Why are gold and silver tanking so rapidly?

[renewable]

Re: Why are gold and silver tanking so rapidly?

Jim Sinclair offers a wager about 1.000.000 USD regarding a further rising gold price.

He's mentioning some 'young derivative dealers' showing interest; looks like there will be an announcement monday.

Won't some derivative dealer just take the bet, then spend a million on something like Jan 2011 calls @ $1650? They'd either make a big gain, or no net loss.

Gutsy move by Jim - certainly demonstrates his conviction, as he has before.

[makkie]

Re: Why are gold and silver tanking so rapidly?

Jim Sinclair offers a wager about 1.000.000 USD regarding a further rising gold price.

more informations here:

Link

Spread the word !!!

[Finster]

Re: Why are gold and silver tanking so rapidly?

EJ writes in:

The chart above is from my keynote presentation at the Hard Assets Conference in Las Vegas Aug. 2007...

I think it would be more telling to invert that chart ... show what is happening to major currencies in terms of gold ...

[c1ue]

Re: Why are gold and silver tanking so rapidly?

It is much, much harder to track physical than bonars, anyways. Who says you didn't give a 1 oz coin every Sunday in tithe for 3 months, because of your grandmother's recent recovery from a serious illness? And yeah, I sold the rest to a coin dealer a few years ago. And yeah, I also bought some for my old grumpy uncle who liked my gold sales pitch. All the records show that you at one time bought coins. Where they ended up?

Both buy and sell records can be subpoena'd.

Also you will have a hard time hiding the bonars resulting from a sale unless you are doing a straight gold to product barter. Last I looked, not too many merchants accept fifths of Krugerrands or what not.

Then of course you have the lovely sales fees going through dealers.

Again, just pointing out that there are fees resulting from conversion of PMs into money - in opposition to most other forms of investments.

[Rajiv]

Re: Why are gold and silver tanking so rapidly?

Who says us gold holders are going to remain US citizens?!?

The US Government will issue a "Stop Loss Order" ;)

From California Appellate Report

Santiago v. Rumsfeld (9th Cir. - May 13, 2005)

Emiliano Santiago enlists in the Army National Guard on June 28, 1996. His contract and his understanding is that his enlistment is for eight years. Which is, after all, what everyone else understands the enlistment period to be as well, since that's what the Army says it is. Then, eight years later, in June 2004, Santiago is told that he's not going to be let go: that the President has signed a "stop-loss" order that extends his contract. As a result, notwithstanding his eight-year contract, Santiago is told (in writing) that "[a]s a result of the unit alert, your [estimated termination of service] date was changed to 24 December 2031 and it is scheduled to remain so until [your] unit is removed from alert status or until demobilization is completed."

Santiago says: "But we had a deal!" The Army says: "Tough." And the Ninth Circuit agrees. Judge Canby holds that the Army is indeed bound to its contracts, but notes that there is a tiny clause in Santiago's contract that says the following: "Laws and regulations that govern military personnel may change without notice to me. Such changes may affect my status, pay, allowances, benefits, and responsibilities as a member of the Armed forces, REGARDLESS of the provisions of this enlistment/reenlistment document." As a result, Judge Canby concludes, the Army can do what it wants. Lawsuit dismissed.

[jtabeb]

Re: Why are gold and silver tanking so rapidly?

I wonder how many people here on iTulip holding physical PM's calculate daily the net value after taxes. The taxes alone make me question whether there are not better ways to deploy capital in order to ultimately possess more bonars.

Who says us gold holders are going to remain US citizens?!?

[ocelotl]

Re: Why are gold and silver tanking so rapidly?

It was troy ounces Poco! Silver just seems near impossible to get.

Last weeek, in sight of the correction, I tried to get some silver coins on the 19th, only to find that the dealers I go to were closing for the day. I didn't push it and waited till 24th in the morning. As I checked that the Libertad ounce sell price was 209.25 mexican pesos, nearly the same as Eagles and Maples at Kitco, I got as much as I could then.

