PRECIOUS METALS: Gold, Silver Plunge As Investors Leave

SOS

ONA
Wackbag Staff
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I was wondering when this would happen given the survivalist/anarchists pushing metals.

I wonder if it is a start of a trend or a blip.

* SEPTEMBER 23, 2011, 5:59 P.M. ET

PRECIOUS METALS: Gold, Silver Plunge As Investors Leave

--Comex Dec gold fell $101.90, or 5.9%, to settle at $1,639.80 a troy ounce

--Comex Dec silver down $6.477, or 17.7%, to $30.101 a troy ounce

--Rush to cash leaves precious metals by the wayside

--Silver hit hard due to its double role as precious, industrial metal

--Physical gold ETFs buck the trend, holdings keep steady

--Traders say sharp declines likely triggered margin calls, accelerated selling

(Adds CME Group raises margins in second paragraph.)

By Tatyana Shumsky

Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Precious metals posted deep losses as investors continued to leave the market in favor of cash.

After the market closed, Comex operator CME Group Inc. raised the collateral requirements for trading in gold, copper and silver futures. CME has said in the past that it changes margins based on market volatility, not prices.

Silver was the hardest hit by the market turmoil, dropping 18% because of its additional role as an industrial metal.

Comex silver for September delivery dropped $6.487 to finish at $30.051 a troy ounce. It was silver's worst dollar-decline since 1980, the year the Hunt brothers of Texas were forced to liquidate their silver positions after attempting to corner the silver market. At the time, silver tumbled from a record $41.50 to around $12 in just three months.

"Silver had a double impetus on the upside, when the economy was still looking good and you had investment demand and industrial demand," but the metal faced double the pressure when prices reversed course, said George Gero, a vice president with RBC Capital Markets Global Futures.

Silver is used in everything from glass and solar panels to high-end electronics and CDs.

Silver finished Thursday down 9.6% and added to those losses Friday, with declines accelerating late in the day, as some investors faced margin calls from their brokers. Investors typically put down a fraction of the futures contract's value as collateral to trade silver futures. Known as margin, this amount must be topped up when prices move against the trader.

"You will have margin liquidations on these kinds of moves," said Frank McGhee, a precious-metal dealer with Integrated Brokerage Services.

As prices fell, many traders took short positions, meaning they sold silver with the plan to profit by buying it back at a lower price.

"The hedge funds, the big macro funds ... there were quite a few traders who were not just liquidating long positions but selling short," said Mike Frawley, head of metals trading at Newedge.

Silver's slide underscores the fact that silver is a more volatile asset than gold, mainly because the market is much smaller.

"It's thinner, there are less worldwide interests in silver than there are in gold," Gero said.

The gold contract for September delivery lost $101.70, or 5.9%, to settle at $1637.50 a troy ounce, its largest one-day percentage decline in more than five years. For the week, gold settled $174.60, or 9.6%, lower.

Europe's struggle to tame its government debt crisis, coupled with a slowing U.S. economy and concerns about China, have many investors fleeing to the safety of cash and skirting all other assets. Investors have been streaming out of the futures market as gold prices tumbled lower throughout this week.

"Markets will be slow to come back because all the nontraditional traders have been exaggerating the price to a degree, and they're not likely to rush back to the market," said Bill O'Neill, a principal with Logic Advisors.

Gold open interest, a measure of open futures contracts, fell by 8,161 to 489,588 contracts at the end of Thursday. This is equivalent to a decline of 816,100 troy ounces of gold.

Gold open interest is down 3% this month and well off the record 650,764 contracts set November last year. At the time, investors rushed in to the gold market amid fears that the Federal Reserve's loose monetary policy would trigger higher inflation.

The sharp price moves in recent weeks had some traders expecting a correction.

"We were seeing all the red flags ... this was a disaster waiting to happen," said Davide Accomazzo of Cervino Capital in Los Angeles.

Accomazzo, chief investment officer of the $10 million fund focused on commodities, said he loaded up on put options over the past two weeks to protect his long-term bet on rising gold prices from a short-term decline.

Put options are bets that prices of an underlying contract will fall.

By doing so, he says his gold investment is likely up about 1% over the current options contract cycle, instead of sustaining big losses.

"There was so much speculation and so much leveraged money going into the space," Accomazzo said. "Our strategy has a long bias, but we protected our down side."

However, one side of the gold market appears to be holding still. Physical gold-backed exchange-traded funds like SPDR Gold Trust, the world's largest gold ETF, are showing little outflows. SPDR Gold Trust has seen its holdings rise to 1,252.2 metric tons from 1,251.90 metric tons at the end of last week, showing that some investors were purchasing gold even as prices declined.

Platinum for October delivery lost $97.40, or 5.7%, to settle at $1,613.20 a troy ounce, while palladium for December delivery fell $21.55, or 3.3%, to $642.50 an ounce.

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

--Jerry A. DiColo and Matt Day contributed to this article.
 

