Is This Why Gold Prices Are Rising? | Zero Hedge

Is This Why Gold Prices Are Rising? | Zero Hedge
The Game Changer For Gold In One Chart | Gold Silver Worlds
Gold Price Recovery Faces Resistance :: The Market Oracle ...
James Turk Blog: Gold Price Manipulation
Jim Rickards: Target Gold Price Between $7,000 And $9,000 per Oz ...

Posted: 11 Feb 2014 06:16 PM PST

While there are numerous reasons why precious metals prices rise and fall - from supply, demand, manipulation, money-printing, and jawboning - it is abundantly clear that as prices drop, Asian demand has risen rather notably. But what is the reason? Why are Asian 'people' and central bankers - most notably China - buying gold now? We suspect the following chart from SocGen provides considerably color when answering that question historically (and more importantly - going forward).

Via SocGen,

Chinese economic policy uncertainty and gold prices Clearly, huge negative economic developments (tail risks) like a China hard landing are hard to predict. Accordingly, economic "policy uncertainty" (rather than the actual event) is something that our SG Economists have looked at in detail and in particular how economic policy uncertainty influences business confidence and economic activity. The natural question for us, given China's large proportion of gold demand (and to focus on just one commodity for brevity), is what is the resulting effect of increased Chinese economic policy uncertainty on the gold market?

To measure Chinese policy-related economic uncertainty, we use an index from www.policyuncertainty.com based on a scaled frequency count of articles about policy-related economic uncertainty in the South China Morning Post. Chart 17 shows that increasing and then decreasing uncertainty since 2010 have coincided with gold prices risisng then falling. For most of 2013 the two series appear to be moving in tandem.

...

SocGen further finds, through co-integration analysis, that there is a causal linkage where gold prices reacted significantly to policy uncertainty.

...

We cannot predict increases in policy uncertainty in China, but can undertake a simulation using our index and price time series, and simply ask ourselves what a change in Chinese economic policy uncertainty would do to gold prices. The model above suggests that if uncertainty in China jumps 20%, back to the level of August 2011, the flat price of gold should rise by roughly 3%, or almost $40/oz at today's price levels.

A hard landing in China, with 2% GDP growth, would pull gold higher initially, but even before this, more policy uncertainty would also drive prices higher too.

With uncertainty over whether the PBOC and Chinese government reforms will be upheld or folded on, we suspect this rising uncertainty over Chinese policy is major factor in the safe-haven stacking of precious metals in the last month or two.

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The Game Changer For Gold In One Chart | Gold Silver Worlds

Posted: 08 Feb 2014 03:54 AM PST

This is a guest post by Frank Holmes from USFunds.com.

Earlier this week, we watched Ben Bernanke officially "pass the puck" to Janet Yellen, who became the new chairman of the Federal Reserve's Board of Governors this week.

Imagine if the puck were the Fed's assets—that would mean the disk is five times bigger today than when Bernanke became chairman in 2006. At the beginning of his reign, the Fed's assets were $834.6 billion. Now, the balance sheet has grown to $4.1 trillion, a previously inconceivable size.

Until last year destroyed gold's multi-year bull reign, the expansion of the U.S. balance sheet and the price of gold over the past decade moved in near lockstep. From 1999 through 2012, the correlation coefficient of the rising price of gold to the Fed's climbing assets was 0.95.

Even with the tapering of the bond purchases that began in late 2013, the Fed's balance sheet remains on an upward trajectory and much higher than the price of gold. This suggests we should see much higher prices.

What will break gold of its losing streak? Will inflation, which is a lagging indicator, be stronger than expected? In one of my most popular posts last year, I said that based on the jobs market, the limited housing recovery and regulations slowing down the flow of money, the Fed would have no choice but to start tapering and raising rates very gradually to keep stimulating the economy.

In CLSA's Greed & Fear, Christopher Wood points out the forward-looking U.S. data, pending home sales index, is "clearly suggesting stalling momentum." Pending home sales have been declining for seven months in a row, "plunging by 8.7 percent month-over-month in December to the lowest level since October 2011."

There's also a weaker demand in mortgages in the past quarter. According to a survey of banks, nearly 30 percent reported weaker demand for prime mortgages, which is the "worst data since April 2011," says CLSA. About 46 percent of banks are seeing weaker demand for non-traditional residential mortgages, the worst since January 2009.

The ISM manufacturing new orders index is also off. In January, new orders fell from 64.4 in December to 51.2 in January, which was the largest monthly decline since December 1980.

