So much for "store of value" and "hedge against risk"
Good god, this is a total meltdown
Time to buy? When everyone's selling, buy, when everyone's buying, sell...
Gold and other metals suffered their biggest meltdown since the early 1990s Tuesday, as concerns over the impact of rising interest rates on global growth continued to rock speculative markets.
"We are witnessing another great transfer of wealth in progress, and the process has just begun," writes Jack Chan, trader and founder of Traderscorporation.com. "We can debate over China, India, and a whole lot of reasons why metals should go to the moon sooner or later, but the fact is, a lot of hot money was required to propel these markets to the current great heights."
Gold for August delivery plunged $44.50, or 7.28%, to close at $566.90 an ounce. It was the worst single-day percentage decline for gold since January 1991, according to brokerage Miller Tabak.
The selloff was even more pronounced for silver, with the July contract losing $1.44, or 13%, to $9.62 an ounce. Copper for July delivery dropped 21 cents, or 6.8%, to $3.01 a pound. Both routs were the worst percentage declines in more than a decade.
The pain that has befallen commodities since mid-May has now lopped off 21% from the price of gold, 28% from the price of silver and 25% from the price of copper.
June 13, 2006
Gold and other metals suffered their biggest meltdown since the early 1990s Tuesday
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51 comments:
Interesting. I have been saying this all along and I was joking about gold "it never goes down/they don't make any more gold" bullies.
This is what happens when there is a bubble and a lot of clueless amateur speculators.
It is sad that people who talk about RE bubble are unable to see another bubble.
I think gold is a good hedge and investment (but not now since all those speculators have driven the price too high). The right time to buy gold was 4 years ago when all clueless speculators were not yelling out this.
Maybe gold bullies learn their lessons (just as dotcom and RE speculators). There is no easy money and guaranteed profit (despite what you may hear on TV or blogs)
what a ride
you did say there would be wild swings but woah
That article is rich with idiocy. They are saying that gold is high because of the fundamentals and yet people wishing to cash out their profit brings the price of gold down to where it began.
How silly! If people are profit taking because the price of gold is high then you would expect people to STOP PROFIT TAKING when the price of gold goes down, right, right?
If you ask me, over the past two months we saw the stupid money getting in just as the smart money was getting out, and once again, the last fools were left holding the bag.
Lets watch this closely because the rise and fall of the gold bubble is a fast-forward version of the housing bubble.
And here is the Thinker's million dollar prediction, there will be an asset class that will start to skyrocket soon enough. The smart money will have to go somewhere next. I just don't yet know where, I will have to do a little more thinking and get back to you.
It aint over yet. It only takes fuel to mine it and with the hurricane season upon us its my guess that inflation will rekindle the feaver soon.
Wait till you see the elephant!
I'll take a pile of the color at lower prices over a pile of the paper any day.
Shiny yellow metal with several useful commercial and industrial properties. Formerly used as currency now a commodity that tracks the commercial and industrial metals group with an additional speculative component because so many people still don't understand the definition of "formerly."
Once you start hearing about the next "never goes down" asset class on internet boards, it is too late. Smart money is there already selling to new suckers (that's you).
And here is the Thinker's million dollar prediction, there will be an asset class that will start to skyrocket soon enough. The smart money will have to go somewhere next. I just don't yet know where, I will have to do a little more thinking and get back to you.
-could it be shorting stocks and put options?
autofx.......where aaaarrreee you?????
how are your metals predictions doing now?
Gold and silver needed this correction. They had moved up parabolically due to speculative and leveraged buying, and that is unsustainable. Alos, Bernanke has convinced markets that the Fed is determined to nip inflation in the bud and the housing market be damned. Long term fundamentals for gold and silver, especially silver, still quite excellent. Silver below $10 is a longterm buy and hold - but wait until mid-July for true bottom; same for gold.