Creasy Bear

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The gold bubble was bound to burst. Way too much hype for it to be healthy. Shit... like half the scamvertisers on Sirius/XM are "gold investment" scaremongers. Alex Jones' show has basically become an infomercial for the gold racket... that and "survival seeds".

Oh well... another bubble pops.
 

d0uche_n0zzle

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Sep 15, 2004
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#4
Silver is still a buy, IMO. Although, it could go a bit lower to the mid twenties.
 
Mar 2, 2005
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#5
back when gold was $300 a troy ounce was when we were all riding high. i sold every price of gold i had when it was $1744 an ounce at a place that paid 90% of spot price. i walked out with just over 6k
 

phillyfranko

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#6
our money is not worth the paper it is printed on...keep printing money feds...Gold will hit at least $2500 an ounch...maybe $3000 or more before its all over...Hope I am wrong...but it is not looking good...
 
Dec 8, 2004
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#7
So I guess I sold my chicks broken necklaces at the right time...
 

The Godfather

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Gold isn't a bubble, you dummies.

This is an excellent buying oppurtunity. I've shifted most (all, actually) of my domestic mutal funds into phsyical gold and silver the past 2 days. (I'm not yet willing to give up on my small cap asian funds)

I can ASSURE you, at current prices... central banks around the world are buying up gold as we speak.

The dollar has a limited life span at this point. Deflation will not be allowed to occur. Deflation will be countered with inflation, that has been the gameplan for years now.

The Federal Reserve bank is going to ride in to the rescue on their white horse when the DJIA index drops below 10,000.

QE3 will happen, because there isn't the political will to bail out the TARP banks from 2008 again. There also isn't the political will to allow BoA, GS, JPM, C, WFC, AIG... ect etc to fail after the massive political and capital (phony capital) investments made by Congress and the Fed just 3 years ago.

A sovereign debt crisis is unavoidable at this point.
 

JoeyDVDZ

That's MR. MOJO, Motherfucker!
Aug 20, 2004
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#10
They have actually had booths set up in my employee cafeteria with some company buying gold from schmucks that work there. Weird shit.
 

Motor Head

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Jan 23, 2006
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#11
I sold all 22 ounces, for $150 under market value per coin. The dealer confided in me that the coins were already sold. Apparently the rubes are still scarfing up coins.

Now where the fuck should I park the money?
 

Madness

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Dec 9, 2004
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#13
Dave Ramsey has talked about gold a few times and pointed out that it historically doesn't have a good annual growth as an investment.

If the world collapses... what the fuck good is it then. Gold is only worth something if someone is willing to give you something for it. Otherwise it's just a paperweight. A gun, ammo and a willingness to use those for survival is worth more than gold.
 

Motor Head

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Jan 23, 2006
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#14

If the world is going to go to shit soon, of course this will be my first "investment". I already have guns and ammo and a dog. I guess a few cases of dog food and having two giant gas tanks installed would complete the deal.
 

greensnacks

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Dec 20, 2004
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#15
Gold isn't a bubble, you dummies.

This is an excellent buying oppurtunity. I've shifted most (all, actually) of my domestic mutal funds into phsyical gold and silver the past 2 days. (I'm not yet willing to give up on my small cap asian funds)
I sold most of my holdings too and bought EPV and HDGE in anticipation of the Greek default and a lackluster US economy. With dollar strengthening (however temporary that may be) and people covering losses, they seemed to have dump gold this week. I had considered FSG as an investment for a few months, but gold makes me nervous. I am sure my logic is flawed a bit, but a few years ago, you couldn't walk outside without someone asking to buy gold from you. There is far less of it today and those same people are trying to sell you gold (mainly advertisers and talk show hosts). I feel the gold boat sailed a while ago and it's too late to join the party. You see stuff like, "Bullion Vaults Run Out of Space as Gold Rallies: Commodities", and it just feels over bought.

I can ASSURE you, at current prices... central banks around the world are buying up gold as we speak.
Yep. I think the European Central Bank is laying down the framework for an orderly Greek default and loading up on gold and foreign currencies for when it happens. The euro will be worth so much less than most everyones currency.
Central banks return as gold buyers




The Federal Reserve bank is going to ride in to the rescue on their white horse when the DJIA index drops below 10,000.
A sovereign debt crisis is unavoidable at this point.
I think we will see at least 8500. In 2008, the Dow touched 6600 and it could arguably be worse today, with our banks still weak and europe facing their own problems.
 

CousinDave

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Dec 11, 2007
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#16
I sold all 22 ounces, for $150 under market value per coin. The dealer confided in me that the coins were already sold. Apparently the rubes are still scarfing up coins.

Now where the fuck should I park the money?


McDonalds just increased their dividends
 

Creasy Bear

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#17
Dave Ramsey has talked about gold a few times and pointed out that it historically doesn't have a good annual growth as an investment.