So even if investors shrugged off the disappointing jobs report today, we're pretty certain the incoming chairman is paying close attention to the scoreboard.

Further reading: Read the Fire Fueling Gold

Gold Price Recovery Faces Resistance :: The Market Oracle ...

Posted: 13 Feb 2014 04:40 AM PST

Commodities / Gold and Silver 2014 Feb 13, 2014 - 01:40 PM GMT

By: Gregor_Horvat

Gold is at the new highs after breaking out of a triangle at the start of the week. We see price now moving up in wave (c) of a second zigzag that may form a top in current 1290-1300 area. Keep in mind that despite higher highs and higher lows we think that move from 1181 is corrective, thus temporary recovery so we need to be aware of a bearish turning point in coming days. An impulsive fall back 1254 will suggest that highs are in.

GOLD 4h Elliott Wave Analysis

Written by www.ew-forecast.com | Try our 7 Days Free Trial Here

Ew-forecast.com is providing advanced technical analysis for the financial markets (Forex, Gold, Oil & S&P) with method called Elliott Wave Principle. We help traders who are interested in Elliott Wave theory to understand it correctly. We are doing our best to explain our view and bias as simple as possible with educational goal, because knowledge itself is power.

Gregor is based in Slovenia and has been in Forex market since 2003. His approach to the markets is mainly technical. He uses a lot of different methods when analyzing the markets; from candlestick patterns, MA, technical indicators etc. His specialty however is Elliott Wave Theory which could be very helpful to traders.
He was working for Capital Forex Group and TheLFB.com. His featured articles have been published in: Thestreet.com, Action forex, Forex TV, Istockanalyst, ForexFactory, Fxtraders.eu. He mostly focuses on currencies, gold, oil, and some major US indices.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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James Turk Blog: Gold Price Manipulation

Posted: 13 Feb 2014 09:30 AM PST

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Jim Rickards: Target Gold Price Between $7,000 And $9,000 per Oz ...

Posted: 09 Feb 2014 01:06 PM PST

We had summarized a while ago 10 Currency War Insights From Jim Rickards and we explained how the World Currency System Is Moving Towards Catastrophe. Our latest articles have focused on how The Ongoing Depression Could Force A Return To The Gold Standard and how the Most Likely Outcome Is Still A Monetary Collapse.

Courtesy of The Epoch Times, Jim Rickards gives a first set of insights from his new book which will be out in April 2013. In "The Death of Money, The Coming Collapse of the International Monetary System" (preorder on Amazon), Rickards confirms the predictions made in Currency Wars and goes deeper in the matter by explaing how the international monetary system might collapse and how the new monetary system could look like.

About his new book:

The sequel is that in "Currency Wars" I also had a lot of history. There were five chapters of history and I thought that was very important.

If you are going to talk about gold with the reader, a lot of times if you jump right into gold, people think you are sort of a nut. I find if you tell the story through history people can see gold in a context, and when you talk about it, it doesn't seem quite so strange.

In my new book, "The Death of Money," there is no reason to repeat the history—that's all in "Currency Wars"—so it's more forward leaning, and talks more about the future of the international monetary system, a coming collapse.

And not just a collapse, because a lot of people are running around talking doom and gloom, the end of the dollar and all that. I might even agree with that, but I don't think it has a lot of content.

What I try to do is provide a more in-depth analysis describing what will come next, what the future international monetary system will look like.

I point out that the international monetary system has already collapsed three times within the last 100 years—1914, 1939, and 1971—and that another collapse would not be at all unusual. But it's not the end of the world. It's just that the major powers sit down and reform the system. I talk about what that reformation will look like.

So that's the sequel or the continuation of the story looking over the horizon. Some stuff that is before "Currency Wars" and some stuff that is after. And other content on the contemporary situation in Europe and China, so I hope people enjoy it.

Rickards on gold's prospects:

Gold has a number of vectors. It is technically set up for a massive rally. Let me separate the fundamentals from the technicals.

Fundamentally my target price for gold is in the range of $7,000 to $9,000 per ounce. That's not something that will happen straight away, but it's not a 10-year forecast either. It's a three- to five-year forecast, for the price to rise by about five to six times.

My analysis is based on a collapse of confidence in the dollar and other forms of paper money. To restore confidence you have two means: You either flood the world with liquidity from the International Monetary Fund in the form of Special Drawing Rights [SDRs, a form of money issued by the IMF], or we return to a gold standard.

