The Gold Price Validated it's $1250 Support Closing Up at $1262.20

The Gold Price Validated it's $1250 Support Closing Up at $1262.20
The Gold Price Closed Down 1.64 Percent at $1242.20
Silver and Gold Prices: The Gold Price Closed Down $12.60 at ...
Gold Price BOOM! :: The Market Oracle :: Financial Markets Analysis ...
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Gold price gains halted as ETF investors sell into rallies | MINING.com

Posted: 29 Jan 2014 04:25 PM PST

Gold Price Close Today : 1262.20
Change : 11.40 or 0.91%

Silver Price Close Today : 19.535
Change : 0.050 or 0.26%

Gold Silver Ratio Today : 64.612
Change : 0.419 or 0.65%

Silver Gold Ratio Today : 0.01548
Change : -0.000101 or -0.65%

Platinum Price Close Today : 1406.40
Change : -1.30 or -0.09%

Palladium Price Close Today : 710.25
Change : -5.35 or -0.75%

S&P 500 : 1,774.20
Change : -18.30 or -1.02%

Dow In GOLD$ : $257.76
Change : $ (5.49) or -2.08%

Dow in GOLD oz : 12.469
Change : -0.265 or -2.08%

Dow in SILVER oz : 805.67
Change : -11.81 or -1.44%

Dow Industrial : 15,738.79
Change : -189.77 or -1.19%

US Dollar Index : 80.660
Change : 0.078 or 0.10%

The GOLD PRICE was pushed up today. Comex closed up $11.40 (0.9%) at $1,262.20. Silver lagged badly, rising only 5 cents to 1953.3c.

Yesterday the gold price fell back to support at $1,250.80, and today rebounded like a trampoline champ. That validated $1,250 support. In the aftermarket gold has pushed through the $1,267.50 December high, but not enough to call it a breakout.

The GOLD PRICE is pounding at the door of that downtrend line from April, but pounding isn't breaking down. Strength shown so far whispers it will break through tomorrow, but if not, it can fall back as far as $1,210 without changing the outlook. All indicators I watch are pointing up, and I expect to see higher gold soon.

The SILVER PRICE since early December has formed a rising flat topped triangle with the base or top at about 2050c, and a slowly rising hypotenuse beginning at 1889c through 1910c through 1931c and now today at a 1945c low. This line was broken only once, by the plunge on 31 December 20 1872, but that was an intraday low and silver never closed below that hypotenuse.

Silver stands below its 20 and 50 DMAs (1984 and 1992). It has dithered two months trading sideways. Two days ago the MACD flashed a Sell.

This picture must clear, or threaten gold's performance. Related markets can disagree for a day or two, but past three it begins to look like a family argument where somebody's fixin' to take out a knife and go to cuttin'.

To confirm a rally, the gold price must close above $1,267.50 and silver must hop aboard and climb over 2050c. It's very rare that gold will stage a rally all on its own. Possible, but infrequent.

One thing about us nacheral born fools from Tennessee, I ain't crafty enough to lie when I'm caught out wrong and make out like I was saying the other thing all along. I'll just out and admit it, I was wrong. The scummy criminals at the Fed did taper after all. In the FOMC's statement today -- Bernanke's swan song -- the Fed said it would reduce its securities purchase by $10 bn total, knocking $5 bn of its present $40 bn monthly US Treasury bond buying and $5 bn from its $35 bn Mortgage Backed Securities purchases.

But the Fed also promised it would hold interest rates near zero until unemployment dipped below 6.5%, or 'till hell freezes over with Gatorade, whichever comes first (I snuck in that last part on my own. They didn't really say that). Here are the really gut-bustin' hilarious gems from the FOMC statement:

** the economy is improving.

** "The committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance." (This is loony from the standpoint of protecting the dollar's purchasing power, which is why y'all don't understand it, because the Fed doesn't give 2 hoots and a holler about the dollar's purchasing power. That ain't their job. Their job is to keep all y'all BELIEVING they aim to protect the dollar. And it's genrlly working.)

** "The Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." Translation: we are going to continue to create new money at the same rate as far as we can see into the future.

And how did the stock market take the news that the Fed is jerking the punch bowl? Not calmly. Dow plunged another 189.77 points (1.19%) to 15,738.79. Scorecard: Dow has lost 676.53 (4.1%) in the last seven trading days. S&P500 today peeled off 18.3 (1.02%) to perch on 1,774.20.

Clearly the Fed is playing "chicken" with the stock market.

Where doth that leave us? The Dow has crashed back below the upper channel line that it threw over (rose above) in November, and reached its last low (15,703.79 in December) matched with a September peak at $1,5709.58. If the Dow punctures this support, next obvious stopping point is the 200 DMA now at 15,454.71. No indicator gives a sign of an upturn yet. S&P500 looks no better.

