Gold/silver A Bubble - Yes Says...

Discussion in 'Commodity Futures' started by andrasnm, May 10, 2006.

Will The Bubble be OVER in Metals?

  1. YES

    9 vote(s)
  2. NO

    28 vote(s)
  1. Helmut Eschwey.....repost from the FT article
    The bubble-like levels of gold and silver prices cannot be sustained, according to the head of the world’s largest precious metals trader, as bullion surged through the $700 a troy ounce mark for the first time in 25 years.

    But Helmut Eschwey, chief executive of Heraeus, a family-owned German trading and technology group, said prices in platinum and some rarer precious metals, all at or near record highs, were justified by demand and low stock levels.

    “The rally has been enormous [but] it can’t go on forever,” he told the Financial Times. “Silver will be the first to fall. Gold will not last at this level. It is different with platinum because there is industrial need.”

    His comments carry weight because Heraeus, based just outside Frankfurt, has been in the precious metals business for more than 150 years and makes annual revenues of about €7bn from trading
  2. Here is a good looking chart for plat/gold....
  3. Aok


    Helmut says

    "“The rally has been enormous [but] it can’t go on forever,” he told the Financial Times. “Silver will be the first to fall. Gold will not last at this level. It is different with platinum because there is industrial need.”

    Translation. He wants to buy some more but doesn't want to pay up.

    Or he put on a massive short hedge and is getting squeezed.

    Or maybe something else.

    Curios timing?

    M1, M2, and M3 are measures of the quantity of money, in this case dollars. The measures each include different categories of money. M1 is the most restrictive; M3 is the most inclusive. M3 includes offshore dollar deposits (AKA eurodollars). Petrodollars are just eurodollars held by oil producers.

    There are two definitions for inflation. The one the layman is most familiar with is an increase in prices. Another definition is an increase in the money supply in excess of the real increase in the size of the economy (which tends to raise prices, either of assets such as real estate or of consumer goods). Hyperinflation is just when inflation spirals out of control, like in Germany in the 1920s, when housewives pushed shopping carts full of paper money to the bakery to buy a loaf of bread.

    The idea here is that the Federal Reserve Bank is suppressing the M3 measure of money because they want to conceal sharp changes in the number of dollars held overseas, for example if foreign central banks start dumping their dollar reserves, which they might do as a result of the following developments, among others:

    1) The US economy slides into recession by spring of 2006, the Fed lowers interest rates sharply, and the value of the dollar drops sharply against other currencies (since people are holding dollars mainly because they can get a better interest rate in the US than in most other countries with apparently sound banking systems).

    2) Iran opens its oil bourse, where people can buy and sell gold in euros, and it is such a success that foreign central banks no longer see a need to hold dollars to safeguard their ability to import oil.

    The combination of 1) and 2) would be particularly disastrous for the dollar.

    The result would be sharply rising import prices in the US (sharply rising prices in general) and probably recession. The likely Fed response would be to print money in an attempt to push the US out of recession. This, however, would be likely only to make matters worse and could lead to hyperinflation.

    Or, the Fed foresees recession and plans to print money by buying US government debt (Treasury notes), which would force down interest rates in an effort to get US consumers to take on more debt. This would sustain the consumption of imports and the trade deficit, which would send MORE dollars overseas, dramatically increasing M3. This outcome would also mean inflation, but it would manifest itself mainly in further asset bubbles (a revival of the real estate and stock market bubbles, mainly).

    I believe that this strategy would fail either because consumers will no longer be solvent and able to take on more debt after this winter's shocks to their budgets, or, if enough do remain solvent, because this strategy will boost economic activity in both the US and the many countries that export to the US, which will again push up the price of oil to the point where US consumers are no longer solvent.

    However, the bankers at the Fed seem to be masters of wishful thinking, and they figure that if they can keep the public from knowing about alarming developments in the money supply, they will be able to keep the party going at least long enough for the big players to buy up gold or other real assets, leaving ordinary consumers, and probably countries that rely on the US consumer market (e.g. China), to deal with the wreckage.
  4. Aok


    BTW, just because a economic stat that has been published since 1959 and now won't is not evidence of chicanery. Dont read too much into my cynical mind.

    Dont take my word for it. Or Helmuts advice either. It tough enough to find merchants who will accept $100 bill.

    I wonder what they would say to transact business with an American Eagle. :p

    Trade the trend. Or have tight stops.
  5. Helmut must be related to Field Marshall Bernanke...Grand Duke of Devaluation
  6. Gold is going to $1000 US an once.

    We are two thirds of the way through a giant marco move.

    I called it. It's on record.

  7. why does silver fall first?
  8. ha...they must be delta short....
  9. I never heard of this company before today

    - Heraeus -

    anyone in the precious metals dealings or in europe that has heard of this company?

    are they really such a big trader in metals ?
  10. during the 1980 $850 gold run, I recall some ads in WSJ etc.

    they appear to be a european conglomerate of stuff.........
    #10     May 11, 2006