The flooding of the market with SDRs would be highly inflationary, so that by itself would drive gold to a higher level. If they go back to a gold standard they will have to take a non-deflationary price.

People say there is not enough gold in the world. The answer is there is always enough gold in the world. It's just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It's not about gold, it's about the price.

If you go back to a gold standard you have to avoid the blunder that England made in 1925, by going back to the gold standard at the wrong price, which proved to be highly deflationary, and contributed to the Great Depression.

I've done the math on that and the non-deflationary price for a gold standard today is about $9,000 per ounce.

The target price is based on supporting the paper money supply with gold. That would be using M1 [paper notes, coins, and checking accounts] as the monetary base, with a 40 percent backing. If you were to use M2 [M1 plus savings accounts and money market funds] with a 100 percent backing, that would be $40,000 per ounce.

What it means for gold investors:

It wouldn't mean gold would be worth any more [in real terms]; it would just mean the dollar has collapsed. But yes, you get more dollars for the ounce. Let's call that the three- to five-year forecast.

For the year ahead, those fundamentals are unlikely to play out in a year. But the technicals can play out. Technically, gold is set up for a major rally based on the decline in floating supply.

Whether gold's outlook is linked to gold's crash of 2013:

There was 500 tons removed from the GLD [Spider Gold Trust ETF] warehouse by the bullion banks. That was a massive physical overhang removed from the market. People don't really understand how the GLD ETF works. When people are buying the GLD, they are not buying or selling gold; they are buying and selling shares.

The gold sits in a warehouse and is only available to authorized participants. If you look at the list of authorized participants and look at the list of bullion banks, they are pretty much the same people: Goldman Sachs, Citigroup, JPMorgan, Morgan Stanley, Deutsche Bank, HSBC, etc.

Those banks have the ability to buy up shares, take the shares, cash them in, and get physical gold. And they were doing that and they were sending that gold to Shanghai to support trading and leasing on the Shanghai gold exchange. So when you take 500 tons and dump it on the market, that's about 20 percent of the annual mining supply. It's a massive physical injection.

The other factor is just outright manipulation, which is very visible in Comex future prices. I've seen some statistical analysis that demonstrates market manipulation beyond the shadow of a doubt.

So the point is that between central bank manipulation through Comex futures and bullion banks dumping the physical, and by cleaning out the GLD warehouse, and also the Comex warehouse for that matter, there is a massive amount of gold that came on the market over and above normal supply trends, putting massive selling pressure on the Comex.

So that was a bad combination, but the problem is that it's not sustainable.

Where physical gold is going:

You can't loot the warehouse twice. Once you take all the gold out, you can't take it out again. JPMorgan's vault is low, Comex's vault is low, the GLD's vault is low.

One of the big movements right now is gold moving from places like UBS, Credit Suisse, and Deutsche Bank to private storage such as G4S, ViaMAT, and Brink's. That doesn't increase the supply of gold at all. But what it does do is it decreases the floating supply available for trading.

If I have my gold at UBS, UBS typically has the right of rehypothecation. But if I take my gold and move it over to ViaMAT, it's just sitting there and it's not being traded or rehypothecated.

So, if I move gold from UBS to ViaMAT, there's no more or less gold in the world. I'm still the owner, and it's the same amount of gold. But from a market perspective, the floating supply has decreased.

The biggest player in that is China. China is buying thousands of tons of gold secretly through deception and using military intelligence assets, covert operations, etcetera.

Whether gold will rally:

There is a total supply of gold in the world. But to corner a market or squeeze a market, you don't need to buy all the gold, you just need to buy the floating supply. Think of all the gold in the world, it's about 170,000 tons. Think of a little sliver on top of it that is the floating supply available for trading.

Gold that's in the Comex or JPMorgan or GLD vaults is available for trading. Gold purchased by the Chinese will not see the light of day again for the next 300 years, and is not available for trading. So with the gold going from West to East, and from GLD to China, the total amount of gold is unchanged, but the floating supply is declining rapidly.

This means that the paper gold that sits on top of the floating supply is becoming more and more unstable and vulnerable to a short squeeze, because there is not enough physical gold to support it. So that's likely to collapse at one point and lead to a short squeeze and heavy buying.

Is This Why Gold Prices Are Rising? | Zero Hedge

Is This Why <b>Gold Prices</b> Are Rising? | Zero Hedge

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