Meanwhile the Dow in Gold is cascading over the rocks. Closed today down 2.5% at 12.42 oz (G$256.74 gold dollars). All moving averages are in downward alignment, and the next to be struck is the 200 at 11.76 (G$243.10).

Thanks to silver's recent lethargy, the Dow in Silver has not dropped as dramatically. Today it lost 2.18% to end at 798.92 oz, and stands below its 20 and 50 DMA (814.41 oz), and it's outside its upward trading channel. Gravity is calling.

Since the Fed pulled the plug on its stock support today, I reckon investor's appetite for risk has been trimmed. That showed up in rising bond prices/falling ten year T-note yield. It dropped 2.59% to 2.675%.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.

The Gold Price Closed Down 1.64 Percent at $1242.20

Posted: 30 Jan 2014 07:27 PM PST

Gold Price Close Today : 1,242.20
Change : -20.00 or -1.64%

Silver Price Close Today : 19.11
Change : -0.43 or -2.18%

Gold Silver Ratio Today : 64.999
Change : 2.438 or 3.90%

Silver Gold Ratio Today : 0.0154
Change : -0.0006 or -3.75%

Platinum Price Close Today : 1,380.70
Change : -25.80 or -1.83%

Palladium Price Close Today : 706.65
Change : -4.30 or -0.60%

S&P 500 : 1,794.19
Change : 19.99 or 1.13%

Dow In GOLD$ : $263.74
Change : $ -2.46 or -0.92%

Dow in GOLD oz : 12.76
Change : -0.12 or -0.92%

Dow in SILVER oz : 829.29
Change : 23.66 or 2.94%

Dow Industrial : 15,848.61
Change : 109.82 or 0.70%

US Dollar Index : 80.66
Change : 0.08 or 0.10%

Alas, today was not the day the GOLD PRICE burst the bonds of surly earth. Instead, it hit that downtrend line from the April 2013 high at $1,267.70 & fell back as low as $1,237.50. The GOLD PRICE shuttered the Comex $20 (1.64%) lighter at $1,242.20. Silver shucked 42.5 cents (2.18%) to 1911.1c. Today witnessed an 1897c low.

Gold's low took it to but not through its 50 DMA, and closed slightly below the uptrend line. This itself is not fatal, but the 12 day rate of changed went negative today, & the MACD might be rolling over downward.

No way to predict what will happen here. Gold has been very strong, so the 50 DMA which in past months has acted as a barrier to stopping it might now support it. Or we might see lower prices still. I am watching the $1,210 line as the shoulder line of what might be a upside-down head & shoulders. As long as that $1,210 line at the top of the shoulders remains intact, the pattern remains valid & presages an upside breakout.

The SILVER PRICE low at 1897c today shattered the little uptrend it had going, but stopped about where declines stopped through December at 1889c & 1910c. Remember the December intraday low came at 1872c, so that's silver's drop-dead line. MACD & RoC & RSI all point downward, I am sad to report.

Not sure why, but I really don't expect another waterfall out of silver & gold from here. Might be too big a natural born fool from Tennessee to see it coming.

Well, I reckon the question we all ought to ask ourselves is, How big a sucker are you? In a world where most everything is staged for propaganda purposes, financial & political & cultural, we also have to ask, Is it real, or Memorex?

Before I launch my boat upon the stormy sea of doped-up markets, I realized something spooky this morning as I was waking. On 22 & 23 January several stock market indices were making new all time highs. That was the day the Dow reiterated its non-confirmation by falling the second day in a row. On the 23rd its Niagara began.

Why is that spooky? Because the Dow topped at 11,722 on 22 January 2000, before the rest of the indices topped in March. And because there was a stock market high in 2000, again in 2007, and now, seven years later, in 2014, exactly two times seven years from the 2000 top.

Here's another, smaller spook. Silver & gold bottomed on 28 June 2013, then again on 31 December 2013, right nearly six months to the day or halfway around the year from each other.

But today the sun shone bright in Stockland again. Dow jumped up 109.82 (0.7%) to 15,848.61 & the S&P500, like a giant running its course, leapt 19.99 (1.13%) to 1,794.19.

The raw numbers sound good until you look at the charts, Dow managed to climb back to support it had broken through, but no more. S&P500 remains way below its 1,812.60 50 DMA, ready to drop through a long term uptrend line. Sure, both indices might catch here, but they need to rise above their 50 DMAs to do that (1,812.60 & 16,153.57).

Gold's tumble today floated the Dow in Gold up a little, 2.76% to 12.76 oz (G$263.77 gold dollars). As yet that amounts to nothing but a tiny countertrend move in a very long downtrend.

