gold bullion, dinar, dirham, gold, silver, jewellery

Saturday, May 14, 2011

The truth about silver

Gold and silver are strange things.  They have been used for centuries as money and only in the last 40 years have they been shoved aside by the financial communists - yet they still exist as a free market monetary asset despite the force of all the government's guns.
The strange thing about gold & silver, however, is that while they are the last vestige of a money that is not in and of itself able to be manipulated by the political criminal class many people still trade instruments in gold and silver which are easily manipulated by the aforementioned.
We can't speak for the marketplace but we, here at The Dollar Vigilante, buy gold and silver as a way to protect ourselves from the easily foreseeable collapse of the current non-free market monetary system.  To us, to try to protect ourselves from the collapse of the monetary system by buying instruments (futures) which are a part & parcel with the current monetary system makes as much sense as buying shares of Enron in late 2001 because you had inside knowledge it was a fraud.
We suppose at this point there are probably two types of precious metals investors.  Those that are blissfully unaware of the reasons to own the metals and are just bandwagon jumping the bull market and those that understand what is going on and who are buying gold and silver as protection and a way of preserving their assets through TEOMSAWKI (The End Of The Monetary System As We Know It) to come.
We live in a literal financial house of cards.  It is all paper.  That house of cards has been in the process of collapsing since 2008.  Astute market participants realize this and are buying bullion, one of the only financial assets with no counterparty risk, as a way to protect themselves from the coming storm.
Those who think this is just a bull market to trade likely buy highly leveraged futures that have little or no direct connection to actual gold or silver bullion.
So, what happened with silver?  It more than doubled since Ben Bernanke began his high level terrorist attacks against the US dollar with "Quantitative Easing II" announced in August of last year, rising from $18 to just below $50.
The rise in gold and silver was likely making Bernanke feel a bit uncomfortable about his "there is no inflation" story and a phone call was likely put into the COMEX.  Five margin increases in rapid succession  later and the COMEX had increased initial margin requirements by a substantial 84%.
Anyone who had bought silver futures using leverage and without a substantial cash holding was forced to immediately sell their silver futures.  The result was a drop in silver futures prices from near $49 to below $34 in a matter of hours.
So, what's the first moral of the story?  If you are buying gold and silver to distance yourself from the highly manipulated and rapidly failing monetary system then don't buy gold and silver in forms that are under the control of the central planners.
Silver Bubble?
The action in silver has most of the world saying that silver was in a bubble and now that bubble has popped.  Those who say this don't know what a bubble is and have been blinded by the inflated dollar nominal prices.
If you look at the silver price in US dollar terms it does look like quite a parabolic, bubble-like rise.  However, when you just discount the silver price by the US Government's own CPI Index - which they say is a proxy for inflation - the silver price looks like it has not done much at all.  And when you take Shadowstats.com's CPI - which just calculates the Government's CPI the way they used to calculate it in the 1980s before they learned how to hedonistically remove the inflation - silver has been in a long bear market since 1979.
This jives with the following chart as well, taken from the May issue of The Dollar Vigilante, where we looked at the price of a number of disparate items in 1980 and in 2010.  Can you spot which one of these items is in a bubble?
What's the second moral of the story?  You take your investment life into your own hands if you pay attention to the price of your investments in US dollar terms.  In nominal dollar terms silver looks like it has been on a ludicrous rocket ride.  When looked at discounted to 'inflation' as defined by the US Government's CPI or when compared to other assets over the last thirty years, silver has been a long bear market and has done relatively nothing compared to any other assets.
And compared to the growth in US Federal Government debt, silver has underperformed by a factor of five.  One bubble is about to pop... and it isn't silver.

Steve Forbes Predicts U.S. Gold Standard Within 5 Years

A return to the gold standard by the United States within the next five years now seems likely, because that move would help the nation solve a variety of economic, fiscal, and monetary ills, Steve Forbes predicted during an exclusive interview this week with HUMAN EVENTS.

“What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said.
 
