Gold Bear Market Baffles Believers Who Think Favorite Commodity Should Always Go Up and Up

Both gold and the entirely fake bitcoins have seen big drops this week.  The gold bear market worsens:  BREAKING NEWS: Gold Prices Hammered Below Key $1500 Psychological Level– What’s Happening? as gold falls $86 in just one day.  When gold goes up in terms of currencies, gold hoarders rejoice.  When, like all markets, it suddenly falls, these same people go insane with fury because in their minds, gold should go in only one direction: up.  This is true of speculators of all kinds.  Stock buyers suffer the same irrational delusion.

 

The present fall in gold prices baffles the ‘experts’ who advise gold buyers here in the US: Gold News, Gold Market, Mining Companies, Silver News | Kitco News:

 

Otherwise, the decline does not appear to be fueled by any major breaking news, observers said. In fact, the slide is coming on a day when U.S. economic data has been soft and equities are on the defensive.

 

“It’s a liquidation event,” said Frank Lesh, broker and futures analyst with FuturePath Trading. “The market is forcing people out.”

 

Several traders reported that sell stops have been triggered. These are pre-placed orders activated when certain chart points are hit, often to kick traders out of positions to limit losses or book a profit,

 

I love economic analysis like Mr. Lesh, saying, ‘I am wet and standing in the rain so it is stormy’.  Of course, when there are more sellers than buyers, bids drop!  Duh!  And people who are scared of losing previous rises in value, have automatic sell orders if the price drops.  Duh, again.  This is true in all markets since the dawn of trading.  When there is a long bull market, everyone is ready to run for the hills when the price begins to drop.

 

This accelerates the drops so they become collapses as everyone rushes to the market to dump whatever they have been holding.  This is why obvious bubbles are dangerous: they rise fast and thus, as everyone rushes for the exits, fall even faster.  Nothing created by humans can avoid this certainty.  All markets operate the same way, all the time.  This is why charts and graphs are so useful, it is easier to spot a saturated market this way.

 

In the case of any market, looking at the situation of the regular buyers pays off.  I was frankly astonished several years ago when I learned the #1 buyer of gold was..INDIA!  So, any astute or careful gold buyer would watch India like a hawk.  When the value of the rupee goes down due to inflation, this does not cause a gold rush, it causes the opposite due to less money available to buy gold.  This simple formula is ignored by US gold market ‘experts’ for some odd reason which amuses me.

 

Many a gold lover hated me when I pointed out this fact.  They just did not want to believe that gold operates this way, resentment that India determines gold markets pissed off people.  Oh well.  Tough titties.

 

Now here is today’s gold headline from Bloomberg:  The Scary Risks of Safety Bubble Up – Bloomberg

 

Things people perceive to be safe may not be as safe as they think. Any investment, if you push its price up too much, will have a lousy return…Gold prices have been weak for the past few months, but it is also part of the safety bubble. The math to prove this is fairly simple. The least efficient gold producers can currently produce an ounce of gold for about $800. The fact that gold now trades for about twice that cost shows there’s a lot of precautionary demand in the market. The fundamental value is $800, but people are buying it because they’re scared.

 

Yes, people are scared.  But the ‘scared people’ in the US market is a drop in the bucket compared to ‘scared people’ in India!  And since the rupee buys much less this year due to government money printing, far from being able to buy more gold, they can buy less and indeed, they want the price of gold to go down, not up!  This rupee-gold conversion isn’t to protect against inflation but for marriage dowries.  Hard to believe, no?  Ditto in the Muslim Gulf states and others.

 

Now, someone had to unload a lot of gold and this may have a role in the sudden plunge in value in just one day, a $80+ drop is big:  Bullion bloodbath: 125-ton sell-order sets gold price for plunge! overnight!  Gold, Silver, Gold Price, Silver Price, Gold Rate, Gold News | Kitco

 

“It appears that the significant selling pressure last Friday was amplified by a four million ounces (124.4 tons of gold) selling order, to be executed on Comex opening. This was clearly too much for a relatively empty market to handle, and the initial pressure resulted into waves of selling, which in turn attracted further selling all the way down,” Gerhard Schubert, Head of Precious Metals at Dubai-based Emirates NBD, wrote in his weekly report.

 

So, which country in the Middle East dumped their gold so they can convert it to ‘money’.  Note, please, that money is desired, not more gold.  Since gold has zero basis in the value of any currency these days, this hoard of gold was sitting there as an investment and now cash is needed so it is, like so many things, AUCTIONED OFF.  The buyers get to bid and the fewer bidders there are, the lower the price.  Seeing the base price fall, all other holders suddenly want to dump, too.

