Gold: stirrings

Though gold has not yet mounted any sort of relief rally, there are some encouraging signs we are getting quite near a bottom.

First and foremost, gold futures speculators are net negative for the first time ever:

The disaggregated Commitment of Traders Report (COTR) show, for the week ending July 21, money-managed speculative gross long positions of Comex gold futures fell by 2,116 contracts to 106,297. At the same time, short-sellers added to their positions by 10,317 contracts to 119,853. The gold market is now net short 13,556 contracts, the biggest short position since the series began in 2006. 


Second, gold is being pronounced dead, not just at Bloomberg, Market Watch, Forbes, Business Insider, CNBC, The Economist, Kitco and the Wall Street Journal, but most investment houses like Goldman Sachs, Credit Suisse, Soc Gen, ABN Ambro, S and C,  UBS, Deutsch Bank and Morgan Stanley as well as many analysts with large followings like Harry Dent, Dennis Gartman, La Forge, and Martin Armstrong are all urging their clients to SELL gold here at $1100 dollars to avoid the inevitable fall to $600.

Perhaps they'll all be right.  But nobody of any note is calling for a bottom here - or near here.  When everyone is positive gold has much farther to drop - it's a good bet that everyone can't be right.

The big argument now for the continued fall is that there are still some troglodytes clinging to their gold in their caves.  But after World War II, there were some Japs in the trees clinging to their rifles and that didn't keep the war from ending.

Third, ebay has become a fire sale for semi-rare coins with "Low mintage dates."  Coins like the 1995  100 yuan Panda that couldn't be had at any price because of hoarding a few short years ago are being peddled on masse (3-4 ready examples on any given day).

And last, but not least, the global debt situation is deteriorating at an ever accelerating rate.  The narrative is that debt is now suddenly under control.but global debt has grown by 57 Trillion since the last crash in 2008 - and global debt to GDP has grown by 17 percent.  How long before the next crash?

Gold the Euro and the Dollar

As the euro crumbles, and the yen deteriorates, the Dollar becomes stronger and stronger.  This pressures gold.

The strong dollar will be touted as proof that the US economy is the world's strongest.  This is true.

It will also be touted as proof that the US economy is in recovery and on the way towards a sustained positive economic growth.

This is not true.

Money is fleeing into the dollar.  It is not seeking out economic opportunity.  It is seeking safety.  If you had your money in Greece or Spain or Italy or Portugal, or France, or anywhere in Africa or the Middle East, would you want to keep it there, or move it into Dollars - if you could?

As capital flees into the Dollar, at first - right now - everyone (in the economic press and the corporate flaks) will rejoice.claiming a victory for loose money, for bailouts, for massive central bank interventions.

And gold will languish.

But what happens in a functionally zero growth economy with functionally zero rates when the the currency strengthens irrepressibly, ineluctably, continually?  What happens when the Euro breaks down to 80 cents, then to 60 cents, while the Yen jumps to 180, then 200, and all that money flows into the Dollar.

What happens when billionaires all over the world, take their cash to the US and buy up everything in sight?

Some will argue this is great for the US economy.  The people arguing this will be very very rich.  Because it will be great for them.  For everyone else it will be an abject disaster.

It will not cause any growth.  It will destroy growth.  We will be able to export nothing.  It will create tremendous asset bubbles that will benefit the very very wealthy.  Everyone else will be priced out of everything even as their salaries plunge.

In other words look at the imbalances in our economy now.  Then multiply that by a billion.  You get the picture of what is coming.

It will lead to tremendous loss of faith in government.and central banking.

And gold is the measure of faith in government and central banking.

Greece and Gold

So predictable.  Gold is dead because even the Greek crisis hasn't moved the price.

But the Greek crisis is the beginning of what will move the price.

It hasn't moved yet because the only thing that counts is THE NARRATIVE.  And the current narrative states that the Greek Crisis is well contained.  Just like the Sub Prime crisis was well contained.

But the Greek Crisis has only just begun. Greece is not all that different from Spain and France and Portugal and Italy and Belgium.  All of these countries are over-indebted and all are running ever increasingly large deficits that are made artificially even more burdensome by the strength of the Euro.

Now Podemos in Spain wants restructuring.  As does the National Front in France.  As does PS in Portugal.

All will need debt restructuring at some point. 

(As will Puerto Rico, California, New Jersey, Ireland, Japan, the UK, Brazil, Russia, etc etc etc)

Here's the problem. Debt restructuring is never on the table until there is default and chaos.

Why?

Because the Banks rule the world and they don't want to lose one penny they think should be coming to them.  They'd rather lose it all.

This is what happened in Greece.  The German banks would not even consider restructuring.  They just kept bailing out Greece, so that they could keep making interest payments while they went into unending depression.

Now they have chaos.

But don't worry.  It's contained.

That's the mantra.  That's the Narrative.

It's contained.

And until the Banks lose control of that narrative, gold is going nowhere.

But how long can they keep control of such utter nonsense?

We'll see. But  I'll bet not all that much longer.

GOLD: What will it take to turn it around?

With the intensification of the Greek Crisis, gold continues to fall.  This has led many to ridicule gold as a lost cause, a barbarous relic.  If the Greek Crisis can 't move gold, they claim, nothing will.  It no longer has use as a safe haven in the modern world.

Gold has not risen during the Greek Crisis, because it is a Greek Crisis.  Gold didn't rise during the Crisis in Chad, or the crisis in Chechen, or the crisis in Iceland, or the crisis in Uganda.  It won't rise if there is a crisis in your household either.

To understand Gold, you must understand one thing and one thing only.  Gold is an alternate currency.  it will rise when the stability of the major reserve currencies APPEARS TO BE threatened.

ALL markets reflect one thing and one thing only: THE CURRENT CONCENSUS REGARDING THAT MARKET.

Markets do not discount the future.  If they did, they would never crash or spike.  They would move in gentle slopes.  That's just math.

Markets reflect current consensus.

Current consensus is the Dollar is stable.  Current consensus is that the Euro is stable.  Current consensus is that even the Yen is stable.

When this consensus is shaken gold will move.  Not one second before.

When the Greek crisis is mirrored in Spain as Podemos takes power, and in France as Le Pen takes power, the consensus about the Euro will change.  Then you'll see gold begin to rise.

When the crisis spreads to the yen, as China's recession intensifies, gold will move higher.

When the crisis spreads to the dollar, as the US engine is the only engine left to power the world, and it's anemic (statistically manufactured) 2 percent growth just isn't strong enough to hold up under that burden, then gold's rise will intensify, and it will spike.

But not until then.