Short covering, triggered by rumours of a potential US downgrade from Moody’s, are sending gold and silver prices vertical. The move higher comes after a very suspicious spike this night in which the silver price was pushed 10% lower within the first hour of Asian trading (with a bank holiday in Europe). The charts show the price action in today’s trading sessions. In our own words: folly of the highest degree, or the metals being subject to greediness of traders.
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Another weak day for gold and silver yesterday has continued during Asian and European trading today, with gold falling below $1,750 and silver once again trading under $32.50. Yesterday brought mixed economic news: one the hand, claims for unemployment benefits in America shot higher while corporate earnings from giants such as Google disappointed; but strength in the Philadelphia Fed’s manufacturing survey gave the bulls something to cheer about. The Dollar Index gained 0.40%, with the greenback also strengthening against a broad basket of emerging-market currencies, as that familiar “risk off” trading returned. Action in gold at the moment may be disappointing for some, who may have been expecting an endless [...]
The following is an essay version of a speech given by Spanish trader and economist Felix Moreno de la Cova, at a recent event in Madrid to mark the publication of the Spanish version of Gold Wars by the late Ferdinand Lips. GoldMoney would like to thank the Asociación Española de Metales Preciosos and Barbara Lips of the Lips Institute for their work on this project. The sadly departed Ferdinand Lips left us an astounding legacy with this jewel of a book. It sends a powerful message that our political and banking elite would do well to remember, and is even more relevant now in light of current events. Lips was a private Swiss banker and a [...]
With QE to infinity everywhere, it is not surprising that gold and silver prices have been performing strongly recently. Buyers from hedge funds to central banks to ultra-high net worth individuals abound. In the past the limitation has always been the ability of those categorised as Commercials at the Comex to put a lid on things. So the big question has to be, can they do it again this time? The chart below gives us some context. It shows all categories of Comex traders, plus open interest, in 100-ounce gold contracts. Note the sharp rise in open interest (black line) from historically low levels. Note also the principal driver, Money managers (blue [...]
Another Monday, and the start of another quarter. We are also heading into the Indian festival season, which is often a period of strength for precious metals prices. Over the last decade, the gold price has on average performed best during Q4. Right now though, the metal is struggling to clear resistance at $1,780. Though some of the selling pressure last week was a result of hedge funds taking profits/squaring books at the end of the quarter, look at a gold price chart for the last year plus and it’s pretty clear that the $1,780-1,800 zone is an important resistance level for gold. Dan Norcini highlights gold’s year-long trading range at his site – [...]
When considering whether gold is a value investment, one needs to first recognise that gold does not have a balance sheet, management team, price-earnings ratio or any of the other things one needs to analyse before making an investment. Also, gold does not generate any cash flow, so it does not pay a dividend. We can therefore conclude from these observations that gold is not an investment. Indeed, it is something different, which means that normal investment analytical techniques cannot be used to determine gold’s value. Value of course arises from an item’s usefulness, and gold is useful because it is money. Though only used as currency these days in [...]
Gold and silver have been performing strongly over the last 24 hours, with the yellow metal now making tentative steps above $1,780. Silver is closing in on $35, while the Dollar Index is down 0.18% since the start of the day, as markets react positively to new budget proposals from the Spanish government, aimed at getting the country’s deficit under control. This has staunched the bleeding in Spanish bonds, and pushed stocks and commodities higher. Elsewhere, the steady drip-drip of disappointing economic data continues. US durable goods orders for August disappointed, while Q2 GDP growth was revised down. In Japan today, new data shows consumer prices dropped by 0.3% compared [...]
The US Republican Party recently announced its intention to set up a “gold commission”, to examine the feasability or not of returning to a gold standard. This raises important questions, cutting across the neoclassical economic consensus, so is bound to be controversial. If the commission is appointed, it members will have to re-learn how gold works as money, take on board the consequences of its reintroduction, and understand the reasons why mixing un-backed paper and gold is a flawed compromise. Gold as money is fundamentally different from the paper-money environment we operate in today. Gold cannot be manipulated by government, while fiat money gives governments the flexibility in monetary policy they [...]