Trillion dollar question: can Bernanke save the dollar whilst not causing a depression by collapsing the RE market. The debt levels and RE prices are insane and excessive. Present interest rates are not that high in historic context - yet look how they have whacked the residential RE market already. IMHO, given the US triple deficits and the boomer benefits/SS tsunami coming soon to a market near you, I don't see how Bernanke will not have to raise rates substantially more to keep attracting foriegn cash into our debt instruments and not have to monetize massive amounts of debt (highly inflationary)- yet I suspect that the RE patient is already moribund and hanging on for dear life. RE prices on the coasts and select bubble markets are completely and utterly excessive and a massive correction is needed.
The US economy is riding the razor's edge between defaltionary depression and hyperinflation. I feel soory for anyone who paid too much for a house in the last three years: you are in for a major bruising, if not financial amputation.
Good luck to all.
Gold is like guns. You have to have them but you don't want to have to use them. I bought gold/silver 3/2001, 10% of net worth. What I do not understand is the perpetual preoccupation with common stock. Is it this generations defining characteristic to turn everything into oh, so common stock, must everying be a gamble, a bubble.
A bit offtopic but interesting article:
http://www.heritage.org/Research/Budget/bg1820.cfm
Basically, the study says that the US deficit is not that bad.
Just reassures me that I didn't "miss the boat" after all.
I did lose $70 on that silver I bought when it was $14/oz. Ah well... could be a whole lot worse! And now I know not to trust sudden fast rallies. Everyone loses once in a while.
some housing bubble blog guy told me to buy @ $700+. He must be corrupt and greedy.
I am thinking about buying gold coins. So far just thinking, but the price has come down pretty fast. Bloody fast.
$604 for Maple Leafs today.
at least you can live in your gold coins...and they pay dividends...oh wait, they dont.
I heard it said that the stock market has traditionally done well in times of inflation because businesses are more able to raise prices above and beyond what is necessary to respond to increased costs.
That being said, I have always found it perverse that the stock market goes up when bad figures come out because people think bad figures will lead to a rate decrease. I think investors find justifications for doing what they want to do and then just follow the herd...
I am bullish on stocks.
So that's the Thinker's play-of-the-day for June 13, 2006, S&P at "5001,223.68"
I am sure someone on this blog will let me hear about it if I am wrong. Lets check back on this in 4 months time and see how I did, shall we?
I am buying me some nice grillz with my gold
http://www.traderscorporation.com/
His free blog on stockcharts: http://tinyurl.com/wzrk
Jack Chan's the man!
Signals and sets-ups, not analysis and attitude.
I once was long, but now am short, to paraphrase a religious song.
This is what you call a sale.
Thinker: "I heard it said that the stock market has traditionally done well in times of inflation because businesses are more able to raise prices above and beyond what is necessary to respond to increased costs."
Certain businesses can do just that. These are the ones that Warren Buffet has made his fortune and why I decided to go long BRK-A. Lots of cash, exceptionally strong free chashflow, ability to index to infaltion, etc. With all the uncertainty, what is not to like about BRK?
Has anyone else noticed how short term most of our expectations have become?
Everyone wants to get rich...and right away dammit! It's all part of the what I call the American InstantCulture. We want what we want and we want it NOW!
The result is everyone chases the latest thing to go up a lot in price. 2 years ago it was houses, earlier this year it was gold, in 1999 it was internet stocks. And of course this is almost always the recipe to LOSE a lot of money 'right now'...
There's even a daily newspaper, Investors Business Daily, that is entirely set up for momentum investors. They brag about how the CANSLIM system is the road to fast and fabulous riches. I bet almost NO ONE can actually successfully use that system however.
Wealth accumulation takes a while and involves work, investment and persistance. Betting on the horses doesn't. Too many people are, in one way or another, 'betting on the horses'...
Here's a fun exercise.....
Read all of Keith's GOLD articles in Apr/May.....substitute the word "Gold" with "Real Estate".
The exact stuff that Keith was saying about Gold is the exact crap that he rails about from the Real Estate Complex.
I am glad Gold fell.
