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Saturday, March 7, 2015


goldspiralptnet Gold loses 3% in six hours – and no rally

I’ve been posting quite a bit of late about gold, based on my continuing conviction that its price is being systematically destroyed….prior to a buying swoop by Central Banks…and then a revaluation upwards in bank balance sheets – for which allowance is made in Basel IV. (This may or may not involve a blanket ban on all citizen gold trading while that fiddled revaluation is being enacted).

Recently, I suggested that the pace of destruction may well quicken given the growing pressure on bank viability. Today, I believe it highly likely that we have seen the first major evidence of acceleration towards the central banker goal.

Let’s start with a simple chart:

gold6315 In just five hours of trading yesterday afternoon CET, gold fell 2.6%. At the the close of play, it stood at $1168.2. There was no discernible rally: it just went ‘wump’ – right off the cliff, the minute the NYSE opened.

The lack of any bulls perhaps reflected the fact that traders who might have wanted to try a rally had already left for the countryside to beat the Friday rush.

goldhistory6315ptnet The chart above will make your head hurt rather more, but the signals it gives for gold are not good:

Here we see that after late 2008, gold begins to zoom upwards to its 2010 peak of $1923. Look down to the centre right and see where we are now, and then further down to see what – on this basis – would be the likely low gold would reach IF the following happened:

* gold goes down through $1130 quite rapidly

* if gold tests $1030, and drops further still.

At that point, the “no such thing as a gradual panic” principle comes into play.

Most observers would say that the technical low would be $678. Yes, an amazing number. But they’d also tell you that pretty much any time after $1000 would be a good time to start buying: and, as it falls further, keep buying. Because when the CBs’ buying swoop starts, the price will – after they’ve drunk their fill – go through the roof.

I’m not qualified to give technical advice, but at the rate things went yesterday – and allowing for 2-4 strong rallies along the way – gold would be at $500 by the 10th April. I’d imagine there’ll be a rally Monday when the goldbugs return from their Gatsby mansions, but the point here is this: the window is limited. For example, a ten times upward value multiple on Gold would deliver a minimum price of $6780 per ounce. But I suspect that there won’t be much time between CB revaluation of gold and a potential ban on private purchases. Furthermore, a skyrocketing gold price would almost certainly produce a stampede out of the stock market – the last thing anyone in the West wants. So the two acts of grabbing the gold and then closing the door behind them may be almost simultaneous.

If all this sounds too conspiratorial, I suggest you ask what kind of mess some of banks would be in if the asset requirements codicil in the Basel IV document were to be enacted. Basel IV (which is just a nickname given to it by the media – it’ll be called something else) is potentially toxic for the banking industry because it demands much higher standards of asset risk, liquidity, and above all asset calculation. This from KPMG:

‘…..restricting the advantages to banks of using internal models to calculate their capital requirements could take the form of limits on the extent to which risk weights based on internal models could diverge from risk weights under the standardised approach…’

In other words, there’ll be no more of, when asked, why is this throbbing turd here down as worth $2.3bn, “Because we say so”. The best answer to this conundrum for a banker is thus to have something where the valuation is apparently genuine. Gold.

If that valuation is to appear genuine, the US Treasury can give Wall Street all it needs to effect a surge for gold and it would be entirely legal . The US Gold Reserve Act of 1934 specifically authorises the U.S. Treasury Department — through the Exchange Stabilization Fund — to intervene secretly in and rig not only the gold market, which was the original authorisation – but as amended in the 1970s by Tricky Dicky, the ESF is authorised to rig any market — in fact, any and all financial instruments.

What the stock market does next – and how many sour derivative bets it triggers – will of course be crucial. Based on what’s been happening to gold in recent weeks, the pace of value destruction has clearly accelerated. Somebody in there is in a hurry. He (or she, I’m not fussy) sees a giant pantechnicon careering down the road.

We would all do well to keep an eye on stuff.

Filed under: Gold loses 3% in six hours - and no rally, THE FRIDAY GOLD MASSACRE: WILL GOLD BE WORTH $500 AN oz BY APRIL 10th? Tagged: Basel IV, Gold really worth $5-6000 an oz, The US Gold Reserve Act of 1934


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