Who is shorting Gold?

[jk]

Re: Who is shorting Gold?

anyone know anything about this little item?

Commodities Slump As Traders Exchange Rumors Of New Margin Requirements

Posted by John Carney, Mar 19, 2008, 4:07pm

Commodities slumped across the board today. Most market watchers are saying that aid for the mortgage markets encouraged some investors to move money from commodities to bonds. But commodities traders had more on their minds than bonds today, as rumors of additional margin requirements made their way across trading desks via instant messaging and phone lines.
What sparked concern was a rumor that the futures exchanges or regulators—or maybe both—were considering raising margin requirements for “non commercial” commodities traders—especially non-com energy traders. Non-commercial traders speculate on the price of commodities but do not ever take delivery of the commodities. Amaranth was a non-commercial trader, while Exxon-Mobil is a commercial trader.
The Commodity Futures Trading Commission, which is charged with overseeing trading in futures contracts, does not set margin requirements. This responsibility falls on the exchanges, such as NYMEX and the CME, which are viewed as having a better, ground-level view of the market’s volatility and risks. Spokespeople for the CFTC said they had no plans to begin regulating margin requirements.
A move to increase the margin requirements for non-com traders could be aimed at diminishing price-volatility, and might reduce commodity prices. This, in turn, might be viewed as aiding a faster recovery as investment dollars would be re-directed at areas of the economy that fuel growth. What’s more, it might tamper—or at least obscure—inflation fears by reducing prices in things like oil and gold.
The exchanges rarely distinguish between commercial and non-commercial traders, however. Market watchers DealBreaker contacted were skeptical that they would put in place such a distinction now. One economist also said that the move could actually fuel volatility, at least in the short term, by obscuring efficiency-creating arbitrage in the markets.

http://dealbreaker.com/2008/03/commo...traders_ex.php

and here's a comment at that site:

From what I hear from a NYME floor trader (i.e. the guy probably know very little), the Fed got to look at BSC prime brokerage book this weekend and worried about the hedgies' huge one-sided commodities bets. They thought before the next bubble builds, this is a good time to take down leverage so they prodded the SEC to talk to the exchanges on raising margin requirement. Besides, having lower commodities price helps the Fed with lowering inflation expectation too. Also, the Fed is trying to woo hedgies to the fixed income side of the tables. Their Wall Street fixed income friends are pretty lonely these days with all the markets except treasuries stuck in the mud-like liquidity. The Fed is not playing fair? Well, since when are the words fair and Fed belong together? Go ask Jimmy Cayne.


this might explain some of the action last week.

Re: Who is shorting Gold?

C1ue -

GBP was primed to fall, allowing David (Soros) to slay Goliath (Bank of England). ... :rolleyes:

OK, I admit that analogy is a bit comical.

Consider: For a hedgie to gain leverage or 'grip' upon an asset class, sufficient to start a runaway move which he can ride to a hedge fund sized killing on the short side, that asset must be exquisitely primed for a fall. My view is that anyone today thinking gold, and notably silver, are 'exquisitely primed for a fall' is sorely mistaken. Another year of the PM's prices working their way on upwards will assure whether today was yet another low point for the propagation of more murky alarmism.

Here's the point why there is no analogy whatsoever with any kind of successful short squeeze like Soros and the GBP. These shorts have been losing massive amounts of money for years.

There is zero comparison with a hedge fund like the Quantum fund managing to create a runaway breakdown of the GBP. That short squeeze on the GBP took place in a matter of weeks. In the case of the massive and systematic shorting of Silver, it's been going on for years, and it's been losing money consistently for years. What earthly resemblance is there between this and a successful short squeeze on the GBP, which played out in a matter of weeks?

Going on past recent history (silver price action over 5 years) alone, this silver squeeze will culminate in the annihilation of the shorts at some point, or simply the dead-weight accumulation of truly gargantuan losses on the short side. There is no similarity whatsoever between this and the run on the GBP, which was highly profitable for the Hedgie doing the shorting. They are antithetical events.

[c1ue]

Re: Who is shorting Gold?

A large misunderstanding on your part C1ue.

You are attempting to draw a parallel between Soros' ability to start and then ride a run on the overvalued British Pound , and the current situation in the over or under valuation of silver, as well as gold?