LMAO - "gold meltdown" - this bull has just begun to buck and kick - the weak sold -
My prediction - gold $1650 in one year.
Gold fell because rates are rising and CB's are squeezing liquity from the system......right now.
If they start again when the recession begins, Gold will start to fly right back up.
i look at gold as wealth preservation, not an investment. gold is not an investment. I bought and buying more to protect against the dollar, goepolitics, etc. gold is an investment only if there's a scheme to pump/dump/manipulate it similar to RE and the stock market. such scheme, the leasing of gold by central banks and probably other schemes exist. Eventually, I think gold will recover.
i think in few months or years, the effect of "Monopoly(R)" money will manifest, nationally, and/or globally. And if gold is not the or "a" way to protect wealth, I'm open to what you think would/will be. thoughts?
Don't know about FX, but like him, I'm more into silver than gold.
I started buying early 03, seen this big pull back thing before (April 04).
I bought most of mine at below $5 an oz, and even if it drops down as low as $6 as some pundits have said, I'm still in front compared to sticking it in a savings account.
I'm in this for the long haul, and see $20 an oz (for silver) by year end.
Steady away I'll keep buying the dips, in 5years time we'll see who's still laughing.
If the sky is falling in every asset class, stocks, bonds, real estate, commodities, where is the safe haven for the recession we are about to enter? Booze and gambling????
Investment Recommendation:
Sell Gold
Buy 9mm
"Buy 9mm"
Don't make me laugh, most folk couldn't hit a barn door with a blunderbuss!!
Now even if someone can do 2" groups with a pistol at 10yds, very very few people are born killers.
To make a point, I have a nice fluffy bunny here, who could break its neck with their bare hands, and who has actually done it?
Who on this board was investing or trading in 1974, or lost/bought real estate during the S&L crisis?
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Snippets from the incomparible Richard Russell and http://ww2.dowtheoryletters.com/
June 13, 2006
...Here's one thought that's never left my mind, and this is it -- at the lows of 2002, stocks never got anywhere near undervaluation. In other words, at the 2002 lows there was nothing that even hinted of a classic, "great valuation" bear market bottom. In my opinion, the bear market that started in 2000 never ended. For that reason, I believe the end of the bear market lies somewhere ahead.
-----------------------------------
Gold -- The Fed undoubtedly feared and disliked the rise in gold to over 700. Regardless of what they say, in their guts the Fed crowd knows that surging gold is an indication of inflation. But what can the Fed think now that gold is collapsing? Thoughts of deflation must be entering their mind.
...Should they stay with their anti-inflation stance and raise rates once more, should they ease up on that stance, or should they be actively trying to re-stimulate the economy? And most important -- do they dare to raise rates again at the end of June?
-------------------------------------
Remember, huge amounts of debt are basically deflationary. Thus, not to inflate enough is to invite deflation. The massive edifice of debt means that the Fed must inflate -- it's a case of "inflate or die." The inflation-deflation pendulum is now swinging wildly. The Fed's back is against the wall. It must soon, very soon, reversal itself and move back to INFLATION MODE.
Remember, and I want to re-emphasize this -- nobody -- and I mean nobody -- is thinking in terms of what I talked about at the beginning of this site. I'm talking about this being a resumption of the primary bear market.
If I'm correct, we're going to be hearing the word "bankruptcy" coming up rather often as the bear market moves along. I remember at the frightening 1974 lows, the fear was that anything you bought or owned was a possible candidate for bankruptcy. That's how deep the fear went.
I want to remind subscribers that there's only one item that can't go bankrupt -- that item is real money -- gold. The truth of this statement will emerge as we move along. And it's something that every one of my subscribers should keep firmly in mind.
--------------------------------------
CONCLUSION -- The Dow, the S&P and the Nasdaq are now all down for the year -- the whole year's gains have been wiped out as of today.
I don't care what the Fed or anyone else says, this is deflationary action in the markets, and the markets always lead the economy. If this brand of selling continues, it going to hit what's MOST VULNERABLE in the ECONOMY. Two items that are "most vulnerable" -- the dollar and debt.
