Holy Crap What's Going on With Gold?!

Finally I have a reason to use "Emergency Escape"
by Chen Wenling

I don't remember where I first heard about JP Morgan and Goldman Sachs piling into December gold futures and I've tried finding a reference but I can't. Sorry. So I can't point you to that but there is a pending stampede on the Comex and the boys with the largest balls on Wall Street are leading the pack. Hint hint dumbasses.

I can tell you JP Morgan is betting on $1100 an ounce:

This week, gold futures have held above the $1,050 mark, but analysts have cautioned investors not to get too caught up in gold fever. JP Morgan has also forecast gold prices to rise above $1,100 next year, but in a research note earlier this month, the bank's analysts cautioned, "We do remain concerned that gold as an 'inflation trade' is both expensive and premature." Those using gold as a hedge against inflation may want to consider how investing in gold factors into their overall plans if inflation doesn't explode as they fear.

Well who cares? JP Morgan is just trying to make money, right?

The Gold Report continues where we left off with JP Morgan betting on $1100 an ounce and then some:

"Gold has been the overwhelming beneficiary of investment allocations to commodities all year," the former investment bank says, setting price targets of $1,000 an ounce between now and end-Dec., with a rise to $1,100 looking "likely" for early 2010.

Last week saw betting on Gold Futures and options swell by 10% to a 15-month record of 635,000 contracts.

The "net long" position held by hedge funds and other speculative players—meaning the number of bullish bets minus bearish contracts—rose to a fresh record of 259,000.

On the other side of this leveraged, derivative market, the "net short" position held by commercial players such as miners, refineries and bullion banks hit a near record of 304,000 contracts.

"Other than being nice to have, the case for investing in gold looks to me like another example of the greater fool theory," writes Anthony Hilton in the Evening Standard.

"[Gold] makes sense just as long as there is someone out there willing to pay even more for the metal than you did."

"Gold's usefulness as an inflation hedge has been exaggerated," agrees David Smith of London's Sunday Times—also judging gold's performance from the one-day spike of $850 an ounce, hit on 21st Jan. 1980.

"With many countries suffering deflation, inflation worries look misplaced."

"Let's remember that the US bond market is many multiples bigger than the gold market," says fixed-income strategist George Goncalves at broker Cantor Fitzgerald.

Yeah, let's also remember that Zimbabwe Ben is imploding the dollar and those dollar-denominated bonds won't be worth the paper they are printed on if ZB has his way. Call us nutcases if you want, the real nutcases are the ones holding onto dollars waiting them to be spun into gold.

In sort of related news, our Twitter friend @MCHammer (yes he follows @adrigonzo... maybe not after this post...) has teamed up with Cash 4 Gold in the UK to get all those tangled necklaces you're too stupid to hold onto off of your hands (don't say we didn't try to warn you, morons):

Cash4Gold, the world’s #1 gold buyer and the company that created the mail-in gold buying industry, has received more than 1,600 suggestions from the British public as to which UK celebrity should star in a future Cash4Gold ad with MC Hammer. One lucky winner, randomly selected from among those who recommend the celebrity that ends up chosen, will join MC Hammer and the UK celebrity for tea.

Cash4Gold CEO Jeff Aronson said, “The late, legendary Ed McMahon brought us his experience with Carnac the Magnificent in opening envelopes, while MC Hammer taught our staff how to dance. For our expansion into the UK, we are looking to learn a new set of skills by teaming up with a well-known celebrity who will bring a smile to the faces of the UK public.”

The three-time Grammy Award-winning MC Hammer currently appears in an informal video on Cash 4 Gold’s UK website asking the British public to e-mail their celebrity suggestions. “You don’t need the crown jewels,” says the hip hop legend. “It’s time to take that gold and get it sold.”

Is MC Hammer famous in the UK? Who is? How about that British chick who beat up her accountant in a coke-fueled rage?

Oh wait look! I found the gold monkey business. Thank you, Antal E. Fekete, you never disappoint when I have a gold point to make:

A prime suspect is the gold basis calculated using COMEX futures prices, or the forward gold price of the London Bullion Market Association (LBMA). Further suspects are: certain gold Exchange Traded Funds (ETF’s) such as GLD and their weekly updated bar lists; certain central banks such as the Bag Lady of Threadneedle Street (nickname of the Bank of England) that has rushed to the rescue of her agents, the bullion banks, trying to bail them out by offering substandard (22 carat) gold in settlement of contracts at the verge of being defaulted. Substandard gold stinks, as I shall explain below.

There seems to be circumstantial evidence that this month the gold exchanges are unable to honor their expiring contracts for which delivery notices have been issued in September. It has occurred in spite of a robust, even increasing, contango. Furthermore, circumstantial evidence exists that counterparties to these expiring contracts for future delivery — bullion banks, to be precise, the name of J.P.Morgan and Deutsche Bank being prominently mentioned — have offered bribe money up to 125 percent of the quoted spot price to holders of long contracts if they would take settlement in paper, on condition that the embarrassing affair will be kept secret. If true, these maneuvers are motivated by the desire to conceal the real gold basis, and to deny that gold is in or approaching backwardation. If the truth were widely known, then there would be a run on the bullion banks. The “let’s get physical” movement would trigger a chain-reaction culminating in all offers to sell physical gold being permanently withdrawn around the globe. “Gold would not be for sale at any price”, whether quoted in US or in Zimbabwe dollars — or, for that matter, in any irredeemable currency — the only kind of money people are allowed to have nowadays. The curtain would fall on the “Last Contango in Washington”. The day of permanent gold backwardation would dawn. The chapter on a reactionary episode of history, irredeemable currency, allowing the Treasury and its central bank to create unlimited liabilities out of nothing which they have neither the means nor the intention to honor, but could use them for check-kiting purposes to mesmerize gullible people around the world, would be closed and become but a bad memory.

Okay I don't understand half of that and I don't need to to understand that we are fucked. Sit back and watch the stampede, it might get interesting. I'll be here LOLing, thanks!

JP Morgan, I dedicate the following awesome Goldfrapp cover of "Let's Get Physical" to you motherfuckers:

Put that shit on your iPods while you're trying to figure out how to turn paper into gold, bitches. Oh and best of luck with that.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Mark Herpel said...

Nice one!!!!


Krupo said...

Funny, I noticed the MC Hammer thing: http://www.videosift.com/video/The-Today-Show-covers-the-Cash4Gold-ripoff

Anonymous said...

King World News interviews GATA's Douglas on 'imaginary' gold

GATA board member Adrian Douglas, publisher of the Market Force Analysis letter (http://www.MarketForceAnalysis.com), was interviewed for 11 minutes today by Eric King of King World News. Douglas described how the creation of "imaginary" gold -- paper claims to gold that doesn't exist but is never called for delivery -- has prevented the gold price from catching up with inflation in recent years. But, Douglas added, as the fraud increasingly is discovered and people who have purchased "imaginary" gold get suspicious and ask for delivery, the gold price will explode quite without any help from inflation or deflation. You can listen to the interview with Douglas at the King World News Internet site here:


If you are even considering selling gold, check out http://www.luriya.com/page/sell-gold-in-nyc

Anonymous said...

this was cool. http://www.buyersofnewyork.com