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’Inside the mind of a gold bug
Warning: this is a very scary place to be. Rampant inflation, conspiracy, socialism, totalitarianism and Ayn Rand can be found at every turn.
Presenting the latest Thunder Road report from former resource analyst Paul Mylchreest:
Make your own (collateralised) gold standard
We know the gold bug/Austrian case.
When the United States broke away from the gold standard in the 1970s it allowed for unchecked credit creation, beyond what could realistically be supported by economic growth.
Correlation… still really high
“When the storm comes, everyone gets wet.”
Remember when we facetiously told you to shelve your adviser? Probably no need to bring him back yet.
The quote above and the chart below are in the latest monthly update of 30-day correlations from ConvergEx,
LCH.Clearnet to accept gold as collateral
First there was cash for gold. Then there were commodity exchange positions for gold. Now, thanks to LCH.Clearnet’s move to accept gold as collateral by the end of October investors will be able to take any leveraged stock position (or range of other OTC market positions) for gold.
Gold and other currencies
It won’t be of any consolation to those stopped out during Monday’s wild trading, but the gold price is still underpinned by two very powerful pillars, reckons Capital Economics.
They are: the outlook for monetary policy – i.e.
Strange days for goldbuggers
A bloodbath for gold this week but especially today, when it was off more than $100 at its lowest point before rallying a bit:
Reuters analyst John kemp pointed out earlier in the day that this is more than a four-standard deviation move:
Gold, puking, and vodka
“Liquidation” seems to be the word here…
Seems clear that the unwinding of gold longs is crashing into equities longs on Friday. Though it’s also worth standing back and looking at commodities leading sovereign credit — such as Russia and crude,
Treasuries are the new gold
We’ve talked a lot about how US Treasuries have arguably become a *type* of Giffen, Veblen, choke-price resistant good/asset (pick one) since about mid-August this year.
A date which happens to coincide with the return of over-riding deflation fears,
The market for honesty: Gold at $10,000
To those who think inflation is not a problem SocGen’s deep-thinking strategist Dylan Grice has two charts for you:
And what connects the first with the second is the fundamentally dishonest practice of printing money.
Why gold forward rate inversion is important
Here’s a crazy situation to consider.
The gold lease rate (which can also be understood as gold Libor, the gold interest rate or the cost of shorting gold) is becoming increasingly negative at the short end.
Anything for collateral…?
The inversion of the gold forward rate curve continued to intensify on Tuesday, with seven out of eight banks that submit quotes to the London Bullion Market Association quoting short-term (one or two month) rates above 12-month rates:
Cash for gold, financial market edition
Presenting a screenshot of Monday’s London interbank gold forward rates page from Reuters:
The above are live rates, meaning what’s on the screen is what the institution in question was willing to trade at when we took the screen shot.
Through the looking glass with US Treasuries and gold
We’ve been harping on for a while now about how a scarcity of quality collateral in the market (read US Treasuries) has been wreaking havoc in the repo markets — and how QE-related large scale asset purchases have only added to the problem.
Swiss real estate will become the new gold
Here’s an interesting view on the consequences of the SNB’s move from Societe Generale’s Sebastien Galy.
First of all, as others have noted too, Galy believes the decision to defend a 1.20 level floor against the euro is credible this time,
Kiss of death for gold?
This was the gold price on Wednesday:
To describe the move as “tanking” — we think — is fair.
It comes just days after the GLD gold trust officially dethroned the SPY (S&P 500) fund as the largest ETF by market value.
The life of Bryan, or what did monetary policy ever do for us?
To understand why Rick Perry this week picked a fight with Ben Bernanke and why media pariah Ron Paul continues to attract a cult following, it helps to know what happened on the evening of June 20, 1790 at a New York dinner party.
SocGen and the hand of GOFO
For those just tuning in, the story so far…
Having noticed a sharp sell-off in the French banks in European afternoon trading, FT Alphaville compiled a post looking to understand the move. We noted a number of rumours which were circulating.
Why is Socgen offering 12-month gold for less than spot? Or is it a typo?
[ATTENTION - It is very possible the data in the Reuters chart could be wrong]
Something is afoot at the French banks.
At pixel time Societe Generale was trading 11.5 per cent lower:
BNP Paribas was off 7.5 per cent:
Canaries and mines
Nothing has been harder hit in the current market swoon (in London at least) than the mining sector.
Which begs the question of what’s now being priced in?
As luck would have it, Citigroup has run some numbers and concludes:
Goldman says ‘it’s got riskier’ (but we still ♥ commodities)
For anyone wondering how commodities will do out of the USA(A+) downgrade, Goldman Sachs takes a stab at predicting the course of events in its Monday commodities research note.
In a nutshell, it’s going to get riskier out there,
Gold’s non-record level
What with all its recent records, you’d be forgiven for thinking that gold prices were dangerously extended.
However, Lombard Street Research makes a good point on Thursday. Despite all the recent records,
Terry Smith says the world is living in a fantasy
Terry Smith, CEO of Tullett Prebon, has given a remarkably bleak interview to the BBC’s Today programme on Friday.
Though it’s scarily logical.
Here are the key points:
1) He is very pessimistic about the Greek deal — “it doesn’t cut Greece’s debt enough”
Gold’s not as stretched as you might think, Citi says
One for the gold bugs, this.
The possibility of a surge in the price of gold is growing, according to the commodities team at Citigroup.
In fact, they say, the probability of a short-lived spike in gold is now above 25 per cent (up from 5 per cent just a few weeks ago) and that’s even without a worst-case economic scenario actually happening.
Dick Bove says – the search for a new safe haven is on
Gold? Pffft.
The euro? Too euro-trash.
The dollar? Puh-lease.
Rochdale banking analyst Richard Bove reckons the search is on to find a new global safe haven. Because even if this US debt debacle gets sorted by lifting the ceiling,
The Swiss franc’s safe-haven status, a visual interpretation
The Swiss franc is on the rise against the euro and the dollar again on Wednesday thanks, as multiple market reports state, to its safe-haven status.
In fact, the currency was last quoted at about 1.158 versus the euro and 0.7996 against the dollar.
What’s as good as gold, but potentially much more volatile?
The Swiss franc.
It has indeed often been cited as being as good as gold.
But while, on the surface, its similarities with the yellow metal might seem obvious, there is one very important difference to bear in mind.