If the world collapses... what the fuck good is it then. Gold is only worth something if someone is willing to give you something for it. Otherwise it's just a paperweight. A gun, ammo and a willingness to use those for survival is worth more than gold.
I stopped listening to Dave's show like a year ago... not because he doesn't give sound advice, he absolutely does, but his shit gets crazy repetitive after awhile. A lot of it is just basic common sense which he repeats over, and over, and over...

I was also getting fed up with Dave's claim that you could easily make a 15+% return on a standard mutual fund... like it's a guarantee carved in stone. He kept up the claim loooooong after it became obvious that the market had soured and nobody was seeing returns anywhere near 15% on any mutual fund. He may still be making that claim to this day. I don't know... I got sick of rolling my eyes whenever I heard the 15% thing and I bailed on him.
 

Don the Radio Guy

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#18
It's speculation. Not investment. This just proves that once again.

Park that gold money in something diversified. Total market fund. Pick one and leave the money there until you retire. Forget it's even there. And never buy gold again.
 

Madness

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Dec 9, 2004
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#19
I stopped listening to Dave's show like a year ago... not because he doesn't give sound advice, he absolutely does, but his shit gets crazy repetitive after awhile. A lot of it is just basic common sense which he repeats over, and over, and over...

I was also getting fed up with Dave's claim that you could easily make a 15+% return on a standard mutual fund... like it's a guarantee carved in stone. He kept up the claim loooooong after it became obvious that the market had soured and nobody was seeing returns anywhere near 15% on any mutual fund. He may still be making that claim to this day. I don't know... I got sick of rolling my eyes whenever I heard the 15% thing and I bailed on him.
You would be surprised how uncommon that common sense is though. I'm surrounded by people that have no concept of some of that shit.
 

whiskeyguy

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#20
Silver is still a buy, IMO. Although, it could go a bit lower to the mid twenties.
I agree. I see silver at the very least doubling in value in the next 15 years.

Gold in my opinion is pretty close to its ceiling, so it wont show the same returns silver is potential of... but I do think it's a fairly safe bet at holding its value over the next couple of decades at least. Gold will definitely have value as a currency after the collapse. Direct trading would probably be the norm immediately afterwards (for example, I'll dig a well for you for a cow), but that is inconvenient because some people won't need anything immediately in return. That's the entire point of a currency. Gold and silver make great currencies because they are hard to counterfeit and are finite.

The only way I see the gold market plummeting is during a massive and obnoxious stock market recovery. If there is "easy" money to be made in the stock market, people may pull their money out of gold to do so.
 

The Godfather

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Dave Ramsey's a douche.
[video=youtube;ZladO06LVNI]http://www.youtube.com/watch?v=ZladO06LVNI[/video]
 

Creasy Bear

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Dave Ramsey's a douche.
[video=youtube;ZladO06LVNI]http://www.youtube.com/watch?v=ZladO06LVNI[/video]
Huh? I didn't watch it all the way through but what I did see was comparing apples to oranges.

Dave was right... the market didn't(hasn't) crashed, and Peter Schiff was predicting a downturn, not a crash. So I don't see how the conclusion is being drawn that Dave Ramsey was "wrong" where Peter Schiff was "right". They weren't even saying the same things.

Oh... and whatever douche put that video together should be shot in the face for the completely unnecessary and awful music track they added.
 

The Godfather

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May 9, 2007
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#23
Dave Ramsey was advocating in January 2008 investing in paid-for real estate and said "gold is a stupid investment, buying gold is a dumb idea, I don't recommend it."

He's an idiot, don't listen to him. I'd rather listen to Suze Orman yell at home makers than listen to Dave Ramsey give bad advice.
 

Norm Stansfield

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Mar 17, 2009
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#24
Dave Ramsey has talked about gold a few times and pointed out that it historically doesn't have a good annual growth as an investment.
Gold is currency. Holding any kind of currency is not an investment. It's the exact opposite of an investment.

People store money on a permanent basis when they are afraid that investing it would cause them to lose it, not because it's a profitable thing to do.

In today's economy, holding gold for that reason is a very good idea. Doesn't mean you can't also invest some of your money, but investing all of it would be a little reckless. And keeping it in
USD would just be stupid.

If the world collapses... what the fuck good is it then. Gold is only worth something if someone is willing to give you something for it. Otherwise it's just a paperweight. A gun, ammo and a willingness to use those for survival is worth more than gold.
I don't know who Dave Ramsey is, but if this is the kind of wisdom you were left with after listening to him, he's a moron.
 

Norm Stansfield

私は亀が好きだ。
Mar 17, 2009
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#25
I sold all 22 ounces, for $150 under market value per coin. The dealer confided in me that the coins were already sold. Apparently the rubes are still scarfing up coins.

Now where the fuck should I park the money?
Money is a tool, not an end in itself. If you tell us what you are hoping to achieve, then maybe someone can give you some advice on how to use your money to achieve it. Until then, everyone who gives you any advice is full of shit, they have no clue what they're talking about.