Such a move would help to stabilize the value of the dollar, restore confidence among foreign investors in U.S. government bonds, and discourage reckless federal spending, the media mogul and former presidential candidate said.  The United States used gold as the basis for valuing the U.S. dollar successfully for roughly 180 years before President Richard Nixon embarked upon an experiment to end the practice in the 1970s that has contributed to a number of woes that the country is suffering from now, Forbes added.

If the gold standard had been in place in recent years, the value of the U.S. dollar would not have weakened as it has and excessive federal spending would have been curbed, Forbes told HUMAN EVENTS.  The constantly changing value of the U.S. dollar leads to marketplace uncertainty and consequently spurs speculation in commodity investing as a hedge against inflation.

The only probable 2012 U.S. presidential candidate who has championed a return to the gold standard so far is Rep. Ron Paul (R.-Tex.).  But the idea “makes too much sense” not to gain popularity as the U.S. economy struggles to create jobs, recover from a housing bubble induced by the Federal Reserve’s easy-money policies, stop rising gasoline prices, and restore fiscal responsibility to U.S. government’s budget, Forbes insisted.

With a stable currency, it is “much harder” for governments to borrow excessively, Forbes said.  Without lax Federal Reserve System monetary policies that led to the printing of too much money, the housing bubble would not have been nearly as severe, he added.

“When it comes to exchange rates and monetary policy, people often don’t grasp” what is at stake for the economy, Forbes said.  By restoring the gold standard, the United States would shift away from “less responsible policies” and toward a stronger dollar and a stronger America, he said.  “If the dollar was as good as gold, other countries would want to buy it.”

An encouraging sign for Forbes is that key lawmakers besides Rep. Paul are recognizing that the Fed is straying well beyond its intended role of promoting stable prices and full employment with its monetary policies.

Forbes cited Rep. Paul Ryan (R.-Wis.), who, he believes, understands monetary policy better than most lawmakers and has shown a willingness to ask tough but necessary questions.  For example, when Federal Reserve Chairman Ben Bernanke appeared before the House Budget Committee in February, Ryan, who chairs the panel, asked Bernanke bluntly how many jobs the Fed’s quantitative-easing program had helped to create.

Politicians need to “get over” the notion that the Fed can guide the economy with monetary policy.  The Fed is like a “bull in a China shop," Forbes said.  “It can’t help but knock things down.”

“People know that something is wrong with the dollar," Forbes concluded.  "You cannot trash your money without repercussions.”
source http://www.humanevents.com/article.php?id=43439

Robin Griffiths - Silver Could Eclipse $450, Gold $12,000

With gold over $1,500 and silver around the $35 level, today King World News interviewed one of the top strategists in the world, Robin Griffiths of Cazenove. Cazenove is one of the oldest financial firms on the planet and is widely believed to be the appointed stockbroker to Her Majesty The Queen.  When asked if this time around silver will eclipse the 38 fold up-move which took place in the 70’s Griffiths replied, “Yes, I think getting to $50 was a slam dunk certainty, you test the old all-time high.  We now have a consolidation for let’s call it two months and I think then we are going to go on up because the paper monies are still being printed.” 
Griffiths continues:

“I’ve got it (silver) as a ten bagger from current levels.  You don’t want to be wobbled out here because of a few champagne bubbles.  You want to be able to stay with and add to your long-term holdings.  Bulls (bull markets) are very successful at wobbling people out at the wrong time.” 

When asked if his $350 target was a realistic price level for silver Griffiths stated, “That is absolutely not unrealistic.  If you adjust the old all-time high for inflation...that gives you $450 for silver.  Then you add in the fact that they are printing money, you can take it higher than that without any difficulty at all.”

When asked about gold specifically Griffiths remarked, The run-up to the peak in markets like gold is between now and 2015.  I think it will all be over by 2015, a lot of it depends on how aggressively paper monies get printed from here on in I think $3,000 is an absolute minimum target.  I can believe in targets certainly above $5,000 and it’s theoretically possible to go to $12,000, that’s dollars an ounce for gold.  

