lol I haven't seen that.

fyp

In other news I do not understand the proposed Operation Twist 2. I thought the Fed would sell long dated paper and buy short dated paper, but apparently it is the reverse. I don't understand what the point of that would be.

What's a margin hike and how does it lower the price of gold

The exchanges allow speculators to trade on margin; they put up a fraction of the cost of the commodities or securities they are buying and borrow the rest. So if the margin requirement is 10%, they can lever up by a factor of 10 in their purchases. When the exchange hikes the margin requirement, it forces the holder of the long position to come up with cash to cover the new requirement. If they can't, it forces them to liquidate some of their long position, which increases supply, reduces demand and puts downward pressure on prices. A few months back the CME hiked silver margins 5 times in a few days, shaking out all the weak, leveraged holders and crushing the price by nearly 40%.

Correct, but it also forces out the weak shorts just the same.

For people who are still buying, heres a full sovereign, .2354 AGW shipped for 410

http://www.ebay.com/itm/1907-EDWAED-...#ht_2895wt_844

After rebates its $378 + $10 shipping, so gold at $1648. Can get more off if you get credit card rewards. I'm waiting to buy but maybe someone wants to snag this.

edit nm someone already snagged it

lol this.

did he already give the speech? tried to searching online but didn't find anything except this: http://www.forbes.com/sites/stevesch...n-hole-speech/

so was wondering if you were saying it was confirmed already what the Fed was going to be doing

That would be 20%+ down from the high. Just a guess of course, but I doubt that you'll get a chance to see 1500.

Just pulled that number out of my ass. I'd be adding more right now if I had the money, because $1780 might be as low as this goes. On the other hand, a series of margin hikes could push gold down further.

I basically buy gold whenever I have the extra cash floating around and I don't worry much about timing my purchases. I'd love for gold to get killed short term so I my $x gets me more gold. All I'm saying.

http://www.thisismoney.co.uk/money/m...=feeds-newsxml

So what percentage is the margin at? How big are the hikes usually?

What are people's thoughts on the gold-bubble phobia?

We seem to have skipped a whole phase. Compare it to the housing bubble, where we say three clear steps. First, something happens that creates a big incentive to invest (in the case of housing bubble, fannie and freddie handing out free monies left and right.) Second, a big industry springs up around this. Sophisticated buyers get in early and make a lot of money, but soon everyone and their grandma starts investing (near the end of the housing bubble ~25% houses were being bought just to be flipped. Third, people begin to realize there's been a huge overinvestment, and the bubble bursts.

With regards to gold, we've skipped step 2. Pundits are (and have been for years) that gold's a bubble, but we never had that phase where everyone was buying. I've been telling people to buy gold for two years now and I haven't been successful once. Gold mining stocks haven't kept up with gold at all. The total percent of resources invested in gold, is way below historical averages.

Thoughts?

There is too much currency floating, gold goes higher...

The people who could never see the actual bubbles have been saying gold is in a bubble for as long as I can remember. We are nowhere near step 2, much less step 3. Any time there is a correction in gold the permabulls on the sellside shows will yell, "Ha! You see? That gold bubble is finally bursting!" They've done it multiple times already and will do it at $2000, $2500, $3000, etc.

When those guys are finally buying gold, when everyone you know is buying gold, when gold is on the cover of time, when the top stocks are mining stocks, when there are bullion ATM machines on every corner and your friends' wives are throwing "We Sell Gold" parties, then you can worry about the gold bubble.

Borodog what percent of your gold holdings are in miners compared to the actual metal? Also I'm curious how much of your total holding are in gold if you're willing to share

I think my post was a little misleading. I agree with everything you just said, but I'm wondering why it occurred that way,and what I can learn from it. Why the media was happy to blow hot air into real estate and, before that, the tech bubble, but it jumps down the throat of gold. Given that popular perception of gold is so different from housing, I think the way in which gold will eventually bubble might be significantly different from housing, and I'm trying to think about how this all play out. As you said, gold has a long way to go before I'm going to start trying to time my sell, and I enjoy thinking about that.

I think a lot of it is a result of people not generally understanding that gold is valuable as a medium of exchange.

Zero. I'm not a stock picker.

More than half.

The thing you have to remember is that the mainstream media is an entirely corporate ecology. The mainstream financial media was and still is to a large extent an exercise in corporate PR whose purpose is to buoy stock prices and sell advertising to companies that depend on bullish markets like Charles Schwab, e-trade, you name it. That is slowly changing as the players in this space slowly realize that to retain viewers they have to retain some credibility, and it is becoming increasingly difficult to sell sunshine and rainbows.

Ok, after speaking with Zygote on AIM he explained it to me. Now I essentially think it would be pointless, and don't think it will happen, or if it does happen, it will not have a significant effect, except possibly to give the Fed a less dangerous way than derivatives to control interest rates at the long end for a brief period of time.

PS. I wish I had a way to cut and paste my AIM chat log with Zygote here. Very enlightening.

Ok, but the media being a corporate schill-machine isn't, by itself, sufficient. If people understood money a little better, the media of the last 20 years wouldn't have been able to move markets as it did. Imagine if every person in the country read What Has Government Done to our Money, how differently thing would have played out.

I agree, the media will have to change to retain credibility. The more people educate themselves about money, economics, FRB, the Fed, etc, the greater that change will be. And if (when?) people really do become educated about these ideas, the pot will really start to boil. But (and this has sort of been my point all along), this is going to be a very different process than how housing bursted. It won't be a mass realization that colossal amounts of funds have been inefficiently diverted into a particular market. It's going to be a mass realization that the very foundation of the market is built on quicksand.

Zygote post explanation ITT if you please.

But they don't. This is not new. The people in charge of the monetary system have always been in the business of obfuscating the nature of money.