Thursday, August 25, 2011
Gold drops $100 - What up?
Yeah, gold dropped 100 bucks yesterday. And 50 more overnight, though it rebounded for 30 this morning. WHAT'S GOING ON?
You'll hear lots of commentators talking about speculative markets, bubbles, bullion banks covering naked calls and going short when the open interest drops blah blah blah.
These are games played in the Futures Markets by your buddies over at Goldman Sachs, J P Morgan etc. They get billions in "loans" from the Fed and wait til a buying surge plays out, then WHAMMO, they drop a few billion on the futures markets and take out a bunch of little guy Hedge Funds, and littler guy Rambo Day Traders, and run them right out of the market.
Oh, and by the way, as soon as they've run everybody's stops, set off a selling panic, they'll be there on the other end buying up all those deflated contracts.
Unless you're foolish enough to trade anything in a rigged casino this shouldn't concern you at all.
One Little Brained dude (or bold faced liar) on Bloomberg yesterday had this to say: "Gold should bump around the 1300 dollar level over the next 5 years as the US continues to prosper and we pay down our debt." Continues to prosper? Pay down our debt? On what planet?
However, if this seems like a reasonable proposition to you rather than a bizarre delusion, by all means sell all your gold now.
If you can see however that Europe and the US are still drowning in debt while mismanaged by dysfunctional governments then SMILE. This drop in gold is a gift. And keep buying. Gold is on sale thanks to your friends at Goldman Sachs.
In a related note it seems Goldman Sachs lent the Libyan rebels 2 million dollars to put a bounty on Qadaffi's head. Then they shorted the loan while secretly hiding Qaddafi in Loyd Blankfein's basement. Hey, money's money.