If Mr. Bernanke stays on his current agenda I think those higher numbers will be what you will see.  We’re looking at the trashing of the dollar.  As Marx pointed out, it’s the most assured way of destroying your economy.

There’s a book called ‘The Road to Serfdom’ by Hayek, pointing out that when a country is in debt, getting deeper into debt as Lord Keynes said, ‘Doesn’t work.’  All it does it make the problem worse and it takes longer to solve.  

We’re moving away from the dollar being the main reserve currency on the planet...We’re going to move into an era where world trade is done in mixes of renmenbi, rupees and baskets, and the baskets of currencies will need to be weighted by something can’t be printed like gold.”

source:http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/12_Robin_Griffiths_-_Silver_Could_Eclipse_$450,_Gold_$12,000.html

Thursday, May 12, 2011

Eleven Factors That Could Drive Gold To $5000 - Jeff Nichols

$1700 gold this year, $2000 next and possibly $3000 or perhaps $5000 this decade before it eventually falls back are Jeff Nichols' predictions for the gold price.
NEW YORK - 
Specialist gold analyst, Jeffrey Nichols, has continually been ratcheting up the number of reasons he sees for being bullish on gold, however, as he told Mineweb on the sidelines of the New York Hard Assets Conference this week, some of these are really expansions of the multitude of factors he had already pointed out to his followers in previous analyses.
But Nichols's reasoning is still worth mentioning as he has been very correct in his predictions for the direction of the gold price over the past few years, even if perhaps some of his price predictions have not quite been achieved - at least not yet.  One needs to classify Nichols as a cautious gold bull - he is not one to make forecasts of enormous gold price increases in the short term, although he does feel the price has a fair way to go yet.
Let us look at his eleven reasons:
1.        The U.S. Fed's policy of an unprecedented level of money creation, coupled with zero (or effectively negative) interest rates
2.       Difficulties in reaching agreement on the U.S. budget, coupled with enormous U.S. sovereign debt and eroding creditworthiness
3.       The ongoing depreciation of the U.S. dollar which he sees no end to under the current economic regime.
4.       Accelerating global inflation.  This is being brought about by rising industrial and agricultural commodity prices globally.
5.       Fear of sovereign debt defaults in Europe and doubts on the viability of the Euro as a continuing common currency amongst all its participants.
6.       MiddleEast-North Affrica unrest and the consequent threat to global oil supplies
7.       Growing affluence in the developing world - particularly among nations like China and India whose citizens have a propensity towards gold accumulation as their personal wealth store and guard against inflation and unforeseen events.
8.       The move by Central Banks to become buyers of gold rather than sellers.
9.       The onset of vehicles like ETFs which make it easier for the investor to buy gold.
10.   The increasing acceptance of gold as an investment class amongst major investing institutions.
11.   Limited growth in global mine production of gold.
Overall in Nichols' view these factors all come together to generate a growing gap between global supply and demand.
To these we might add ever rising mining costs - it is becoming increasingly expensive to mine gold, in particular outside the dollar area as the effects of a product which is paid for in depreciating dollars, while input costs continue to rise in local currencies, take their toll.  Although many mining companies quote seemingly low cash costs, there is no standard definition of how these are calculated and they frequently do not incorporate some ongoing financial and capital costs.  There are a fair number of mining companies out there who will find it difficult to remain profitable with gold below $1,000, while the cost of developing new mines becomes more and more costly as often now the tenor of the deposits becomes lower and lower and mines may need to be developed in areas of increasing political and geographical risk.
Nichols went on to expand on each of the eleven reasons for bullishness in the gold market mentioned above and ended with his predictions of where the gold price will likely run.  He reckons gold's fortunes remain very bright with all these supportive price drivers and looks for new all-time highs in the months ahead.  He does stick his neck out on a specific price prediction and reckons gold has every chance of reaching $1700 by the year end, $2000 in 2012 and "possibly $3000 or even $5000" before a time when he feels the cycle may eventually reverse later in the decade.
He also prefers physical metal to gold stocks as being a safer bet.  While the upside potential in stocks may be higher he considers these as also carrying significant additional risk - although he does feel there is a place for these as part of a precious metals portfolio.