 

This is because in all commodity markets, there can be a very far bottom to fall.  You never know but historically, the longer the bull market, the higher the bull market, the deeper the fall and the longer the recovery.   Nixon cut the gold standard in 1972 and by 1980, it rose to $615 an ounce.  By 2001, it fell to $271.  This is a tremendous loss for anyone who bought at the top of the bubble.  It has shot up again but the peak was last year.  If history is any guide and it usually is, the fall will be at least 10 years.

 

From November 2012:  Gold “Being Liquidated for Cash” as Stock Markets Fall Ahead of Fiscal Cliff Negotiations

 

“Gold is being seen increasingly as a source of cash,” says Simon Weeks, head of precious metals at bullion bank Scotia Mocatta.

“Liquidation of gold can cover losses elsewhere.”

 

HAHAHA, pretending gold is cash!  Liquidation of anything has the exact same result.  That is, when markets fall, people who held gold bought at lower prices earlier turn around and sell these again due to fears the bear market will continue.  So they pick up their profits and flee.  Typical of any market of any sort, any era.  Unlike say, housing, gold does pretty much nothing for the holders who bought as an investment.  You can’t eat it.  You can’t sleep on it unless you like something very hard and cold.  As Midas found out, you can’t do much of anything with it except convert it into something else by trading it.

 

Gold is simply an ancient icon for international trade.  And it shows ‘wealth’ by making it into crowns or other icons of rule so these can’t be counterfeited by usurpers.  And it is pretty because it shines.  It can also be used in other ways but when gold shoots up in price, these other uses vanish due to being uneconomical.  Anyways, the gold bear market had ZERO to do with the fiscal cliff negotiations.

 

Indeed, it should have SHOT UP, not down!  The explanation set up by the writer of the article above is bogus.  There is zero cause and effect  here.  What the writer is doing is magic: ascribing an event to something totally unrelated to ‘explain’ things to followers who are gullible.

 

Now back to that huge tech geeky scam, the Bitcoin con game:  How to Get Rich on Bitcoin, By a System Administrator Who’s Secretly Growing Them On His School’s Computers | Motherboard

 

What type of software do you use to make Bitcoins?

 

To get or receive a payment you have to have the Bitcoin application running, or you could subscribe to a service that could have the application running for you. Basically Bitcoin relies on cryptography, so it’s a mathematical problem that can only go one way. I send money to you, both of our addresses are attached to the Bitcoin and randomized to keep things anonymous, and I can’t spend that Bitcoin again, because when I send the transaction, it goes out to all nodes on the network and they’ll all know that I’ve already spent that Bitcoin.

 

Then the transaction records between customer and merchant get added to a long transaction register which then goes on to become a “block.” And that’s where the mining comes in, which is how you make the actual Bitcoins. Mining is essentially a brute force hack. When you’re making Bitcoins, you’re “solving” the block. The block is a long transaction register of Bitcoins. They are all put through this mathematical equation that can only be solved one way. The only way to solve it is basically to hack it

 

Now who makes the block equations?

 

The users do. Every time a transaction is done it adds to the end of the block.

 

So trading Bitcoins creates more Bitcoins?

 

Not quite. Solving blocks creates more Bitcoins. Trading Bitcoins creates more blocks.

 

What does a user have to do to actually install the software and what happens after it’s installed?

 

I actually realized that I left out a very key point. You can download the official Bitcoin software and just click a little check box that says “generate coins.” From there your computer will try and solve a block. And if it solves the whole block, you get 50 Bitcoins. But, depending on the speed of your computer, it might take you a year or longer to solve a block. There is a service called “pooled mining,” which splits up a bunch of these problems into little tiny problems and then everyone in the mining pool splits the reward based on how much they helped.

Basically, the libertarian geeks are lying about bitcoins being free of someone spying.  It is totally being run via tracking who is who.  The coding protecting names is…breakable.  And will be broken by the government if this fraud gets too dangerous for the public.  Just like Madoff tried to hide things on his computer, this can be pried open.

 

The ‘official software’ is handed out and people with powerful computers (Goldman Sachs is laughing here) can ‘mine’ these fake coins by solving math riddles.  The ‘splitting the pool’ is funny talk for ‘Ponzi pyramid scheme’.  This waste of time uses up lots of computers especially say, at universities and other places where they are supposed to work for other things.  Then, the operator’s share the loot made from selling these stupid things to other dumb people.

 

So at the top of the pyramid is all the multimillionaire computer geeks like the Winklevoss twins, and financial foolery.  They spent virtually no capital to create this ‘game’ which was then handed downwards to others with them, at the top, getting a cut.  As this spread out, the money pouring in grew as people were told about great riches to be won by playing this game.  So they were then telling each other with great encouragement by the guys at the top of the Ponzi game, that this is BETTER THAN MONEY.  And it grew, too, all you had to do was ‘mine’ it by using computers and then finding fools to buy into the dream world.

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