After reaching a new all-time high of €1,365 per troy ounce last week, the price of gold looks ready to celebrate the new “unlimited” fashion at the ECB with some healthy action of its own, expect the following months to be very exciting. The temptation to print is just too strong, the old school bundesbankers stepped out and those left behind are more than happy to sound tough in press conferences, but still accommodate the politicians with easy money. The truth is that without free, unlimited money, they would actually have to make hard choices. Imagine that! The horrifying thought of having to choose between ice-cream and chocolate cake, instead [...]
As expected, Federal Reserve Chairman Ben Bernanke didn’t disappoint yesterday: “QE3” is here at last, though it wasn’t called that by him. The Fed is now committed to open-ended purchases of $40 billion’s worth of mortgage-backed securities (MBS) a month in order to stimulate the housing market and to keep long-term interest rates subdued. The FOMC also pledged to persist with “Operation Twist” (swapping short-term US government debt for longer-duration paper) and prolonged its forecast for how long it will keep interest rates at record lows. The Fed promised to keep rates at current levels until the summer of 2015, where previously it has cited 2014 as the outer limit. “QE [...]
Stocks, commodities and the euro have all risen this morning following the German Constitutional Court ruling in favour of German participation in the European Union’s new “European Stability Mechanism” (ESM) fund. The €500 billion ESM is designed to help eurozone countries stave off sovereign default. The court stated that the €190bn “ceiling” on German contributions can be only raised by lawmakers, which implies that the bill for German taxpayers could easily run higher. The EURUSD briefly nudged above $1.29 this morning, and looks like it could be in the early stages of a move that takes it back up to around $1.50. Similarly, the Dollar Index has fallen below 80.00 [...]
Following Friday’s dramatic price surge in response to the Bureau of Labor Statistics’ August jobs numbers, precious metals have cooled a little in trading this morning. Wednesday’s German Constitutional Court ruling and Thursday’s FOMC verdict are the big market-moving events to watch out for this week. The European Central Bank’s insistence that its unlimited purchases of sovereign debt from troubled eurozone nations will be “sterilized” offered a sop to the Germans, though some have doubts about this. Robert Wenzel points to a little commented upon ECB press release that announces the suspension of “the application of the minimum credit rating threshold” on collateral used to access short-term loans from the bank. At [...]
“Draghi Day” yesterday was something of an anti-climax as far as precious metals were concerned: though the European Central Bank is now prepared to buy unlimited amounts of troubled eurozone governments’ short-term debt, these purchases will be “sterilized”. This is similar to what the Fed has been doing with its “Operation Twist” – offsetting new bond purchases with asset sales. So the total euro money supply is not increased by this scheme. What this does do is prop up troubled periphery governments, and help boost inflation in countries like Spain. At the same time, it is offering savers in countries like Germany bonds and/or savings deposits, which exerts a deflationary [...]
Two Bloomberg correspondents reported on August 8 that the US Government’s unfunded liabilities rose by $11 trillion last year, “ten times larger than the official deficit”, and are now at an estimated $222 trillion. The authors base their estimates on figures supplied by the Congressional Budget Office. This makes talk about the “fiscal cliff”, as the Bush tax cuts come to an end, a secondary issue. Meanwhile in Germany the Constitutional Court will be told on 12 September that the bailout costs faced by Germany are €2 trillion with a further €1.7 trillion in the pipeline, compared with only €170 billion a year ago. In contrast with these accelerating deficits, the gold price has [...]
Despite the pause in monetary stimulus and the huge expectations built up over QE3, the truth is that US money supply continues to grow at a healthy pace, proving that the supposedly “sterilised” Operation Twist is still inflationary. US July M3, as calculated by shadowstats.com, is over $14.6 trillion, well on its way to reaching $15 trillion this year. The US national debt stands close to $16 trillion – it being a signature of our current debt-based money system that total debt always exceeds total money supply, as when the central bank creates money out of thin air it simultaneously creates an equivalent amount of debt plus interest. Anybody who understands [...]