Wednesday, May 11, 2011

Gold price moving forward

Here is the likely path going forward.
  1. Silver to recover over several months and re-attack the $50 zone again.
  2. Silver will get past $50 by year end and probably reach $60 before the next strong correction.
  3. With three years left in the Gold and Silver bull cycle from 2001, there is a very good chance silver will be well north of $100 an ounce by 2014, but one week at a time.

Gold should have bottomed at $1462 in what I call an “A wave” down, with the “B wave” currently bouncing to about $1520 if I’m right.  Once this bounce is completed, I look for a soft pullback to $1489 or so, followed by a strong rally to re-test the $1577 highs.  Gold should reach a minimal target of $1627 on this final 5th wave up from the January 1310 lows, with potential to spill higher than that. 
Silver has tripped on itself for now, and Gold will probably move a tad smoother over the near term, but look for Silver to regain it’s sprinting abilities this summer-fall and re-take the baton from Gold and continue it’s out-performance.

Deutsche Bank sees gold rising as high as US$2,000 by Feb 2012

NTERNATIONAL. Gold, which reached a record on May 2, may surge a further 30% by January as investors seek to protect themselves from “economic uncertainty,” according to Deutsche Bank AG.
“I’m bullish on gold despite its current levels,” Hal Lehr, Deutsche Bank’s managing director for cross-commodity trading, said in an interview in Buenos Aires. “It could reach US$2,000 an ounce in the next eight months.”
Investors including George Soros and John Paulson invested in gold as the metal surged over the past year amid a sovereign debt crisis in Europe, economic turmoil in the U.S. and civil unrest in the Middle East. This month‘s record US$1,577.57 an ounce was a sixfold gain since the precious metal’s low in August 1999.
Gold fell 1.6% on May 4 after the Wall Street Journal reported that Soros Fund Management LLC sold precious- metal assets. Soros’ fund held shares in the SPDR Gold Trust, the biggest exchange-traded product backed by gold, and the iShares Gold Trust at the end of 2010, U.S. Securities and Exchange Commission filings show.
Gold rose for a third day in New York today as concern about Europe’s debt woes spurred demand for precious metals as a protection of wealth. Standard & Poor’s yesterday downgraded Greece’s credit rating for the fourth time since April 2010. Gold for June delivery rose US$13.10, or 0.9%, to US$1,516.3 an ounce at 11:05 a.m. on the Comex in New York. 
 
Bullion rose for six consecutive weeks through April 29 as the metal is seen as a hedge against inflation around the globe. Central banks in China, India and the European Union, among others, have increased interest rates in recent weeks as policymakers seek to control consumer prices with tighter monetary policy.
The U.S. Federal Reserve has kept the benchmark rate between zero percent and 0.25% since December 2008 and pledged to purchase US$600 billion in Treasuries through June to stimulate the economy. Standard & Poor’s earlier last month revised its debt outlook for the U.S. to negative from stable.
The U.S. Treasury Department projects the government could reach its debt ceiling limit of US$14.3 trillion as soon as mid- May and run out of options for avoiding default by early July.
Lehr’s so-called cross-commodity team was created by Deutsche last year to handle large investments in commodities without distorting prices with sudden inflows of cash, he said. The team focuses on investment opportunities in a portfolio of commodities, as opposed to looking at individual commodities.

source:http://www.bi-me.com/main.php?c=3&cg=2&t=1&id=52565

Tuesday, May 10, 2011

Another huge downtrend is predicted later before continuing uptrend move

Transition to the D-wave
By Toby Connor   
Don't let the title fool you, for reasons I've outlined in this weekend's report I think gold likely has one more move to new highs before the D-wave begins.
However the action in the dollar and silver this week has probably taken the parabolic phase of this C-wave off the table. Rather than the normal sharp spike up it appears that this C-wave is going to end with a more modest move than prior C-waves. That being said it did last much longer and gain just as much above the prior C-wave top as any other C-wave. So in terms of duration and magnitude this C-wave has fulfilled every expectation.
I've noted in the past that a D-wave is a regression to the mean, profit taking event. That regression tends to be most severe when the C-wave ends with a parabolic move. Action and reaction.
However this time it appears there will likely be no parabolic rally to top the C-wave. In that case the D-wave will probably be milder than prior D-waves. As a point of reference every D-wave so far has retraced at least 62% of the prior C-wave advance.