Dow in silver rose 3.72% to 828.64 oz, above its 20 and 50 DMAs (817.42 & 815.61). This is an iffier proposition, but needs to close above the 853.15 oz high on 31 December to disprove the downtrend.

US Dollar index, hideous spawn of central banking, rose today 53 basis points (0.66%) to 81.19. This takes it out of immediate danger of visiting the earth's magma core, but not much more. It is trying to turn up again to validate its sluggish uptrend. Did close above the 20 & 50 day moving averages, which at least turns momentum up.

Euro, hideous spawn of central banking & eurocratic bureaucratic tyranny, gapped down below all its moving averages, proving its downtrend once again. Plunged 0.79% to $1.3556. Hope the euro has packed its parachute.

Yen, hideous spawn of central banking & corporatism, fell back 0.49% to 97.21, but remains above its 20 & 50 DMAs & in an uptrend. Why, I can't imagine, since the Japanese Nice Government Men stand ready to stab anybody in the back who trusts a rising yen.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

WARNING AND DISCLAIMER. Be advised and warned:

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Silver and Gold Prices: The Gold Price Closed Down $12.60 at ...

Posted: 28 Jan 2014 01:55 PM PST

Gold Price Close Today : 1250.80
Change : -12.60 or -1.00%

Silver Price Close Today : 19.483
Change : -0.288 or -1.46%

Gold Silver Ratio Today : 64.200
Change : 0.298 or 0.47%

Silver Gold Ratio Today : 0.01558
Change : -0.000073 or -0.46%

Platinum Price Close Today : 1407.70
Change : -11.70 or -0.82%

Palladium Price Close Today : 715.60
Change : -6.05 or -0.84%

S&P 500 : 1,792.50
Change : 10.94 or 0.61%

Dow In GOLD$ : $263.25
Change : $ 4.11 or 1.59%

Dow in GOLD oz : 12.735
Change : 0.199 or 1.59%

Dow in SILVER oz : 817.56
Change : 16.50 or 2.06%

Dow Industrial : 15,928.56
Change : 90.68 or 0.57%

US Dollar Index : 80.582
Change : 0.020 or 0.02%

Yesterday the GOLD PRICE closed Comex only 90 cents lower but in the aftermarket lost another $10. That showed up today at the Comex close, lower by $12.60 to $1,250.80, about 1% lower than yesterday. Yet as I said, most of that loss had already showed yesterday. Unlike recent months, gold did not follow through yesterday's weakness.

The GOLD PRICE hesitation here is easily explained: it is bumping against the downtrend line from April 2013. Thus Friday it couldn't get through the $1,267.50 December high, though it came so close. Nothing is out of order here, but the gold price might drop back to its 50 DMA at $1,238.04. Further drop would call its intentions into question. However, the Fed's mumblings tomorrow might derail gold for a while. Just no telling how the market will take their words.

The SILVER PRICE casts the only gloom over this brightening precious metals picture. It lost 28.8 cents (1.5%) today to end at 1948.3c. Remember that on Friday silver's weakness gainsaid gold's strength. Worse, platinum and palladium are falling, too. Copper has fallen back to its 200 DMA.

So the situation is unclear, and will remain so until the FOMC shoots tomorrow. My gut and the trends in place say, regardless what the Fed intones, stocks will continue lower and gold will keep climbing, even pulling silver up. Dow would have to beat 1,500 to change that outlook, and the gold price would have to drop below $1,210

Now if I wanted to put millions of people back to work in America, the very first thing I would do is-- raise wages 39%! Yes, socialist moronism now reigns supreme in Washington, where His Federal Highness, Bernard O'Bama, is decreeing today that all those federal government contractors now paying their minimum wage folks $7.25/hr must raise them to $10.10. This will prompt those employers to look at their payrolls, scratch their heads, and fire the lot of them, as they cannot afford to raise them 39%.

Thus Bernard, our first communist president, will manage to throw countless thousands out of work. Between him and the Fed, it's a job to figure out who is stupidest.

Speaking of the Fed, its long, twisted shadow hangs over markets this week because the FOMC has another meeting tomorrow. Chances are Yellow Janet will be terrified by the stock market waterfall cascading over the headlines and put The Mythical Taper in the dame class with the Easter Bunny, Sasquatch, and Santa Claus, announcing that money creation (and its floor under Wall Street) will continue on, world without end.

I have to leave early today, and am writing this just before the stock market closes, but I'll include closing prices below.

Stocks are in big trouble, although it's not clear yet whether this is merely a correction, or we have seen the ultimate top. For now, I'll opt for a severe correction into February, with the ultimate top later this year, subject to changing my mind at the drop of an index.

