{"id":11509,"date":"2013-04-16T12:26:55","date_gmt":"2013-04-16T16:26:55","guid":{"rendered":"http:\/\/angry.net\/blog2\/?p=11509"},"modified":"2022-09-05T12:18:05","modified_gmt":"2022-09-05T16:18:05","slug":"gold-price-collapses","status":"publish","type":"post","link":"https:\/\/angry.net\/blog2\/?p=11509","title":{"rendered":"Gold price collapses"},"content":{"rendered":"

Note: I had just about finished this post when the news came out about the terrorist bombing in Boston yesterday. Obviously that news took precedence. I will update that as I learn more.<\/em><\/strong><\/p>\n

There\u2019s a bit of interesting economic news coming out. It seems that the price of Gold is collapsing, and in a major way. It isn\u2019t just gold, but all the precious metals are heading for the cellar.<\/p>\n

<\/p>\n

Now I don\u2019t own any gold, silver or other metals. I\u2019ve considered it and have looked into buying some. One thing that has held me back was the high cost of getting it. Looks like my wait may not have been in vain. Here are a few details from Reuters<\/a>:<\/p>\n

Gold headed for its biggest two-day drop in 30 years on Monday as funds accelerated their exits from the market, and investors also cut exposure to oil, copper and grain after underwhelming Chinese growth data.<\/p>\n

The precious metal slid further into bear territory, dropping more than $30 in a matter of minutes at one point. Losses widened to more than 6 percent at the lows as prices breached support at $1,400 per ounce after falling 5.3 percent on Friday.<\/p><\/blockquote>\n

Now one thing you should key in on is the word is \u201cInvestors.\u201d One of the reasons the prices when through the roof in the first place was investors and money managers buying up futures. This means they were buying paper and betting that the prices would go up. They were NOT taking delivery of the physical metals.<\/p>\n

Gold was already under pressure from a variety of factors, including a proposed sale of Cypriot gold holdings, and more fund-based investors headed for the exits on Monday.<\/p>\n

Spot gold hit a two-year low at $1,384.69 an ounce.<\/p>\n

“We have seen massive liquidation from all quarters – ETFs, funds, CTAs, specs and even Chinese and Indian physical buyers. This is a market that has only got one thing on its mind … get me out,” said David Govett, head of precious metals at Marex Spectron in London.<\/p><\/blockquote>\n

This is called a Panic Sell. The investors, who bet on prices going up, are now in the process of getting their heads handed to them. Personally, I\u2019m going to sit back and enjoy it.<\/p>\n

In gold, “what we now see is panic selling, perhaps triggered by the Fed’s stimulus view. The Fed has given the signal that there’s a possibility to reduce QE (quantitative easing), and that took a lot of trust out of gold,” said Dominic Schnider, an analyst at UBS Wealth Management.<\/p>\n

“And people recognize that an environment where you have no inflation is a powerful driver to get out of the metal.”<\/p><\/blockquote>\n

One of the reasons people buy gold is to have a hedge against inflation. Ben \u201cThe Bonehead\u201d Bernanke has been printing money like there\u2019s no tomorrow. The idea was to pour cash into the economy so that businesses could borrow and expand. What he failed to understand is that businesses, at least the big ones, are sitting on mountains of cash. They aren\u2019t investing in their businesses for one simple reason.<\/p>\n

Obama.<\/p>\n

They don\u2019t have a clue what the SCoaMF is going to do next. Since they can\u2019t plan out what their potential expenses might be, companies are pulling back and waiting to see what Der Fubar does next. Getting money for expansion was never the problem. Another issue are those investors who bought gold contracts on margin. From the Wall Street Journal<\/a>:<\/p>\n

Gold for April delivery, the front-month contract, was down 8.6% at $1,372.10 a troy ounce on the Comex division of the New York Mercantile Exchange at midday in New York, its lowest price in more than two years.<\/p>\n

Traders said part of the plunge in prices was a result of investors choosing to sell gold instead of putting up more money as collateral to keep their wagers open. Traders typically put down just a small percentage of a gold contract’s full value in order to trade it, and this amount, known as margin, must be increased when prices fall.<\/p><\/blockquote>\n

