Tuesday, April 22, 2014

Gold And Gold Miners Plunge On China Worries

I want to first make a note of a new revelation that is worth watching.  Americans are recognizing that not only does the emperor have no clothes, he is not to be feared.  The CIA is a criminal, anti-democratic state institution whose only mission is perpetuation of state violence.  It is an affront to anyone who seeks dignity for all of humanity.  It is an affront to anyone who seeks to end the oppression of state violence against humanity.   A military judge has ordered the CIA to expose its global criminal torture network to Guantanamo Bay defense attorneys.   If this trial took place in a democratic court of law in this nation, this would have the potential to turn into some type of major crisis.  Which is why the criminal class in this nation has done everything it can to keep their shenanigans out of our court system.  Even though our legal system is rotten, overt manipulation is nearly impossible when the world’s eyes are focused on its workings.

I wrote this gold update last week but decided not to post it on top of my last post.  So, this is a few days old but that really isn’t relevant.   The fact is gold continues to be very weak.  And so are the gold mining stocks.   Most of which are either hitting or close to hitting new decade lows.   No surprise on here.   Remember, as noted on here many times, gold is a proxy for the actions of central bankers.  It is a proxy for liquidity.  That liquidity is once again draining out of the global economy at an alarming rate.  

There is a lot of simple-minded ‘no-analysis analysis’ of the gold market.   It goes something like this.   The government and/or central banks are suppressing gold prices because otherwise the price must go up.   The price must go up because fiat currencies are worthless or because gold is a deflation hedge.  People can even put up pages and pages of pretty graphs and pictures in support of conspiracies and beliefs that gold must go higher.  And those institutionalized to a limited way of thinking - gold’s religious ideologues who follow gold’s high priests over the cliff like lemmings -  lap it up.   Of course, all of these people own gold.  So, even if they aren’t aware of it, (and most aren’t) they are simply confirming or supporting their belief system’s own bias.   Or, maybe more aptly put, they are simply chasing their own tail with endless rationalizations.    That gold “must” go higher is a simple-minded analysis that doesn’t take into account any criticality of how markets work or why prices rise and fall or more importantly, how this global economic system actually works and, thus, how it affects gold.  Yes, I have little doubt the gold market probably is corrupt.  But then no one is more corrupt than most major holders of gold.

I have a pretty good gold trading system.  I don’t use it but it has allowed me to hit the nail on the head on most major moves in gold.  Those moves were written of on here many times in advance of those moves.  Gold, like every other part of our dystopian existence may be manipulated, but it was manipulated on the way up just as it may be manipulated on the way down.  The level of leveraged, artificial demand for gold has skyrocketed with financialization and its associated leverage. 

Back in 1999 when gold was $250 an ounce, who were the largest sellers?  Central banks.   There is a simple argument to be made the the dumbest people on earth are central bankers.  Just kidding.  Sort of.  But we know this.  The central planners in central banks are almost always going to be systemically-incompetent as any centrally-controlled bureaucracy is.   And, remember, it is the world’s central bankers who have given a certain class of people the money to trade in the gold market.  And the money to hoard it.  That includes manipulating it as well.  Whether that is overt and willful manipulation or simply the fact that central banking money is rigged to flow into a global, predatory, capitalist investor class that then buys gold without any overt intent of manipulation, the end result is the same.   That is, a gold buyer’s best friend is the central bank that allows distortions or manipulations of the gold market to take place.  The central bank that continuously has bailed out the endless moral hazards of gold buyers.

World Gold Council sees increased gold demand in China as its citizens become wealthier.

China loses its taste for gold as demand remains flat.

China companies hoard gold as collateral for their massive speculation.  (That will ultimately lead to gold’s collapse.) 

China GDP showing deeper slowdown.

TSX gold miners plunge on China demand worries.

Gold drops on China demand worries.

People nonsensically have cited Russia’s and China’s central banks as major buyers of gold in support of their bullish positions.   Both Russia’s and China’s economy are right now in the early stages of being beaten back into the stone age because of their own faulty economic policies and massive corruption. Now, the global economy, including particular nations, may see various factors that lead to a bounce or temporary relief from downward pressure, but without massive reforms, the downward trend in these economies and the global economy will continue.  

Someone is going to be very, very wrong about the future price of gold.   As I have said repeatedly over the years,  China (and Russia) will likely become become net sellers of gold at some point.  Both countries have experienced monetary inflation beyond anything ever witnessed in a major world economy.   As just one example, when real estate is rising 25% a month for years on end, that gives us some kind of indication of how much useless, corrupt, centrally-planned money was being pumped into China and Russia for more than a decade.   Much of that useless, corrupt money was used to buy gold in addition to real estates, plants & equipment, etc.  But, when the useless, corrupt money bubble pops, and it certainly will, that money will effectively be exposed as useless to some degree.  Maybe completely useless.   And because of that, so will the worldly possessions bought with it.  ie, Gold.   The trend of China becoming a net seller of gold may be close.   Not good news for the future of gold prices. 

As written ad nauseam on here, if you believe central bankers, the capitalist investor class, Wall Street, politicians and other status quo moochers and parasites are going to save the world they created, then you should load up the truck with gold.   Because it is the status quo who owns most of it and, thus, controls its price either directly or indirectly.  Otherwise, the reality is most likely that there is no place to run and no place to hide for what is yet to come.  

posted by TimingLogic at 9:19 AM

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