Stocks have been flashing all sorts of portents through January, mostly with the Dow refusing to join the party. Right now the Dow stands up 94.44 at 15,932.32, up 0.6% on the day, but in truth doing no more than a dead cat does when thrown from a three story building. The bounce signifyeth not life. S&P has managed to climb 10.93 (0.61%) to 1,792.49, but other indices are down slightly.

Stocks are in such trouble that it's a fair bet that whatever comes out of the FOMC meeting tomorrow, it will contain fat meat for stocks. Ergo, no taper.

Dow in Gold has fallen clean out of the trading channel and made half the journey from the 50 DMA (13.06 oz) to the 200 DMA (11.74 oz). DiG stands now at 12.73 oz (G$263.08 gold dollars). Dow in Silver hasn't been so rambunctious but at 817.75 oz has quite broken below its 50 DMA (812.76 oz).

US Dollar index has gone flat last two days, and is unlikely to move today, waiting for the Fed's Delphic Oracle to predict the future.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

WARNING AND DISCLAIMER. Be advised and warned:

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Gold Price BOOM! :: The Market Oracle :: Financial Markets Analysis ...

Posted: 28 Jan 2014 09:00 AM PST

Commodities / Gold and Silver 2014 Jan 28, 2014 - 12:00 PM GMT

By: John_Mauldin

By Grant Williams

"What a year this has been for gold.

"The price of the yellow metal fell almost 30% from its peak at the end of August a year earlier, to bombed-out lows amidst a wall of selling which included several very sharp and somewhat counterintuitive selloffs, including violent plunges in both the April-May time frame and again into year-end.

"Throughout the year, the spectre of manipulation was never far from the minds of all those involved in the gold market, whether they were crying 'foul' or asserting that, of course, there was no manipulation whatsoever and that those who suggested there might be were nothing more than conspiracy theorists, kooks, and whackos.

"The main suspects at the heart of the conspiracy theories were, naturally, the bullion banks and the central banks.

"The bullion banks, of course, have the eternal motive: profit; but what possible reason could central banks have for suppressing the price? None whatsoever, of course. The gold market is too small and too inconsequential for them to take an interest.

"And yet, rumours abounded that the bullion banks were in dire trouble and that a rising gold price could send one or more of them over the edge and into insolvency as a scramble for physical metal exposed massive short positions that had grown out of a fractional-reserve-based lending system backed (if not explicitly, then certainly complicitly) by central banks..."

Now THAT, you may well have thought, was the heart-racking, pulse-pounding introduction to my year-end look at the gold market. No preamble, no carefully constructed narrative to entice you into my latest little web, just BOOM! Straight into it.

And every word of the above makes sense based upon what we've seen happen in the past twelve months in the topsy-turvy world of element 79, which holds down the spot in the periodic table just after platinum and just before mercury.

But of course, nothing is what it seems when we are discussing gold.

That quotation at the top is the intro to the year-end review of gold that I would have written in 1999 ... had I been doing such things back then.

2013 was, in many ways, a case of been there, done that; and to understand what is happening today, it is extremely instructive to go back to 1999 and reexamine some very strange goings-on at the UK Treasury, AIG, Rothschild, Goldman Sachs, and Number 11 Downing Street.

(Cue dreamy harp music.)

The chart of the gold price between February 1996 and August 1999 will look eerily familiar to anybody who follows the gold market closely; and for those who don't, just stick around and I'll show you what you've been missing.

Source: Bloomberg

After a run-up to a spike-high of $415.50 on February 2, 1996, gold began to fall. It fell fairly quickly at first, losing 3% in six trading sessions; and then the decline steadied for a while but remained consistent — until, around the end of the calendar year, gold suddenly and inexplicably spiked straight down. By the end of 1996, it had lost 11% of its value.

As 1996 turned into 1997 the price continued to fall; and the new year saw several inexplicable downdrafts of considerable size and alarming speed which, by the time the dust had settled at midnight on December 31st, 1997, had cut the value of an ounce of gold by almost a quarter.

Gold market watchers were baffled at the continued weakness in their beloved metal. They bemoaned their bad fortune and pleaded with the gods above, but neither activity made any difference — the price continued to fall. (Sound familiar?)

1998 was a fairly stable year, with the price moving little from January to December (though again, during the year there were several large falls in price that were hard to account for); and as the world entered the last year of the millennium, there was an air of stability around gold that gave hope to those battered by the consistent weakness in the gold price.

(To reiterate, I am talking about the late 1990s here, NOT the last couple of years — just in case there was any confusion.)

On the last day of 1998, gold closed at $288.25, down from $415.50 on February 2, 1996 — a fall of over 30% in three years.

You ... yes, you with the glasses at the back...

(muffled question)

No, there is very little similarity to the 37% decline in the gold price from the August 2011 high to the close on December 31, 2013.