Margin calls were one of the major problems when the Stock Market crashed back in 1929. Back then, it wasn\u2019t unknown for investors to borrow up to 90% of the money they invested. Here is a better explanation from Investopedia<\/a>.<\/p>\n

Here’s how it works. Let’s say you purchase $20,000 worth of securities by borrowing $10,000 from your brokerage and paying $10,000 yourself. If the market value of the securities drops to $15,000, the equity in your account falls to $5,000 ($15,000 – $10,000 = $5,000). Assuming a maintenance requirement of 25%, you must have $3,750 in equity in your account (25% of $15,000 = $3,750). Thus, you’re fine in this situation as the $5,000 worth of equity in your account is greater than the maintenance margin of $3,750. But let’s assume the maintenance requirement of your brokerage is 40% instead of 25%. In this case, your equity of $5,000 is less than the maintenance margin of $6,000 (40% of $15,000 = $6,000). As a result, the brokerage may issue you a margin call.<\/p>\n

If for any reason you do not meet a margin call, the brokerage has the right to sell your securities to increase your account equity until you are above the maintenance margin. Even scarier is the fact that your broker may not be required to consult you before selling! Under most margin agreements, a firm can sell your securities without waiting for you to meet the margin call. You can’t even control which stock is sold to cover the margin call.<\/p><\/blockquote>\n

If you would like to see what happens when a margin call is made, and you don’t have the money, watch the end of the movie \u201cTrading Places<\/a>\u201d with Dan Akroyd and Eddie Murphy. Just understand that what they and their antagonists leading up to the margin call were doing is highly illegal and will get you a nice long vacation in Club Fed.<\/p>\n

Getting back to the plunging prices, just how bad was it? Back to the Wall Street Journal<\/a>.<\/p>\n

The depths of Monday’s selloff at one point exceeded the one-day percentage decline of 9.6% on Feb. 28, 1983. Gold prices fell 11% on March 17, 1980.<\/p>\n

“All of a sudden, the price is below $1,500, and you have to put up more money,” said Jeffrey Christian, chief executive at metals-consulting firm CPM Group. Faced with such choices, more and more investors are choosing to dump their gold holdings rather than risk riding out the selloff, he said.<\/p>\n

“I’m sure there are a lot of margin calls being triggered and positions being blown,” said Bob Haberkorn, senior commodities broker with RJO Futures.<\/p><\/blockquote>\n

And here we have another phrase you need to know about. \u201cGold Holdings.\u201d These investors almost never actually take delivery of the gold they contract to buy. One of the things I\u2019ve heard in the past is that there actually isn\u2019t enough physical gold available to cover all the contracts if they were actually exercised. Of course, there are people who did take physical possession of gold bullion.<\/p>\n

“Everybody that’s bought for the past two years, since April 2011, is losing money,” said Ira Epstein, director of the Ira Epstein division at the Linn Group futures brokerage. “It’s a sea of red,” he said.<\/p><\/blockquote>\n

I worked with a woman who bought a one ounce gold coin. She paid $1700 for it since she bought it at the top of the curve. She\u2019s been kicking herself ever since. She wasn\u2019t the only one who was caught by surprise.<\/p>\n

The fall took some by surprise, with Singapore-based traders saying they hadn’t been prepared for the heavy losses. While China’s growth data is always keenly watched, it seldom causes such large moves in gold and other markets.<\/p>\n

Fears of a slowdown in Indian buying come at a crucial time, as the peak wedding season is kicking off\u2014traditionally when consumers buy gold ornaments for gifts to brides.<\/p>\n

“Some seasonal buying is there. due to the wedding season. But the demand is thin,” said Haresh Soni, chairman of the All India Gems and Jewelry Trade Federation. “People aren’t comfortable entering the market now. They will wait for some more time for the rates to stabilize.”<\/p>\n

For those buying gifts and jewelry for brides, the price drops are actually a good thing. They can spend less and get more.<\/p>\n

Mohit Khamboj, president of Bombay Bullion, estimates about 1\u00bd tons of gold will be sold daily by long-term investors in Mumbai alone. That is a sudden shift from two months ago, when Indian investors were bullish and buying.<\/p>\n

“Gold investments are increasingly looking like a bubble,” said Mr. Khamboj.<\/p><\/blockquote>\n