Without the parabolic stretch I think it's likely that the impending D-wave will only retrace roughly 50% of this C-wave. If gold pushes up to a marginal new high slightly above $1600 (in the weekend report), then it will probably only drop to around $1250 which just happens to mark the upper boundary of last summer’s consolidation zone.

What should follow after that is a fairly strong A-wave surge. A-waves usually test but don't break to new highs. At that point gold will enter a long sideways period to consolidate the massive gains made during this last C-wave. During this period it will get very tough to make money in the precious metals market.
However there is still some upside potential once gold puts in the daily cycle low that is trying to form now. Great potential during the D-wave if you know how to use puts and excellent upside potential during the A-wave next fall, before the metals sink into the consolidation doldrums.

This year still has great opportunities left and of course we still have the next C-wave to look forward to in 2013. That one should make this C-wave look puny in comparison.

source:http://www.goldscents.blogspot.com/

ZK NOTE: This is just a prediction that can be use for our advantage as timing when to buy low as market retrieve. Long term trend is still very bullish.

Special report: What really triggered down market crash last week?

NEW YORK (Reuters) – When oil prices fell below $120 a barrel in early New York trade last Thursday, a few big companies that are major oil consumers started buying around $117.

It looked like a bargain. Brent crude had been trading above $120 for a month. But the buying proved ill-timed. Crude kept on falling.
"They were down millions by the end of the day, trying to catch a falling piano," an executive at a major New York investment bank said.
Never before had crude oil plummeted so deeply during the course of a day. At one point, prices were off by nearly $13 a barrel, dipping below $110 a barrel for the first time since March.
Oil's descent followed the biggest one-day price drop in silver since 1980 on Wednesday, after hedge fund titan George Soros was reported to be selling. Exchange operators raised silver's margin requirements, making it more costly to trade the metal and sending investors out of the market. Silver plunged by 20 percent, more by week's end. The rout unnerved some commodity investors.
Oil just doesn't fall by 10 percent in the course of a normal day, though. In commodities markets, oil is king, and its daily contract turnover, typically around $200 billion, is usually able to absorb even large inflows or outflows of investment.
The rare moves of $10 a barrel usually are set off by dramatic events -- the outbreak of the first Gulf War in 1991, or the collapse in 2008 of Lehman Bros bank, which both led to recessions.
Of course, there was major news last week. But the daring Pakistan raid that killed Osama Bin Laden had done little to shift the balance of oil markets on Monday.
In interviews with more than two dozen fund managers, bankers and traders, no clear cause emerged for the plunge in price. Market players were unable to identify any single bank or fund orchestrating a massive sale to liquidate positions, not even an errant trade that triggered panic selling, as seen in the equities flash crash last May.
Rather, the picture pieced together from interviews on Thursday and Friday is one of a richly priced commodities market -- raw goods have been on a five-month winning tear over all other major investment classes -- hit by a flurry of negative factors that individually could be absorbed but cumulatively triggered a maelstrom.
Computerized trading kicked in when key price levels were reached, accelerating the fall.
"It was a domino effect," said Dominic Cagliotti, a New York-based oil options broker.
The negative factors -- prominent cheerleaders turning bearish, some weak economic data, cheap money from the U.S. Federal Reserve ending by July, a lessening of political risk -- merely provide a backdrop for the waves of selling. What stands out is the way computers turned readjustment of positions in a huge and deep market into a rout.
THE COMPUTERS
Stunningly large jolts from so-called stop-loss trading amazed market traders. The automated sell orders were generated as oil crashed through price points that traders had programed in advance into their supercomputers. In many cases, computer algorithms sold for technical reasons, as oil dropped through levels that, once breached, could trigger ever larger waves of selling yet to come.
The machine trading, based on subtly different but fundamentally similar, algorithmic models, eliminates the white-knuckles and potential human error involved in actively trading a volatile market, and increases anonymity. Instead of breeding hesitation, abrupt price drops can quickly prompt these machines to unload a bullish long position in oil, and build up a bearish short one instead.