(muffled question)

What do I MEAN? Well, obviously, any similarity is completely coincidental because there were a number of strange things happening and rumours swirling back in 1998 about bullion banks being short gold in quantities that posed a risk to them and, of course, to "the system" — whatever THAT means — so those were once in a lifetime circumstances.

(muffled retort)

Well, yes, I suppose, now that you mention THAT, there MAY be some purely coincidental similarities between the two periods, but when you hear what happened next, you'll realize that the time I'm talking about was nothing like today, because the following year (1999) a certain central bank did something quite bizarre that led directly to sharply lower gold prices and a dramatic increase in specula...

(muffled retort)

... oh look, stop it now. Keep your Bundesbank tale under your hat and we'll discuss it when I've finished. We need to get back to the main story.

If I may? Thank you.

So, as I was saying before I was rudely interrupted by young Eric there, 1999 dawned with an awful lot of antipathy towards gold after three years of poor performance. The rumour mill was operating overtime as speculation about large shorts in physical metal moved towards a crescendo, and a group of central bankers either dismissed accusations of any involvement in price suppression or refused to discuss it at all.

The first five months of 1999 looked fairly familiar to anybody who happened to keep a watchful eye on the gold market.

Source: Bloomberg

After three poor years, gold was scratching around trying to find a bottom, and it looked like it was succeeding. The path of least resistance was clearly upward, and it looked for all the world as though a bounce was in the cards, since sellers had become exhausted.

The gold price saw several quick spikes — all of which were followed immediately by sharp selloffs; but the net result was that on May 6, 1999, the gold price stood a fraction above where it had entered the year.

It was at this point that things started to get screwy.

The next day, May 7, 1999, then-Chancellor of the UK Exchequer, Gordon Brown, announced that he would sell almost 400 tons of Britain's gold reserves in a series of auctions over the subsequent three-year period. Dates of those auctions were to be set well in advance.

Tense?

No, I don't mean "Are you on the edge of your seat?" The "tense" I am questioning is that used by Brown in his announcement — it was, in this case, the future progressive.

Ordinarily, when people like Brown make statements, they use a tense exclusively reserved for use by government officials and those heading up the world's major central banks: the future promissory.

This tense is constructed by taking an intended possibility and removing the words we hope and pray from the beginning of the sentence and inserting the word will in the middle.

Let me give you an example. When using the future promissory tense, the phrase "We hope and pray interest rates remain low until at least 2016" becomes:

"Interest rates will remain low until 2016."

Likewise, "We hope and pray we can unwind QE without any problems" becomes

"We will unwind QE without any problems."

Try it yourselves.

Anyway, Brown's use of the future progressive tense was particularly bizarre, because anybody who knows anything about finance, and particularly about the purchase and sale in large quantities of a price-sensitive commodity, knows that you do NOT telegraph to the market what your intentions are, because the market will then front-run you and sell that commodity short in order to generate themselves a nice healthy profit (with every dime of that profit coming directly out of the seller's proceeds).

Now, I may have been a bit naive here, but for the longest time I thought the entire set of "central bankers & treasury officials'" was a subset contained within the set of "people who understand a little about finance."

Thanks to John Venn, we can express the harsh reality rather simply:

Anyway, following Brown's extraordinary statement, I'm sure all those of you who reside firmly in the left-hand circle of that diagram can guess what happened next:

Source: Bloomberg

Yup! As anybody with even a rudimentary grasp of market dynamics could have predicted, the gold price fell off a cliff ... and kept on falling.

Thomas Pascoe of the UK Daily Telegraph took up the story (several years later, after a battle with the UK government over a series of Freedom of Information requests); and I have to say that for a mainstream media journalist, he did a damned fine job:

(UK Daily Telegraph, June 2012): One decision [of Brown's] stands out as downright bizarre, however: the sale of the majority of Britain's gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of "open government", but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model.

The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

Then, Pascoe dropped the hammer:

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public's gold. It was.

We'll come back to Pascoe's article a little later, but in the meantime it's back to 1999 and the rumour mill...

There was consternation in the gold community and anguished cries that, as usual, there was a vast conspiracy in play here. Those rumours of large shorts held by a couple of big players in the bullion market just wouldn't go away, but nobody could quite put their finger on what was going on — although a couple of slightly curious names were being whispered in the gold pits: AIG (remember them?) and NM Rothschild.

Brown's series of auctions over the following three years emptied most of the UK's gold from the Bank of England's vaults, depressed the price to levels previously unthought of and, according to those of a more conspiratorial mindset, achieved something else. Something hidden, something unknown.

But what?

The probable answer wouldn't begin to appear from amidst the fog until mid-2004, when, a couple of months apart, a couple of very quiet and matter-of-fact announcements were made, which we will get to shortly. In the meantime, if the UK Treasury was trying to achieve the lowest possible price for its gold, it was doing admirably — right up until September 26, 1999, when a backlash against Brown's actions crystallized in Washington DC through the signing of the Washington Agreement on Gold.

