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Gold Market

I know more than a few people here also follow precious metals along with cryptocurrencies so I found this pretty crazy. Gold managed to drop down to $1080 USD shortly after the Hong Kong market opened. I usually follow this sector fairly closely just because I was indirectly employed by a number of miners a few years ago and the velocity and ferocity of that move was something I don't think I've ever seen. I think this does matter to Canadians since our dollar is largely a commodity currency, as we've seen with the drop in crude.

I just find this interesting just because this isn't exactly BTC-e with a flash crash. This is one of the most actively traded and analyzed markets in the world. I don't think it's your usual 'manipulation' futures position because of how fast it moved so it could easily be a bunch of momentum traders. This caught me because I actually had a few limit orders at $1130 then wondered why my position was down significantly.

http://www.kitco.com/charts/livegold.html

Comments

  • CPLCPL Member Plus
    edited July 2015
    Someone is dumping paper gold, with no regulatory body that over sees any commodities market and the ETF's are in a position of jeopardy since leveraged decay built into all of the paper PM's is right now costing the holders of that instrumentation an arm and a leg.

    As to why. Because a leveraged ETFs’ goal is to delivery twice or three times the daily return on a specific underlying index. In order to do so, they have to re-balance their portfolios on a daily basis and keep the proper amount of leverage in order to make sure they deliver exactly twice or three times the daily return on the index. As a consequence, leveraged ETFs are exposed to price erosion: an investor would have to borrow more funds to buy more ETFs as the price of the index goes up. Conversely, the investor would need to buy less ETFs as the price goes down.

    Think carefully on how that effects the physical market of silver and gold when all the paper is dumped and no physical assets can be found to cover. The worst place in the world to be long term is holding gold or silver because the price action is going to be forced down. With negative interest rates running all over the big picture is this is how TPTB is going to shake all the PM holders upside down of their assets. The unfortunate thing is without any real hard assets priced in a fiat structure it doesn't take very long to collapse a market.

    Hence BitCoin. It's there, functional, trackable, transparent, international and practically everyone has access to a smart phone/tablet/computer/online banking to use as a wallet. When it happens it's going to get hairy and it's one of the only tools lying around that can quickly be implemented so trade doesn't lock up like is happening in Greece right now. (the real estate market has collapsed because it's all cash and carry now, credit are locked and savings are being stolen by the banks in bail-ins.)
  • BruceWayneBruceWayne Member Plus
    It was an actual physical dump that occurred, at least in part. Japanese markets were closed which drove down liquidity normally found during the open in Asian trade along a pile of stop-loss and some HFTs freaking out. I've heard anything from 1-50 tons were sold in Shanghai and New York at the same time. Might have been a calculated move since jamming 50 odd tons of gold in the middle of the night North America time along with a close Japanese market can easily move spot a long way
  • CPLCPL Member Plus
    edited July 2015
    Work how the process really works with PM's. The physical sell of 50 tonnes, which isn't a hell of a lot of gold, also uninsured all the paper assets that the hedge fun managers hold. Do a quick bit of math.

    Gold per ounce market @ $1100 x 35274 (ounces in a tonne) x 50 = $1,940,070,000

    2 billion dollars, not a hell of a lot of money considering that governments print that and more each day to buy the market and use the word trillion a lot when discussing market solutions. To put it in perspective the GPS satellites that are floating around helping coordinate practically every facility in the supply chain on earth costs around 10 billion a year in operations, maintenance and replacement. Again 2 billion a lot of money.

    Why the movement was felt and reacted (and it's still not over) is because each one of those real ounces is leveraged around 200 times. Silver is worse, it's leveraged 1000 times. When the market action happens like today, that's the HFT/Algo identifying the trend in advance jumping off the paper boat as fast as possible and soon everyone else that didn't jump is going to understand why once delivery doesn't happen.

    The chain reaction that will happen next is the remaining miners are going to get clobbered hard. This then effects industrial equipment sales. Then oil. Oil is part of every portfolio and service because oil runs the world not money, everything else gets adjusted to reflect the change. It's why Shell raised the 'oh shit' flag yesterday to indicate that they see the hole on their ledger.
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