Value has some, but only some part of price.

If this statement is false, then how to you explain bubbles?

Or was the whole Internet thing just a misunderstanding?

Enron? just a 'run on the bank'?

Why do corporations play accounting games?

As you clearly do not give credence to marketing tactics, put some thought into how 'x' amount of money spent can create 'y' image, which in turn can feed into 'z' belief.

That said belief contradicts 'value' or 'reality', is the whole point.

As for Soros, the main point was again that it does not require a central bank to manipulate prices. In this case, it was an attack AGAINST the central bank - how then could a central bank, especially one that communicates with its brethren, be overtaken by any single fund? When said bank can do all sorts of games?

You need to make up your mind - either the central banks are helpless in which case our present American situation is due to factors OTHER than the FED and what not, or the central banks are NOT helpless and CAN affect prices.

Re: Who is shorting Gold?

Nervous Drake -

If you had the impression my open derision about deflationists was directed at you personally then please accept my direct apologies.

You asked:

<< How is it that the major silver bullion dealers are all out of stock and yet the price of silver is falling hard? >>

I think the answer to your question is "it's a temporary market anomaly". The recent run-up in the metals is creating a glimmering of awareness in the general public as to "why the PM's are going up". That is, these are the frst glimmerings of the "rush to hard money". The metals have had a huge run up and need to correct (a lot).

Further in the mix, supplies of physical silver are indeed "tight". Put it all together and you have A) a pullback, B) increasing public participation, C) a tight bullion silver market.

What Idianov pointed out elsewhere is correct (in a lot fewer words than I have! ) - we are coming into yet another decent, or even really good "buy window" in the PM's. This "jumping off the 50th story of the skyscraper in a cloud of fear-driven vomit" sensation for bullion owners is the tell-tale feeling you need to see every time in the bullion markets to spot the good buy points.

Sorry for the slightly gross description, but it's helps for pointing out the stark quality of generalized fear necessary to create the really good entry points.

This is what the "shopping season" feels like! Wait a little while - then it's time to be "greedy when others are fearful" all over again.

All the "deflationistas" that come crawling out of the woodwork moaning the same "collapse of gold / and soaring of paper money and zero coupon bonds" story - every time the commodities and PM's sector has another one of it's periodic shakeouts - it's my view these people are really treacherous to follow for people seeking to protect their families, because the larger theme in the next decade as resources really do begin to run out will be I N F L A T I O N.

Every damn time the speculative froth gets wrung out of this healthy bull market for the PM's these people come crawling out with their tales of the "imminent collapse" of hard money, while paradoxically some of them go on to describe the "imminent soaring" of paper money (the money that's cheap-to-make and being shoved down our throats by CB's becomes "the good asset" in their eyes).

Or, if they are preaching "da-flation" and talking up gold at the same time they are merely incoherent.

The wonder to behold is their determined amnesia about all the other times they came crawling out saying the very same thing previously. If you point it out to them (they are repeating themselves, and being borne out to be wrong yet again), they are so entrenched in the fear-driven-amnesia thingy, that they just resolutely refuse to remember they were saying the exact same things two years before at the last really large CRB correction, and were never proved right that time either!

When will these guys eventually just shut up and go home?

Cheers, (may we all invest and prosper here!!)

Lukester

Lukester, I've ascribed to Janszen's hypothesis since the early months of summer. I was, as you say, trying to figure out if that is what blazespin was saying.

What I was trying to get at with the edit comment is this:
Are there a few huge players in this market who pretty much dominate the price no matter what or not? I've read Ted Butler and all those guys but it just doesn't seem right that the entire market is based on engineered sell-offs and such, which is what is being implied in this thread based on all the comments (gold going to 750). Why would that happen if there is apparently nobody doing anything at this very moment but buying?

Of course there could be a time lag of a month or so I guess but I was just exploring the general mood of the thread.

[friendly_jacek]

Re: Who is shorting Gold?

The above chart elegantly showed why silver had to fall, as it reached a top of trading channel. I sold my commodities before the top but did not have balls to sell short PM. Too bad in retrospect, because when people think that this time it's different, it's usually not.

Re: Who is shorting Gold?

