Wednesday, March 14, 2012


                                    I Would Say Definitely Not

“We got a margin call? You mean the ECB wants more collateral against our worthless soverign debt crap government securities?”

“Duhhhhhhhh - I guess we’ll just sell our gold!”

As  has so importantly pointed out, “the ECB has increased its margin calls on European banks by EUR162 million this week…”

So, just where do you think these illiquid, bankrupt banks are going to find the scratch to cover this? [Hint: sell gold.]

In addition to this zombie mentality, while everyone is focused on the sell off, USDJPY is quietly rallying quite strongly, thus hammering the Yen against the U.S. Dollar and causing all kinds of problems in the cross trade in the Pacific Rim; especially China.

Did somebody just say China??

Yea, I did and its implication is maybe the growth won’t be there like everyone thinks going forward. Can you say weakness in precious metals? How about AUDUSD?

Right now, we are less than $75 / oz. from being lower on the year. Gold has been higher 11 years in a row. I raised this issue in a previous post about the possible effects of the ETF GLD; what happens when millions of people hit the sell button and redeem their GLD shares thus forcing the fund to sell spot gold in a hurry (2 day settlement)?

If you think having a bunch of banks sell gold to the tune of a few hundred million Euros can “rock the bullish boat” in gold, what do you think happens if hundreds of metric tones hit the market in a matter of days? [Hint: it won’t be pretty.]

Don’t get me wrong, I’m not predicting here; what I am doing is trying to point out that every market has 2 sides and to not get pig-headed and think gold can only and forever go higher each and every day.

The irrefutable financial fact is that Chalky Soetero continues to run the U.S. economy in to the ground while running record monthly, quarterly, and yearly budget deficits. Weimar Ben is printing money like there is no tomorrow; hell bent on keeping the stock market from declining so as to make you feel “prosperous”.

 This is centrally planned trading.

We all know governments all over the world hate gold. It prevents them from debasing currency and thus buying votes and promoting crony capitalism.

So, welcome zombie banks to the selling spree in gold. What history will eventually show is that you sold the wrong asset. Some people just won’t listen.

Have a good day everyone.


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