Am I worried about another leg down? Not much, even with the last purchase my average buying price is still 20 percent below bank buy price. Even if it goes lower, then I'm buying more, this time I'm checking a bank that also sells bullion and will get more gold this time, either Libertad .999 ounces, Centenarios (1921-1947 50 pesos) or gold Aztecas (1917-1959 20 pesos), that also sell at bullion value.

Re: Why are gold and silver tanking so rapidly?

It was troy ounces Poco! Silver just seems near impossible to get.

[Spartacus]

Re: Why are gold and silver tanking so rapidly?

The reaction on iTulip was more about Silver.

Couple of us here are way, way overweight Silver.

Lukester, myself, maybe Bart and Aaron Krowne have admitted it

EJ wrote that he wished he had a lot more Silver

My my, gold drops about 8% (so far) and people start freaking out. I'll admit, the suddenness was a head-turner. Curious to see what happens in the next week or two.

Reading through this thread and Who is shorting Gold?, these ideas about unknown überpowerful entities manipulating the market... it's all a bit much. I like conspiracy theories as much as the next guy, but I'm reluctant to believe in them.

Besides the puppetmaster theories, there are some good thoughts here. Gold has been cranking up at an unsustainable pace... various posters here have been talking about a correction for quite a while now. Of course, none of us knew when it would happen, and inevitably it comes when you least expect it, but beyond the timing, no one should be surprised.

After reading everyone's posts and some links to external articles and such, my conclusion is that this sudden drop is the result of a combination of factors.

Hedge funds and other large players got into gold and saw an opportunity to get out at profit. Some large players likely were using leverage and thus can have a fairly large effect on the price of gold with (relatively) small sums of money. That's the whole concept of the basic principle of a lever.

Apparently Bear Sterns had a large long gold position that is being sold off... well of course this affects the short-term supply/demand equation. Perhaps the CB's sold some of their gold last week as well, or at least claimed they were going to.

Even the seasonal factors play a part... gold often drops lower in mid-March before heading back up into May. Then there's just the herd mentality. Once something starts falling in price, especially if it's quick, people panic and bail out, dropping the price even more.

I don't believe that anyone, central banks included, has the resources to singlehandedly drop gold 20%. But if anyone was inclined to attempt to manipulate the price of gold, they'd surely be smart enough to coordinate their efforts with these other factors to amplify whatever effect they might have on their own. Again, leverage. I don't think it takes a gazillion dollars to move the gold market 8% if your lever bar is big enough.

[pococansado]

Re: Why are gold and silver tanking so rapidly?

[quote=The Outback Oracle;31886]a KG of Silver going for A$800 on Ebay at the moment. Correct me if I'm wrong...that's about USD$22.65 per ounce!

be sure to use troy ounces. google: troy ounce per pound

[krakknisse]

Re: Why are gold and silver tanking so rapidly?

GJ, Do you really think it is so difficult for the IRS to subpoena PM dealer records? There aren't so many. Unless you go through pawn shops...

It is much, much harder to track physical than bonars, anyways. Who says you didn't give a 1 oz coin every Sunday in tithe for 3 months, because of your grandmother's recent recovery from a serious illness? And yeah, I sold the rest to a coin dealer a few years ago. And yeah, I also bought some for my old grumpy uncle who liked my gold sales pitch. All the records show that you at one time bought coins. Where they ended up? There is something called the burden of proof (yet). It's not fool proof. But it is much easier to raise the marginal tax rate or VAT another 1% than to go after a number of individuals with what will amount to a minimal increase in the tax base.

[c1ue]

Re: Why are gold and silver tanking so rapidly?

There are several flaws with this as a "problem". One is that many people may spend a few here and there and forget to report them. I wouldn't do that but some people might. I think people should pay their taxes and avoid facing prosecution for cheating.

Second, you pay no taxes until you sell.