(Wikipedia): Under the agreement, the European Central Bank (ECB), the 11 national central banks of nations then participating in the new European currency, plus those of Sweden, Switzerland and the United Kingdom, agreed that gold should remain an important element of global monetary reserves and to limit their sales to no more than 400 tonnes (12.9 million oz) annually over the five years September 1999 to September 2004, being 2,000 tonnes (64.5 million oz) in all.

The agreement came in response to concerns in the gold market after the United Kingdom treasury announced that it was proposing to sell 58% of UK gold reserves through Bank of England auctions, coupled with the prospect of significant sales by the Swiss National Bank and the possibility of on-going sales by Austria and the Netherlands, plus proposals of sales by the IMF.

The UK announcement, in particular, had greatly unsettled the market because, unlike most other European sales by central banks in recent years, it was announced in advance. Sales by such countries as Belgium and the Netherlands had always been discreet and announced after the event. So the Washington/European Agreement was at least perceived as putting a cap on European sales.

So that's clear. What is interesting are the criticisms of the agreement, as posted on the same Wikipedia page:

•The agreement is not an international treaty, as defined and governed by international law.

•The agreement is a sui generis, gentlemen's agreement among Central Bankers, of doubtful legality given the objectives and public law nature of Central Banks.

•The agreement resembles a cartel that materially affects the supply of gold in the global market. In this regard, the agreement stretches the borders of antitrust legislation.

•The agreement was negotiated behind closed doors. Information was not provided to the public and relevant stakeholders were not afforded the opportunity to comment.

•The agreement does not contain formal mechanisms for re-negotiation. Trends in international law regarding public participation and access to information should inform the re-negotiation process, scheduled for 2004.

Sounds pretty much par for the course, if you ask me; but that's the world we've allowed to be created by the governments and central banks of the world while we watch American Idol.

Anyway, with Brown's sales well and truly underway and the market price suitably depressed, the announcement from Washington caused a small problem. Limiting sales of a commodity has the opposite effect to the pre-announced sales by the UK Treasury, and the inevitable ensued.

The gold price, freed temporarily from the shackles of the huge overhang Brown had created, soared, as you can see from the chart below:

Source: Bloomberg

...and that — assuming the rumours were correct and there were a couple of entities short a lot of gold and looking to cover into a falling price — created another big problem.

The post-Washington Agreement spike would have caused severe problems for anybody short gold, and if those problems caused any kind of systemic risk, then they were problematic for central banks and governments, too.

Of course, all this was nothing more than conjecture ... at the time.

BUT several years later a conversation surfaced that had involved Bank of England Governor Eddie George, shortly after the Washington agreement was signed in 1999. Whereupon many of the doubts surrounding the motives behind the strange doings in the gold markets disappeared like my buddy Whipper West 20 seconds before the bar tab is presented:

(Jesse's Café Américain): In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.

You want to find a smoking gun at the crime scene? Well this one has fingerprints on it and the words "Eddie George, Governor of the Bank of England" carved into the butt.

Case closed. Except...

With none of this ever having been officially acknowledged, the whole business has juuuuust enough uncertainty surrounding it to enable those who don't want to know to put their fingers in their ears and repeat "la-la-la-la-la."

As you can see from the chart above, the following 18 months saw the gold price "managed" steadily lower, despite several large spikes in price as the natural forces of supply and demand threatened to overrun the Bank of England — and US Federal Reserve-led intervention.

Eventually, enough force was brought to bear to get the gold price back to its pre-Washington Agreement level. This was in large part due to the sales by Brown of the UK's gold stash. When the smoke had cleared and the auctions were completed, Brown's Treasury conducted an autopsy review of the process that would end up costing the UK taxpayer roughly ₤17 bn in lost profits at gold's peak in 2011, and even in the immediate aftermath a cool ₤175 mn.

That review was bound to be scathing, right? Wrong:

(UK Daily Telegraph): Chancellor Gordon Brown and his Treasury officials have used an internal review to pat themselves on the back for selling more than half of Britain's gold reserves, despite the fact the process lost the taxpayer around £175m.

Huh? Say what?

The news that one of the world's major central banks was selling its reserves contributed to a collapse in the gold price which was a serious blow to the market.

However, the Treasury argues that the auction was a great success. Its review, which has been published on an obscure part of the Treasury website, claims: "The UK Government's sales programme has clearly demonstrated that auctions provide a transparent and fair method for selling gold and similar types of asset."

Oh come ON!! Really?!

I know government officials have a predilection for trying the Jedi Mind Trick on us, but this is utterly ridiculous.