And I would agree with that statement. I thought the price of was way to high when it went through $1200 an ounce. While I am no expert, I would guess that gold really shouldn\u2019t be much about $1000 an ounce. Basically, we\u2019re seeing a repeat of the housing bubble that popped back in 2008. The difference with that bubble is it was completely avoidable and was caused by the likes of former Representative Barney Frank ((Barnett “Barney” Frank<\/a>)). The discussion and coverups have been talked about for years, both here and elsewhere. The prices of gold, while they can be affected by government policies, really can\u2019t be rigged the way the housing markets were.<\/p>\n

As I mentioned earlier, gold, silver and other metals and commodities have always been considered a hedge against inflation. However, since inflation isn\u2019t going up at the rates they should be, considering how the printing presses are being burned out from overuse, something else must be happening. From Reuters<\/a>:<\/p>\n

Gold was under pressure from a variety of factors, including a proposed sale of Cypriot gold holdings, and more fund-based investors headed for the exits after China’s data on Monday.<\/p>\n

China’s economy grew 7.7 percent in the first quarter, undershooting market expectations for an 8.0 percent expansion and frustrating investor hopes that the world’s No. 2 economy would rebound after posting its weakest growth in 13 years in 2012.<\/p><\/blockquote>\n

Cyprus unloading it\u2019s gold reserves isn\u2019t a surprise. Even though they stole all the depositors money to pay for their bank failures, it isn\u2019t enough. China\u2019s economy has been running at 10-12% for years, but with the general collapse of the world economy in 2008, and the utter incompetence of world leaders in understand why it happened, no one is buying anything they don\u2019t have to. China may have missed this and it\u2019s going to really slam them down the road.<\/p>\n

Gold is and always will be a valuable commodity. People have used it as a means of payment for goods and services for thousands of years. It\u2019s only recently that nations have abandoned the gold standard, primarily so they could spend money with abandon. Now, even that has reached the breaking point.<\/p>\n

I\u2019ve been told there is something like 8000 TONS of gold in Fort Knox, plus another 300 tons in New York City. There\u2019s always been talk of having the United States going back on the gold standard ((The Gold Standard<\/a>)), but the amount of gold we have wouldn\u2019t cover the amount of Dollars in circulation. There are a hot of other issues as well and I am certainly no expert in it.<\/p>\n

With the price of gold collapsing, Investors are bailing out before they get slaughtered financially. People who bought and took possession of gold bullion and coins will not get hurt unless they also panic and try to cash in. From what I\u2019ve heard, physical gold and silver owners didn\u2019t buy the metals as an investment. They bought it as protection in case the value of currency drops below that of toilet paper. They will simply ride out this bursting bubble and look at picking up more gold at a lower price. They know it will eventually go up.<\/p>\n