Where are the islands of safety? The initial islands of safety are dollars and T-bills. The ultimate island of safety is gold. So far, investors are rushing to the dollar and T-bills (notice, not so much to bonds). The second phase of this bear market will see a major rush back to gold.
Cash is king = smart money
At least in the short term, "smart money" is going to cash. I predicted someone on the blog that when a recession/depression begins, people do NOT buy ANYTHING - gold, stocks, etc. . .T-bills or cash is where smart money will go. It is now clear that we are headed into a deep recession, and global slowdown. . .even oil is trending lower. When the smoke clears, there will be some great values in stocks. . .Motley Fool already was talking about shipping stocks today which yield 20% dividends have tanked also. . .lots of 7%,10% and 15% dividend yields out there right now. . .but people don't want to risk cas.
RE: "Trillion dollar question: can Bernanke save the dollar whilst not causing a depression by collapsing the RE market."
I think this is indeed the most compelling question now. IMO, I think Bernanke will continue to impliment 'token' rate increases to give the appearance of fighting inflation. In the meantime, inflation will soar past interest rate hikes. This may serve the middle ground. Housing prices will 'back-into' the inflating dollar with possibly the least amount of pain and suffering.
autofx you're probably right. The new guy at Treasury is an insider and that means they expect to need a man with his skills in the comming months. They have to bring long-term rates down and create som new ways for millions of people with no or negative equity to refi their mortgages. How will they buy off the bond crowd this time?
People who watch charts for a living tell me the S&P breaking under 1240 is a BIG deal, and the market is toast from a technical perspective.
There is no way the Fed can allow BOTH the stock market and housing values to tank simultaneously. They will "manage" the situation, and the price of gold will be their report card. How long can they stretch it out? My guess is another 5-10 years.
To make a point, I have a nice fluffy bunny here, who could break its neck with their bare hands, and who has actually done it?
---------------------------------------
My (then) girlfriend had a pet rabbit that tore up my rugs and chewed molding and wiring in my bachelor pad $230K Falls Church townhouse that Zillows out now for the ridiculous amount of $550K. In a fit of displaced anger, I did kill a "meat rabbit" with my bare hands while driving around with her in the Virginia countryside, cooked it and ate it.
Biggest threat to the economy as per BB is inflation? Who is this inflation monster? (It’s the Fed) The Fed will fight inflation? During a war? With housing collapsing? Ha Ha The IMF just reported that Central Banks are double counting their Gold suppy. “So much gold has been double counted already that if the all the owners asked for delivery of their gold, there wouldn’t be enough of it in the world to make good on all the claims of ownership.” Ha Ha A big paper game! Buy Physical Gold as a way to insure your portfolio over a long term. If you buy ETF’s that will not convert to physical delivery you may be buying iou’s that are backed by more iou’s and joining in the paper game. If you have doubts about the financial management of the USA (which you should by now) then convert 5-20% of your liquid net worth into precious metals slowly over time by buying the dips. This time it’s different! Ha Ha Gold has been at the center of monetary history for thousands of years. Gold has backed our currency since our founding up until in 1971 we found a new way based on faith. Now some Ivy League boys think that it’s different and Gold is an archaic unsophisticated relic. Well it’s not different.
I sold GLD early this morning before things really started to get bad. I say don't catch a falling knife...wait for a little more stabilization in the price. We also need indications that the Fed will stop raising rates before we get some support in the price of precious metals. I'm thinking August will be about the right time to consider getting back in.
Here's some good links to find out what's really going on.
http://tinyurl.com/z4cal
http://tinyurl.com/j7gl2
http://tinyurl.com/qqqcm
Chris G said...
I'm thinking August will be about the right time to consider getting back in.
--------------------------------------
Before you go back in, check out Jack Chan's signals and set-ups.