Third, you avoid many risks (and incur some additional ones, admittedly) that attend "better ways to deploy capital", such as bankruptcy and default.

GJ,

Do you really think it is so difficult for the IRS to subpoena PM dealer records?

There aren't so many.

Unless you go through pawn shops...

[grapejelly]

Re: Why are gold and silver tanking so rapidly?

I wonder how many people here on iTulip holding physical PM's calculate daily the net value after taxes. The taxes alone make me question whether there are not better ways to deploy capital in order to ultimately possess more bonars.

There are several flaws with this as a "problem". One is that many people may spend a few here and there and forget to report them. I wouldn't do that but some people might. I think people should pay their taxes and avoid facing prosecution for cheating.

Second, you pay no taxes until you sell.

Third, you avoid many risks (and incur some additional ones, admittedly) that attend "better ways to deploy capital", such as bankruptcy and default.

Physical is for people who look at monthly charts.

[ocelotl]

Re: Why are gold and silver tanking so rapidly?

I wonder how many people here on iTulip holding physical PM's calculate daily the net value after taxes. The taxes alone make me question whether there are not better ways to deploy capital in order to ultimately possess more bonars.

That should depend on the legislation in each country. We in Mexico don't have to worry about tax earnings on our bullion coinage.

Ruling Mexican Monetary Law (dated 1931), in Article 2nd bis says:

Artículo 2º Bis.- También formarán parte del sistema, las monedas metálicas, acuñadas en oro y en plata, cuyo peso, cuño, ley y demás características señalen los decretos relativos.
Estas monedas:
I.- Gozarán de curso legal por el equivalente en pesos de su cotización diaria;
II.- No tendrán valor nominal;
III.- Expresarán su contenido de metal fino; y
IV.- Tendrán poder liberatorio referido exclusivamente al pago de las obligaciones mencionadas en el segundo párrafo del artículo 7o. Dicho poder liberatorio será ilimitado en cuanto al número de piezas a entregar en un mismo pago.
El Banco de México determinará diariamente la cotización de estas monedas, con base en el precio internacional del metal fino contenido en ellas.
El Banco de México, directamente o a través de sus corresponsales, estará obligado a recibir ilimitadamente estas monedas, a su valor de cotización, entregando a cambio de ellas billetes y monedas metálicas de los mencionados en el artículo 2o. de esta ley.

Translated:

"2nd bis. Also will for part of the [monetary] system the metallic coins, coined in gold and silver, whose weight, coinage, purity and other characteristics will detail respective decrees.
These coins:
I.- Will be of legal tender for their equivalent in pesos by its daily quotation;
II.- Won't have nominal value;
III.- Express their content in fine metal; and
IV.- Will have liberating power referred exclusively to the payment of obligations mentioned in second paragraph of article 7th [If debt was contracted in fine metal coinage]. Said liberating power will be unlimited as to the number of pieces to deliver in a single payment.
The Bank of Mexico will determine daily the quotation of these coins, based on the international price of the fine metal contained in them.
The Bank of Mexico, directly or through their distributors, will be obliged to receive unlimitedly these coins, at their quotation value, delivering in exchange of them bills and metallic coins of those mentioned in article 2nd of this law [expressed in fiduciary pesos]"

In this article, the obligation of setting a face value is withdrawn from mexican bullion coinage, and since it is considered as legal tender, won't have an especial tax to convert to and from ordinary coinage. Also avoids a tax loophole expressing clearly that if it's used as payment, it won't be at face value but at bullion value, therefore covering also commemorative bullion coinage with an expressed face value.

[Jim Nickerson]

Re: Why are gold and silver tanking so rapidly?

Thanks for the clarification,I was not aware of the huge difference in taxation between those asset classes

Nicolas

I wonder how many people here on iTulip holding physical PM's calculate daily the net value after taxes. The taxes alone make me question whether there are not better ways to deploy capital in order to ultimately possess more bonars.