Machine-led trading is one plausible thesis for another apparent market anomaly that occurred on Thursday. Exchange data shows that the total number of open positions in the oil market -- a number that would typically fall in a selloff -- instead rose. Normally, panicky funds selling oil en masse would cause total "open interest" numbers to shrink, as exiting investors closed out contracts. But some machines, following the market trend, may have gone further, by dumping long positions and quickly amassing sizable short positions instead.
"Computers don't care. Momentum just increases until nobody wants to stand in front of it," said Peter Donovan, a floor trader for Vantage on the New York Mercantile Exchange.
Some big Wall Street traders watched their own systems sell into the down trend but couldn't know for sure who had initiated the selling spree. They only knew that similar machines at other firms, from New York, to London, Geneva and Sao Paulo, would be automatically selling in much the same manner.
During Thursday's crash, such selling locked in profits that high-flying commodities traders have been accumulating for months. Some of Thursday's rout appears to have been more a product of the wisdom of crowd computing than of widespread human panic.
"We believe the magnitude of the correction appears in large part to have been exacerbated by algorithmic traders unwinding positions," Credit Suisse analysts wrote in a report.
High frequency trading and algorithmic trading accounts for about half of all the volume in oil markets.
BIG NAMES TURNED BEARISH
Some of the seeds for the rout were sown earlier. In April. Goldman Sachs' bullish team of commodities analysts, led by Jeff Currie in London, issued two notes to clients in rapid succession recommending they pare back positions. In one, the bank called for a nearly $20 dollar near-term correction in Brent oil, while maintaining a bullish longer-term outlook.
The closely watched money king, George Soros, who runs a macroeconomic hedge fund, had said for months that gold was pricey. Even online advisors to mom-and-pop investors such as The ETF Strategist had warned of a bubble in precious metals that could be ready to pop.
On Wednesday, the Wall Street Journal had reported the Soros Fund was selling commodities including silver, and four sources from other hedge funds told Reuters they believed Soros was busy selling commodities positions again on Thursday.
Silver markets already had suffered four days of carnage and ended the week down nearly 30 percent. But silver is a tiny market, much more susceptible to sharp price moves. Some traders suspect that big holders were cashing out of the least liquid commodity market first, before moving onto the big one - oil.
As crude crashed on Thursday, it dragged down every other major commodity. The Reuters Jefferies CRB index, which follows 19 major commodities, was on its way to a 9 percent weekly drop, the biggest since 2008.
Oil's selloff began in London, and accelerated as New York traders piled in.
A routine report on U.S. weekly claims for unemployment benefits spooked investors, showing the labor market in worse shape than expected. That fed a growing pessimism about the resilience of the global economy after industrial orders slumped in Germany and the massive U.S. and European service sectors slowed. Then the European Central Bank surprised with a more dovish statement on interest rates than expected, signaling its wariness about the euro zone outlook. The dollar rose sharply.
Before noon New York time, Brent crude oil prices were already trading down a jaw-dropping $8 a barrel.
Fourteen hundred miles southwest of New York's trading floors, on Texas refinery row, oil men were stunned by the drop, which played havoc with their pricing models.
"It was nuts. Our risk management guys were tearing up their spreadsheets," said a major U.S. independent refiner, who asked not to be identified.
A range of factors, both economic and political, were also at play. The recent rise in raw goods has been fueled in part by the U.S. Fed pumping cash into the markets by purchasing $600 billion in bonds. This program has pushed interest rates extraordinarily low, making borrowing essentially free once adjusted for inflation. Investors have been using the super-cheap money to buy into commodity markets. But the Fed's program is slated to end on June 30.
"Funds were likely to take profits before June when the direct (Fed) bond purchases stop. All were eyeballing each other to see who would take profits first," said a London-based oil trader.