Luckily, not everybody was fooled:

Peter Hambro, who runs the eponymous gold company, said: "The idea the auction was a success is completely ridiculous. The point is the Treasury called the bottom of the market with uncanny accuracy. They have forgotten that gold is meant for times of trouble."

Amazingly (though this is government we are talking about here, so the bar over which one has to hurdle to be classified as "amazing" is lower than Kim Kardashian's level of self-respect), despite the fact that the price fell to a 20-year low after the auction process was announced and then soared 30% after its conclusion, the Treasury claimed success based solely upon the fact that "on average, they achieved a price within 75 cents, or 0.3pc, of the market price."

I'm sorry, but when you conduct sales like that, you SET the market price. Idiots.

The article continues:

The review states: "It is not apparent from the data that the market was systematically depressing the price of gold in the run-up to the auctions. Nor is there any evidence that the price of gold systematically rose following the auctions."

Not apparent? To WHOM?? As for evidence that the price of gold systematically rose following the auctions, I would suggest looking at ...... the price!

IDIOTS.

The Bank of England sold 395 tonnes of gold, raising about $3.5 billion. The money has since been invested in euros, yen and dollars as a way of diversifying risk.

The review concludes: "Above all, the programme successfully delivered a one-off and permanent reduction in risk on the net reserves as a result of the better diversification achieved."

It's just too painful to listen to sometimes.

To continue reading this article from Things That Make You Go Hmmm… – a free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment Management in Singapore – please click here .

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Gold Price Exploding In Emerging Markets | Gold Silver Worlds

Posted: 27 Jan 2014 02:44 PM PST

Mainstream economists and mainstream media remain convinced that the economy and markets are in full recovery mode. Along the same lines, gold is unanimously expected to decline in the year(s) head.

One of the most recent appearances of that kind was the 2014 outlook of IMF economic counselor, Olivier Blanchard, who explained last week that global growth would average 3.7% in 2014.

Ironically, the recovery story, based on the central bank premise that they can create wealth by simply exploding their balance sheets, seems as solid as a "house of cards." Past week Thursday and Friday, several emerging markets suffered from an economic earthquake, especially in their currency markets, which resulted in losses in most developed world markets not seen since 6 months. The Yen and the Swiss Franc were considered a safe haven, just like gold and US Treasury bonds.

Bloomberg says this is the worst selloff in emerging-market currencies in five years, revealing the impact from the Federal Reserve's tapering of monetary stimulus. "Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability."

Argentina, Venezuela and Turkey have been hit hard. Argentine's Peso and Turkish Lira lost significant value against other major currencies in the past week. They recovered slightly today.

In Argentina, the central bank pared dollar sales aimed at propping up the peso to preserve international reserves that have fallen to a seven-year low. "The central bank said it would lift two-year-old currency controls and allow the purchase of dollars for savings starting next week. […] The government told today it isn't intervening in the peso's decline, allowing the market, which is mostly closed to buyers of dollars, to adjust prices. It wasn't a devaluation induced by the state. For the lovers of free markets, supply and demand was expressed in the capital markets yesterday."

The Turkish central bank tried an unscheduled intervention in the market to stop the lira from falling to record lows, something they haven't done since two years. "Investors are speculating the central bank's efforts to prop up the lira by burning through foreign-exchange reserves will prove futile without raising interest rates."

The loss in purchasing power for people holding Argentine's Peso is astonishing:

The Peso closed on Friday January 24th at USD 8.0.
Week on week, the Peso lost 17.6% of its value against the USD.
Three months ago, the Peso stood at USD 5.9, a decline of 35.5%.
Since September 2012, the Peso lost 69% against the USD.

The loss in value of the Turkish Lira is not as dramatic as the Peso, but it is still very bad:

The Lira closed on Friday January 24th at USD 2.24.
Week on week, the Lira lost 4.4% of its value against the USD.
Three months ago, the Lira stood at USD 1.97, a decline of 19.2%.
Since September 2012, the Lira lost 27% against the USD.

The interesting part for us, gold enthusiasts, is the price of gold in the slaughtered currencies (prices on the close of January 24^th):

Gold in Argentine's Peso is up 30% in the last 30 days; it is trading at all time highs.
Gold in Turkish Lira's is up 17% in the last 30 days; it is trading just 10% below its all time highs of September 2011.

This chart shows the price of gold in USD (yellow line) and in Peso (blue line). The black line is the currency exchange rate Peso against the USD. Chart courtesy: Sharelynx.

Interestingly, the explosion of the gold price in Peso and Lira has pushed the gold price higher in the Western currencies. That is an important evolution, as it indicates what gold really stands for: a monetary asset. One should note that gold has gone higher even without inflation fears. This could be one of those catalysts that could break the downtrend in gold in major currencies.