... ridiculous to think that the games hedgies play with individual stocks cannot also be played in the PM markets. If Soros can crash the UK CB, why can't one or more big hedgies manipulate the short term price of a PM? Especially since there are all sorts of options and derivatives available.

A large misunderstanding on your part C1ue.

You are attempting to draw a parallel between Soros' ability to start and then ride a run on the overvalued British Pound , and the current situation in the over or under valuation of silver, as well as gold?

Silver is the most undervalued of the precious (and monetary) bullion metals. A prospective hedge fund manipulator a' la' Soros, would be looking for a "strong overvaluation" to assist their plans to create a runaway selloff in silver. Good luck to him consistently shorting Silver with the aim of creating a runaway collapse in the price that would allow his short positions to make a killing.

I would surmise Soros would smile broadly at the notion of trying the GBP short manoeuver on silver today. What Soros accomplished in the run on the GBP was an act of extreme audacity, but it was very finely calculated to ride on probability.

The bull market in gold and silver to date tells a totally different story. These are A) getting a global bid, i.e. rising in all currencies, B) in silver's case, grossly undervalued, not overvalued. Where does a modern day Soros pirate find the existing overvaluation he can tip with a relatively small wall of shorts into a runaway collapse?

Now look at the following two charts. Massive, permanent short position in Silver. Then look at the price action over seven years. Soaring price, in predictable waves. Evidently the massive short positions are failing miserably. These shorts are nothing like the calculated Soros bet against the GBP. They are getting their asses handed to them instead. Where can we conclude from the stark contrast between soaring shorts and soaring silver price that these shorts "control" the silver price?

The silver shorts are bleeding massive rivers of losses at every step. You call that control?

[c1ue]

Re: Who is shorting Gold?

I don't know about the huge players part, but it is ridiculous to think that the games hedgies play with individual stocks cannot also be played in the PM markets.

If Soros can crash the UK CB, why can't one or more big hedgies manipulate the short term price of a PM? Especially since there are all sorts of options and derivatives available.

Re: Who is shorting Gold?

... a few huge players in this market who pretty much dominate the price no matter what or not? ... what is being implied in this thread.

Nervous Drake -

Great name. Is that "Drake" as in bird, or "Drake" as in Sir Francis. If it's the latter he was utterly fearless.

Regarding "huge players in the market [silver or gold] who pretty much dominate" IMHO this is a crock of arrant horseshit, and if anyone here is actually buying that notion they are dumber than a horse's rear end in the present monetary environment.


Sorry not to mince terms more finely, but this calls for crudely minced terms.

[Nervous Drake]

Re: Who is shorting Gold?

.

[Jim Nickerson]

Re: Who is shorting Gold?

There are interesting similarities between gold run in 1970-1973 and 2005-2008. Adam Hamilton has written an essay back in 2006 that compares both bulls technically using rGold values ie. POG/MA(200).

The similarities between now and then using rGold values are amazing. The rGold peak of 1.38 in May 2006 was pretty close to 1.39 in July 1972. Now, rGold peaked at 1.34 in March 2008 similar to 1.34 peak after good run in the beginning of 1973 followed by sharp correction where rGold bottomed at 1.20.

Where is rGold today? It is now at 1.16 using the closing price of $911 and MA(200) of $785.

The Gold is clearly following hyper-volatile channel similar to 1972-1975. Where does it go now? I think it goes much higher to rGold 1.60 from here. I am adding to my holdings using this gift from the market. The history certainly rhymes...

This correction is necessary to drive the price higher.
[ATTACH]303[/ATTACH]

$GOLD = mutha

If anyone wishes to look at the chart of this mutha, you can probably agree that the little green peaks in the top indicator (RSI) have certainly been declining since the highest one in early Nov. 2007. Imagine a straight line drawn from the tip of Nov. peak to the last one in early March. That line would be declining as the price action of mutha has gone up. That is called a negative divergence (that is Relative Strength was decreasing as price action increased) and has been suggesting that the move up was losing strength. Now the RSI is at 36.36 (upper left hand corner of RSI panel). Readings between 30 and 70 are neutral.

Go back to mid-June 2006 and the RSI was below 30, and though the price of the mutha bounced 664.11 in early July, 2006, the RSI did not achieve a new high. It continued lower as did the price of the mutha until the beginning of October 2006, but note that the low of the RSI was in mid-Sept 2006, so here we have a lower low in price of the mutha, but a higher low in the RSI. This is referred to as a positive divergence.