Thatisall<\/p>\n

~The Angry Webmaster~<\/b><\/i><\/p>\n\"1\"2\"3\"4\"5 (1<\/strong> votes, average: 1.00<\/strong> out of 5)
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Possible explanations for the decrease of the gold price | Compare …<\/a><\/h3>\n<\/div>\n
The overall extent of the current decrease is not unusual compared to the decline during previous corrections of the gold price. Although the speed of the correction was unsual with a drop by more than 15% (intraday) within just three trading …<\/div>\n
http:\/\/www.trustablegold.com\/<\/a> \u2014 Tue, 16 Apr 2013 08:48:32 -0700<\/span><\/div>\n<\/div>\n
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Finance Geek \u00bb As Gold Prices Collapse, Investors Seek Answers<\/h3>\n<\/div>\n
Posted by: yahootechticker in Yahoo Tech Ticker. It’s the oldest market pattern in the book. A long-ignored asset finally gets hot, and its price rises for a while. The rising price of the asset attracts new investors, which drives prices even higher.<\/div>\n
http:\/\/financegeek.com\/ \u2014 Tue, 16 Apr 2013 08:39:03 -0700<\/span><\/div>\n<\/div>\n
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Econbrowser: Gold Prices Falling<\/h3>\n<\/div>\n
Gold Prices Falling. Was their rise caused by \u201cbad policies\u201d? And why are they falling now? From the NYT: The assumption among gold bugs was that the flood of new money would cause inflation, making hard assets like gold more attractive. So far, though, there have … Another (related) possibility is the expected value of the utility of gold in the post-apocalypse world has declined (because the probability ascribed to the collapse of civilization has declined). \u201cGold has had all the …<\/div>\n
http:\/\/www.econbrowser.com\/ \u2014 Tue, 16 Apr 2013 08:07:34 -0700<\/span><\/div>\n<\/div>\n
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Fed Behind Gold’s Bloodbath? | AMTV 2013\u2122<\/h3>\n<\/div>\n
FOR RATES, CALL WARREN @ 623-565-9370. [DESCRIPTION]. In today’s video, Topher Morrison of AMTV analyzes whether the Federal Reserve was behind the recent crash in gold prices. For more information and analysis, please visit: …<\/div>\n
http:\/\/www.amtvmedia.com\/ \u2014 Tue, 16 Apr 2013 08:00:30 -0700<\/span><\/div>\n<\/div>\n
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Cheaper oil and gold: a game changer for India? | Global Investing<\/a><\/h3>\n<\/div>\n
Lower oil and gold prices could be a game changer for India. … Analysts at JP Morgan are advising clients to stay long Indian debt, predicting two interest rate cuts and a 50 bps fall in the 5-year yield. They also suggest buying 5-year overnight …<\/div>\n
http:\/\/blogs.reuters.com\/globalinvesting\/<\/a> \u2014 Tue, 16 Apr 2013 07:26:15 -0700<\/span><\/div>\n<\/div>\n
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What Does the Recent Fall in the Price of Gold ‘Prove?’<\/a><\/h3>\n<\/div>\n
In taking his victory lap for his economic theory in this manner, Mr. Krugman endorses the ability of gold to predict monetary dislocation and policy error. I would also add that it is a strong indicator of real interest rates. I think that is important.<\/div>\n
http:\/\/jessescrossroadscafe.blogspot.com\/<\/a> \u2014 Tue, 16 Apr 2013 07:23:00 -0700<\/span><\/div>\n<\/div>\n
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Volatility Pockets In Gold And Silver For April | iStockAnalyst.com<\/h3>\n<\/div>\n
With the recent collapse (lack of liquidity\/buying pressure) under longer term support levels in gold and silver, let’s take a moment to step back and view historical “Volatility Pockets” in price and what this may mean for the current “pocket.” …<\/div>\n
http:\/\/www.istockanalyst.com\/ \u2014 Tue, 16 Apr 2013 07:01:46 -0700<\/span><\/div>\n<\/div>\n
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Common Man News: Assault On Gold<\/h3>\n<\/div>\n
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for …<\/div>\n
http:\/\/themancommon.blogspot.com\/ \u2014 Tue, 16 Apr 2013 05:56:00 -0700<\/span><\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Note: I had just about finished this post when the news came out about the terrorist bombing in Boston yesterday. Obviously that news took precedence. I will update that as I learn more.<\/p>\n