China, the world's fastest-growing consumer of commodities, also is tightening monetary policy to tamp growth rates and control inflation, raising the prospect of a slowdown in demand for oil.
The political risk premium built into oil prices also came under scrutiny last week. The unrest sweeping through the Arab world - home to over half of world oil reserves - has boosted oil this year. The only major supply disruption so far is from Libya, where war has cut off at least 1 million barrels a day.
"We've been in a world thinking there's more risk, more risk, more risk," said Sarah Emerson of Energy Security Analysis Inc. "People took this week, and the news of bin Laden's death, to simply reflect. They stopped and said, maybe there's less risk."
GAME OVER
Put all these factors together, and they amounted to a reason to sell. Traders and brokers who spoke with Reuters speculated that macro funds like Soros and others, which had been aggressively overweight commodities, were cutting the portion of their portfolio allocated to commodities. Because those positions had grown so large, even a small rebalancing would amount to billions and billions of dollars in contracts sold. After weeks of thin trading in Brent oil futures, Thursday's trade volume hit a record.
Early Thursday, investment advisory firm Roubini Global Economics had also joined the fray, telling clients for the first time in years to cut commodities in their macro portfolios. Many funds were merely taking months of handsome profits off the table.
Yet Thursday's rout certainly produced casualties.
By the afternoon New York time, some of the world's biggest money managers thought they smelled blood. Several banks and funds seemed to be selling oil in an orderly fashion, even if the price drop was extraordinary. But could a hedge fund be struggling for survival?
They wondered whether any major commodities funds were on the losing end of bullish oil bets, and were getting forced by margin calls from brokers into dumping massive positions.
One trader at a major bank in New York called a colleague at one of the world's largest hedge funds. During the conversation, they exchanged notes, suspicious that one or more commodities-focused hedge funds might be facing a moment of reckoning, one of the participants said.
No fund could be pinpointed. By the end of the day, the person said, they were less suspicious -- a view shared by week's end by many market participants who spoke to Reuters. No one was naming a major hedge fund in dire trouble, or a computer trading algorithm that went haywire.
And unlike last May's flash crash in equities markets -- when stocks fell by a similar 9 percent margin in just minutes -- Thursday's decline came in rolling cascades, playing out over at least 12 hours.
Even after Brent fell to settle around $110 by the end of the day, crude prices were still up 38 percent from a year ago.
"Since prices have been advancing well beyond any reasonable measure of value, Thursday's declines felt more like orderly corrections than chaotic panics. There was no sense that anyone was ready to jump from the window," said oil analyst Peter Beutel of Cameron Hanover in Connecticut.
CASUALTIES
The day left some commodities-heavy funds nursing wounds - weekly losses of 10 to 20 percent, according to several fund managers who invest in other hedge funds.
Two of the sources said that London-based BlueGold, a fund known for taking aggressively bullish directional bets on oil in the past, had sizable losses. It was not immediately clear how much the fund dropped, and BlueGold declined comment.
One money manager said of BlueGold's head trader Pierre Andurand: "He's had tougher weeks so I don't think it's game over."
Fund sources also cited losses at $20 billion Winton Capital, of around 2.2 percent, on Thursday. FTC Capital, a $300 million European commodities fund, lost 4 percent in one of its larger funds, the sources said. Neither fund was available for comment.
In the space of just hours, the drop in the price of crude oil had shaved nearly $1 billion off the cost of supplying the world's daily oil needs. That could be good news for gasoline consumers. But Eric Holder, the U.S. Attorney General who has recently formed a government working group to investigate manipulation in oil markets, had a blunt warning for oil traders. He wants proof the savings are being passed on to end users.
"This working group was created to identify whether fraud or manipulation played any role in the wholesale and retail markets as prices increased. If wholesale prices continue to decrease, fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump," Holder said on Friday. (Reporting by Matthew Goldstein, Svea Herbst, Jennifer Ablan, Emma Farge, David Sheppard, Claire Milhench, Zaida Espana, Robert Campbell and Josh Schneyer. Writing by Josh Schneyer. Editing by Stella Dawson)