No one of whom I am aware that runs bulletin boards, investment advisories, or modern day churches can see the future, and though I am in none of the above categories, I can't either. But we can try to use past price and RSI behaviors to gain some insight into when a so-called correction may have run its course.

The mutha might turn around tomorrow and go to the wildest high anyone can imagine, but if the mutha were to behave as it did back in 2006, and as many other issues (stocks, funds, indices) have many times (though not always) since Wilder, I believe it was, developed the RSI, then personally I would not be betting on a bottom to be right around the corner. However long it takes for there to develop a positive divergence in the RSI, then waiting a bit and giving that a chance to happen, in my opinion, would offer a better chance of buying in near a tradeable bottom.

These same interpretations are applicable to the MACD indicator in the bottom panel.

Edit: sorry the stockcharts.com chart did not copy into the quote.

Re: Who is shorting Gold?

I need some Maalox and Vodka.

Dbarberic - Bad mix. Try a nice smooth double shot of Stolichnaya over a 'Hail-Bloody-Mary", fortified with a spritz of lemon. If it doesn't work, repeat the procedure.

[dbarberic]

Re: Who is shorting Gold?

I need some Maalox and Vodka.

Re: Who is shorting Gold?

So basically, when every dealer in the US runs out of silver and has the least desirable type (if any of it) left, the price of silver is reflected in that by shooting down so rapidly that you would think everyone and their grandmother is selling the stuff

Not sure if you were being ironic or not Nervous Drake. It does seem you are pointing out the logical inconsistency in Blazespinnaker's comment, so I'll take it as such.

This entire conversation on the gold bull market stands or falls on the inflation / deflation story, which has been hashed out six ways to Sunday on this website over many months.

Mr. Janszen has put forward his robust and very astute case for why the deflationary scenario is seriously flawed, and will prove a bad call. Consequently, those of us who appreciated the solidity of his arguments have re-discovered and strengthened our own certainties as to the nature of the primary trend over the next few years. We conclude that trend is inflationary.

Having arrived at this "cataclysmic" conclusion, all the anxious gnawing doubt expressed by a few posters here on the underpinnings of this admittedly heavily overbought gold market now amounts to mere reactions, shorn of any sequential logic.

The inflation / deflation question has been picked apart and re-assembled sufficiently for all reading here to have derived their personal conclusions months and years ago. All those who a few weeks ago found themselves emphatically agreeing that "deflationistas" are indeed now caught, poached and eaten, would be merely expressing irrationality now if they suddenly bought the notion that the precious metals are really going to crash into a deflationary chasm.

You can't have it both ways. Either you thought Mr. Janszen made sense, and this is a healthy correction in a still modest bull market, or you concluded weeks ago that Mr. Janszen did not make sense - in which case your doubts about the longevity of a gold bull market at least are consistent with your avowed views from those few weeks ago.

Blazespinnaker's reflexively contrarian hypothesis of what's really behind vanishing silver bullion stockpiles (the march of the "last fools" buying PM's), suggests if it were logically consistent, that he concluded weeks ago that Mr. Janszen's entire debunk of the deflationist thesis had no merit.

You can't have agreed with Mr. Janszen's arguments on the one hand, and then only brief days later think that this harsh sell off in gold reveals a gold bear market ahead. It would be sloppy, inconsistent reasoning to think yes of one and no of the other.

[Nervous Drake]

Re: Who is shorting Gold?

.

[seanm123]

Re: Who is shorting Gold?

A local artist in my town who publishes a weekly commentary on the state
of people's perceptions mentioned "Buy Gold" in his
weekly cartoon (with sarcasm since it was a comatose man who uttered "buy gold" just as they woke up). This artist is someone who stands on the street listening to random conversations of the casual passerby.

The folks that live daily on water cooler talk and the 6 o'clock variety show put on by Cramer were perhaps talking about Gold a bit too much, and the price was ripe for profit taking by the day traders.

http://hoboken411.com/archives/11085

This dip is nothing in my humble opinion, even with all of the deck chair shuffling going on by the FED. This kind of spotlight on Gold and other commodities requires extra vigilance to perception when the spotlight is turned on.