His free blog on stockcharts: http://tinyurl.com/wzrk
I am leveraged/margined and short right now but will reverse to long (or go flat) per Jack's signals. He does not favor leverage, and his system is best for unleveraged vehicles such as GLD or mutual funds, especially to control losses (3%).
This is what happens when there is a bubble and a lot of clueless amateur speculators.
It is sad that people who talk about RE bubble are unable to see another bubble.
My personal theory is Kieth had to sell his condo to move to England. Knew he couldn't buy in for a year or two, and hope for the bubble to pop.
Nothing but shear luck.
His bubble blog will be over when he moves back home and needs to buy a house.
The crash in copper is where it is at.
The drop in coper signifieds the Chia economic bing is slowing down.with a China slowdown. The world will have oil, timber, copper, coal. the world will be rich again.
I bought my gold when it was still at $480, and most of my silver when it was at $9. I'm still in the black.
I think it's funny how this blog was full of people laughing at Keith for predicting a housing crash... now it's full of people laughing at Keith for making a little mistake over a Matterhorn movement in gold and silver. Geez louise.
Who's worse off... people who actually look at the economy, or those idiots who gobbled up RE at no money down and neg am and interest-only believing that RE only goes up??
Personally, I think all you scoffers are just jealous.
so bernanke will raise another .25 percent this month, but he better draft and redraft, proofread and spellcheck that damn statement that goes along with it. If there is one wrong syllable in that statement there will be bubbles bursting all over the place, including the bubble known as the world economy.
And here is the Thinker's million dollar prediction, there will be an asset class that will start to skyrocket soon enough. The smart money will have to go somewhere next. I just don't yet know where, I will have to do a little more thinking and get back to you.
I completely agree with you, as I have been contemplating the same thing myself over the past few weeks. However, I'm pretty sure that it isn't hog futures, LOL.
On the long side, I'm thinking education providers should be a good play over the next couple years. When people get canned, some of them go back to school.
Purchases
$325 in 2002, $350 in 2003, $400 in 2004
Is today painful ? Yes.
Am I selling? No.
Is this the end of the gold bull? NO !
Gold bugs like me have had a Gold stash for a long time now. I have no faith therefore I own Gold. I would buy more today if I didn't have any. Sit on the fence like a good boy where you feel safe and let Daddy Fed take care of you.
If you don't believe in gold , think of the logic of cutting down a three thousand dollar tree, turning it into pulp, then paper, put some ink on it then call it a billion dollars. Now that is a theory I want to tie my cart to.
I was talking with the nice old lady at the coin store today as I bought more gold coins. She said that silver is moving pretty well today after the recent drop. She also said that a lot of dealers are not selling at these prices.
Saw a yahoo news clip that said foriegn CBs will be getting into assets other than the US $, like gold. They will also be buying US mortgage backed securities. If a lot of these MBSs are underwater these foriegn CBs will be really pissed of at ANYTHING US $ based.
http://tinyurl.com/g4oc9
I am not sure why people are buying silver coins vs gold coins. The premium on silver eagles is $2 - that is $12 coin at $10 spot. I am paying almost $40 premium on gold coins over spot, so at $600 for the gold coin vs $12 for the silver one that is 50x. 50x $2 premium is $100 premium for every $600 spent. I do not have any idea what the future will hold but I imagine that gold and silver will track pretty much evenly, give or take. If (and I hope it is IF) I ever have to sell coins it will be easier to unload a gold coin to get a couple of weeks spending money vs 50 silver coins. Maybe not, because who knows the future and I would only unload if there was a real need to.
BTW, the sell premium is 2% of spot at this shop. And the transactions are cash. These people do most of their business by mail and phone, very few walk-ups to their little window like I do. They deal all over the US. Amazing for a little shop. If anyone is interested the number is (256) 883-9004.
I was at the coin shop today and watched a couple bring in a wal-mart plastic bag 1/2 full of large bills in "bricks". They wheeled out 3 pretty boxes of coins.
I only got one. Wish I had a bag full of cash.
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