source:http://news.yahoo.com/s/nm/us_financial_oil_rout

Gold back on track..buying opportunity

The sell-off in gold last week was overdone but the current corrective phase offers tremendous buying opportunities
Last week was an extremely volatile week not only for gold, but for many other commodities as well. In the case of gold after recording another all-time high of $1578.20 on Monday, May 02, the price of the yellow metal fell sharply as traders took profits. From then on the prices continued to head south even though all the key fundamental issues driving the price of gold higher have not changed and don’t look set to change for some time to come.
While the market appeared a bit top heavy in the short-term and due for a minor correction, certain extraneous factors came into play which impacted on gold prices, in particular the sell-off in silver.
The sell-off in silver was induced by the The Chicago Mercantile Exchange (CME) the owners of Comex, when they raised the minimum margin requirements on the 5000 ounce silver futures contracts by an unprecedented three different times in one week! The net effect was an increase of nearly 40% in the funds traders must put up to open or maintain a futures position. Initial margins - the amount of cash - that traders must deposit for each contract increased to $14,513 a contract from $12,825. Then for the third time in a week, the exchange hiked margin requirements to $16,200 from $14,513. But, to make matters even worse, as of the end of business on Thursday, the initial margin of the main 5,000-ounce silver-futures contract increased again to $18,900 from $16,200. Then as of the close of business on Monday, May 09, the initial margin will rise further to $21,600. Margins are also rising for Comex MiNY silver futures and E-mini silver futures. A year ago the margin required for a 5000 ounce contract was less than $5000! But, what concerns me is the fact that the CME increased these margins in a falling market. How come they did not increase the margins as the prices increased?
This unprecedented increase in margin requirements together with a rebound in the US dollar together with the latest spate of economic data resulted in a broad based commodity sell-off which hit silver and crude oil the worst. The selloff then spread to other commodities including gold which broke through the $1500 psychological level and hit a low of $1470 an ounce. The price of crude oil broke $100 a barrel and the CRB commodity index posted the biggest weekly fall since 2008 as it dropped sharply from the  prior week's high of 370.7 to close at 337.35 last week.
Later in the week the dollar staged a strong rally after the The ECB left the main refinancing rate at 1.25% and continued to gain against the euro, Swiss Franc and Yen after the Non-Farm Payroll report showed stronger than expected expansion in the job market. Private sector hiring, including a big jump in the retail sector, boosted overall nonfarm payrolls by 244,000, the largest increase in 11 months, the US Labour Department said Friday. Economists had expected a gain of only 186,000. However, the unemployment rate had the first increase since November and rose from 8.8% to 9.0%.
Later in the day, the US dollar received another boost against the euro when the German magazine Der Spiegel reported that a meeting was held on Friday about Greece exiting the Eurozone and wanting to readopt its own currency. Later, that was vigorously denied by both Greece and Germany. The euro hit a session low of $1.4454, down about 0.4% on the day. It was down about 2.3% this week, its worst week since January. Interestingly, as the dollar gained, the price of gold bounced off its lows.
By Monday, May 09, the price of gold was back above $1500 an ounce as market participants turned their focus back to the underlying fundamentals behind the gold price which include the sovereign debt crisis in the Eurozone, rising inflation around the world, and continued uncertainty in the Middle East.
As far as I am concerned last weeks’ sell-off was completely overdone. However, a correction was overdue with or without the help of the CME, but the market will soon recover its losses and we should see resumption in the upward trend. But, before this we may see a prolonged correction which will offer bargain prices for many astute traders and investors.
TECHNICAL ANALYSIS

Last weeks’ drop in gold prices has sent prices to within a fraction of the support level of a major upward trend line and the medium term indicator the 50 day MA. It also coincides with the 38.2% Fibonacci retracement level of the move from $1325 to $1575 which is set at $1480.