There\u2019s a bit of interesting economic news coming out. It seems that the price of Gold is collapsing, and in a major way. It isn\u2019t just gold, but all the precious metals are heading for the cellar. Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":9924,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[5,71,115],"tags":[172,171,5,101,64],"class_list":["post-11509","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-history","category-news-of-the-day","category-stupidity-crime","tag-economics","tag-gold","tag-history","tag-news","tag-taxes"],"views":1556,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2012\/11\/Hostess-Twinkies.jpg?fit=300%2C166&ssl=1","jetpack-related-posts":[{"id":39979,"url":"https:\/\/angry.net\/blog2\/?p=39979","url_meta":{"origin":11509,"position":0},"title":"Once again, Biden is being Biden and doing the wrong thing","author":"Angry Webmaster","date":"March 22, 2023","format":false,"excerpt":"Good day all. With all the talk about President Trump being arrested and bogus charges, other things have slipped under the radar, such as Dementia Joe Biden once again showing what a complete moron he is. In this case, he is planning on shutting down mining on an area that\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/angry.net\/blog2\/?cat=176"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/i.pinimg.com\/originals\/55\/8c\/d5\/558cd5782bcf8a49bc421bd7da11a2c4.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":18406,"url":"https:\/\/angry.net\/blog2\/?p=18406","url_meta":{"origin":11509,"position":1},"title":"This isn’t what they mean by \u201cHe’s a gold plated dick\u201d","author":"Angry Webmaster","date":"June 24, 2015","format":false,"excerpt":"Good day all. I stumbled across this gem this afternoon. It seems that one of Los Angeles brighter gang members thought he would celebrate his favorite movie of all time. In the process, he managed to become the probable Darwin Award winner of 2015.","rel":"","context":"In "Entertainment"","block_context":{"text":"Entertainment","link":"https:\/\/angry.net\/blog2\/?cat=4"},"img":{"alt_text":"The-Good-Idea-Fairy-3","src":"https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2014\/07\/The-Good-Idea-Fairy-3-268x300.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":12928,"url":"https:\/\/angry.net\/blog2\/?p=12928","url_meta":{"origin":11509,"position":2},"title":"Caution! EPA Goon squad at work!","author":"Angry Webmaster","date":"September 6, 2013","format":false,"excerpt":"Good day all. With all the news about Der Fubar\u2019s wanting to show he really is manly, and failing miserably as usual, this story sort of slipped under the radar. Apparently, the EPA sent a SWAT team out to do a water inspection on some Alaskan gold miners.","rel":"","context":"In "liberty"","block_context":{"text":"liberty","link":"https:\/\/angry.net\/blog2\/?cat=37"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2012\/06\/Gadsden_flag.png?fit=800%2C533&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2012\/06\/Gadsden_flag.png?fit=800%2C533&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2012\/06\/Gadsden_flag.png?fit=800%2C533&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2012\/06\/Gadsden_flag.png?fit=800%2C533&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":43560,"url":"https:\/\/angry.net\/blog2\/?p=43560","url_meta":{"origin":11509,"position":3},"title":"Harris and Democrats try to slam Trump over Arlington visit, get hammered instead","author":"Angry Webmaster","date":"September 21, 2024","format":false,"excerpt":"Good day all. Recently, the families of the soldiers who were killed in Kabul due to the massive incompetence of Joe Biden and Kamala Harris, attended a memorial for their family members. They asked President Trump to attend, which he did. They also asked Joe \u201cIs it time to go\u2026","rel":"","context":"In "Hero"","block_context":{"text":"Hero","link":"https:\/\/angry.net\/blog2\/?cat=181"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/i.pinimg.com\/originals\/c8\/bb\/52\/c8bb52ece7502cae4859eca7b74c3ad4.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":39955,"url":"https:\/\/angry.net\/blog2\/?p=39955","url_meta":{"origin":11509,"position":4},"title":"Happy Saint Patrick\u2019s Day, 2023!","author":"Angry Webmaster","date":"March 17, 2023","format":false,"excerpt":"Top O\u2019 the Mornin to ya, and a Happy Saint Patrick\u2019s day to ya! It\u2019s a day when the whole world becomes honorary Irishman and Women, especially all those red haired lasses. Oh great. He showed up. I wonder what view he likes? The pot of gold or the other\u2026","rel":"","context":"In "General"","block_context":{"text":"General","link":"https:\/\/angry.net\/blog2\/?cat=32"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/angry.net\/blog2\/wp-content\/uploads\/2015\/03\/irish-Eyes-663x1024.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2779,"url":"https:\/\/angry.net\/blog2\/?p=2779","url_meta":{"origin":11509,"position":5},"title":"Book Review: After America","author":"Angry Webmaster","date":"September 11, 2010","format":false,"excerpt":"Hail and salutations Angry Fans! Today I'm going to move away from my normal rants and raves and review a new book titled \"After America\" by John Birmingham. This is the second book in a trilogy that takes place after a disaster has wiped out all human life within North\u2026","rel":"","context":"In "Book"","block_context":{"text":"Book","link":"https:\/\/angry.net\/blog2\/?cat=63"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/11509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11509"}],"version-history":[{"count":18,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/11509\/revisions"}],"predecessor-version":[{"id":38411,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/11509\/revisions\/38411"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=\/wp\/v2\/media\/9924"}],"wp:attachment":[{"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/angry.net\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}