In addition to the negative comments about Gold in the WSJ and NYT: This evening we were treated to a CNBC visit to the GLD vaults in London. The video shows enormous quantities of gold bars and there is an interview with the "custodian" HSBC in which they talk about never leasing the gold as that would be illegal. This interview is important as there are many that believe GLD is backed by paper gold not physical gold. I think this is the start of a coordinated raid against gold that could result in a substantial price drop over the next week or so. Long term gold will be good but short term traders need to beware. The dollar is also looking stronger this evening - a stronger dollar is required as an antidote to high gold prices.
These news paper articles, the NY Times in particular, do not usually come without some prodding from the FED or White House. In a similar (in my view) vein, ABC always gets the "scoops" because they can be counted to push the White House agenda. They are worth reading because I think they mark the start of an attempt to flush out all the recent buyers.
Gold will go a lot higher in the long term because of China and the rest of the world but in the short term we could see more articles like these as they start to apply a downward pressure on any competition to paper money.
Gold is bad for banks and governments
The Dollar just got hit. This means the Central banks are still keeping a lid on it as a means of containing the European crisis. They cannot do this for ever and this will make the inevitable move higher and even larger. Having said that .. they have a saying... "don't fight the FED". I am staying with EUO but the wait may be longer than I would like.
The Dollar is showing a little strength this morning. The key is to watch if it gets slapped down almost as quickly - as has been the case the last few times this has happened. If the Dollar stays strong it may mean that the central banks have given up trying to keep a lid on it.
From my perspective good riddance BofA is a crummy bank and needs to be shut down:
I won't go into a lengthy discussion about "fractional" gold and silver trades by the dealers but there is a good point to be made that people who think they own gold or silver in a bank often don't. They may have a position that has a fluctuating value as prices go up and down but it is often easier for the bank to sell your bullion and still charge storage and other fees on the anticipation that you will never want to actually remove your gold or silver from the vault. It is this fear - that the bank or dealer doesn't actually hold your metal - that drives people to buy coins or bars and keep them in a safety deposit box or at home. There is nothing wrong with this but when/if anarchy takes hold it won't be that easy to get to your deposit box or spend your coins. The bigger issue is the trading spread.
Take gold eagles: Typically the main dealer that buys large quantities from the US Mint charges their sub dealers a 3% premium ( the premium gets larger for half, quarter and one tenth ounce coins). The sub dealer can then charge the consumer a 7% +/- premium. When it comes time to sell most dealers will give you a bid based on spot prices i.e. no premium. So there is roughly a 7% spread between bids and offers. Then, assuming you pay taxes, there is a 25% or so tax on what you made. This means that if you are right about the market you have a potential 30% "attrition" factor. Checking this against eBay: Recently one ounce eagles have been trading for around a $ 100 per ounce premium over spot. So... say you sell today at $ 100 premium you then have to factor in eBay commissions, paypal charges and shipping PLUS some counter party risk PLUS our friends at the IRS - and don't think they won't check your eBay activity if they think you are a serial non tax payer. All these costs add up. Roughly the same formula applies to silver eagles. One hundred ounce silver bars are also popular but at some point, if their value increases enough, people will start requiring a new assay. The bars also weigh around 7.5 pounds each. Try lugging a few of those around!
So.. yes bars and coins and bullion you have in hand is a good insurance but do not do this if you are trying to trade as the odds are against you big time.
They say that when the "shoe shine boy" starts giving stock picks that it is time to get out of the market. Over the last few days I have had several people who I would put into that category tell me they are going to buy gold and that the dollar will be devalued and that there will be a QE 3. They might be right but the herd is usually wrong. I have sold a little of my core gold and silver position on this move up. The next week or so could see some surprises so I have reduced my exposure.
I am still short the Euro and long the Dollar. There is a 2% risk I am willing to take and I see a 12% potential profit. There is no question that the Fed is trying to keep the dollar weak but if Europe becomes chaotic the dollar short squeeze will be enormous. I am long EUO at these levels and a little higher so the trade is offside at the moment.