The underlying reason for the emerging market turmoil is said to be attributed to capital flight out of those markets. Directly linked to that is the tapering fear from the US Federal Reserve.

What is the importance of this for Western investors? There could be a counter intuitive answer to that question.

Basically, up until today, there was a narrative surrounding the Federal Reserve who got credit for the positive economic results after having stopped the implosion of the financial system in 2009. However, there is still no empirical evidence that the plan has worked, because the world is still on the monetary infusion. We should note that the present type of situation, characterized by tapering in a global fiat based monetary system with huge amounts of debt, is unique in human history.

As John Mauldin pointed out this week, if the narrative about central planning changes, indicating that the present monetary experiment was the wrong answer to the problem, there could be very nasty effects, especially out of the emerging markets. This is why (courtesy of Ben Hunt):

For 20+ years there has been a coherent growth story around Emerging Markets, where the label "Emerging Market" had real meaning within a common knowledge perspective. Today … not so much. Today the story is that it was easy money from the Fed that drove global growth, Emerging Market or otherwise. Today the story is that Emerging Markets are just the levered beneficiaries or victims of Fed monetary policy, no different than anyone else….

I'm not asking whether the growth rate in this Emerging Market country or that Emerging Market country will meet expectations, or whether the currency in this Emerging Market country will come under more or less pressure. I'm asking if the WHY of Emerging Market growth and currency valuation has changed. The WHY is the dominant Narrative of a market, the set of tectonic plates on which investment terra firma rests. When any WHY is questioned and challenged you get a tremor. But if the WHY changes you get an earthquake.

What are the investments that such an earthquake would challenge? You don't want to be short the yen if this earthquake hits. You don't want to be long growth or anything that's geared to global growth, like energy or commodities. You don't want to be overweight equities and underweight bonds. You don't want to be overweight Europe. You can run from Emerging Markets with US equities, but with S&P 500 earnings driven by non-US revenues, you cannot hide. If you think that your dividend-paying large-cap US equities are immune to what happens in China and Brazil and Turkey … well, good luck with that. My point is not to sell everything and run for the hills. My point is that your risk antennae should be quivering, too.

Nodoby knows how exactly a change in the narrative will play out, but given this week's evolution, it seems likely that a flight out of risk assets into gold as a safe haven is very likely. Once the narrative changes, the product of the most powerful central bank, i.e. the US dollar, could be hit by a serious trust crisis. That is the point where the Western world could rediscover the monetary value of gold. That is the point where the correlation between the commodity index and precious metals prices (as evidenced since 2011) will break. Gold is more than a commodity. It is the ultimate protection against the central banking illusion.

There really is a reason why we advocate holding physical gold outside the banking system.

Gold price gains halted as ETF investors sell into rallies | MINING.com

Posted: 27 Jan 2014 03:56 PM PST

The recent rally in the price of gold came to a halt Monday ahead of a two-day US Federal Reserve meeting starting on Tuesday and amid continued outflows from gold-backed ETFs.

In late trade on the Comex market in New York, February gold futures changed hands at $1,255.20 down $8.30 or 0.7% from Friday's close after earlier in the day climbing to a fresh two-month high above $1,270.

The sell off on financial markets on Friday which continued into Monday saw gold gaining for five straight weeks and trade 5% higher year to date.

Gold's 28% price drop in 2013 were marked by a rotation out of gold-backed ETFs into riskier assets like equities and despite gold's strong performance in 2014, investors continued to pull their money out of ETFs.

Over the past four weeks, holdings dropped by 28.1 tonnes to 1,739 tonnes across the more than 100 gold-backed ETFs listed around the globe. Holdings peaked in December 2012 at more than 2,600 tonnes.

Holdings of the world's largest gold ETF – SPDR Gold Shares (NYSEARCA:GLD) – dropped 6.6 tonnes last week – as the price of gold was rallying. At 790.4 tonnes GLD holdings are at the lowest level since January 2009 after a whopping 552 tonnes left the fund last year.

The Federal Open Market Committee meeting which wraps up on Wednesday is widely expected to deliver another $10 billion reduction to the $75 billion a month purchases under its quantitative easing program that has pumped $4 trillion of easy money into the US economy.

Monetary expansion in the US and around the globe, particularly since the financial crisis, has been a massive boon for the gold price. Gold was trading around $830 an ounce before Chairman Ben Bernanke announced Q1 in November 2008.

Should the Fed announce that it is throttling the program back at an increased rate which would boost the dollar, it could spell trouble for the price of gold.

Charles Plosser, president of the Philadelphia Federal Reserve, recently said asset purchases should be wound down sooner than the end of the year, while Dallas President Richard Fisher said he wanted the taper to be double the size it was, that is $20 billion.