to close for several hours on Tuesday, one day after suffering massive falls in value.
Trading on the RTS and Micex bourses was postponed by the country's financial regulator after stocks lost nearly 20% of their value on Monday.
Soon after reopening, the RTS index rose by 0.58% while Micex gained 2.16%.
Meanwhile, Russian President Dmitry Medvedev called for urgent action to deal with the global financial crisis.
In a video clip posted on his website kremlin.ru, Mr Medvedev said: "International political issues and the crisis in the world financial system demand concerted and urgent actions."
"It's absolutely clear that the time has come for new solutions."
He said he would raise the issue at an international conference in France on 8 October.
Monday's falls on the dollar-denominated Russian Trading System (RTS) index and the rouble-denominated Micex (Moscow Interbank Currency Exchange) were the steepest declines for a market that was booming until recently.
Since May, the RTS index has dropped more than 60%.
Other countries in the world have felt the pain as well - notably as the worst month in stock trading's history on record... the October Crunch has taken over Iceland. With lawsuits pending from across the world, Iceland nationalized banks due to loss thus far.
The Icelandic government has taken control of the country's third-largest bank, Glitnir, after the company faced short-term funding problems. The government has bought a 75% stake in the bank for 600m euros ($860m; £478m) to ensure stability of the bank during the current financial turmoil. Glitnir is expected to operate as normal and the government said it did not intend to hold the stake for long. It is the first Icelandic banking nationalisation of the current crisis.
Posts
No comments:
Post a Comment