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Gold price dives through support to new low. Gold Bubble continues to deflate.; Gold price to drop another 15% this year say strategists at Societe Generale
Topic Started: 3 Apr 2013, 10:29 AM (37,677 Views)
miw
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Enjoy The Ride
24 Apr 2013, 10:07 PM
miw- Off topic. the crossed or locked market which occured last night. What broke?
A very good question to which there are many answers. I'll just give my understanding of what happened, and you can make up your own mind what was broken, OK?

1. Someone hacked into AP's official twitter account and sent out a tweet that went something like: "Breaking: 2 explosions reported at the Whitehouse. Barack Obama injured."

2. This was retweeted about 1600 times in the first minute or so.

3. It was obviously picked up by a lot of traders, but I think it was picked up even quicker by trading bots that pick up keywords.

4. The whole world hit "sell" on almost everything. They hit "buy" on GLD, SLV and lots of put options. As a result gold and silver and the VIX all spiked. The VIX spike was pretty awesome. - about 10%. I, not being a bot, just watched with my jaw on the ground as my portfolio lost nearly $5k in 30 seconds and then got back $4k of that almost as fast. And I have hedging (short calls) in place on many of my positions. Note that this kind of hedge is good against a price drop but works against you with a spike in volatility, so it was less effective than normal in the very short term. I also have long VIX calls, but they don't really kick in as a hedge until things get much worse. Still, it gives me a nice fix on a good hedging ratio in an armageddon situation. VIX went up by 10% when the market went down quickly by 1%.

5. Once the bots hit sell on the keywords, different bots picked up the sell-side volume and also hit "sell". Then that would have triggered stop-loss orders on a lot of accounts and caused more selling. I have no confirmation of the next bit, but I also suspect that some of the bots that are supposed to be acting as market makers withdrew from the fray and stopped offering nbbo which made things even worse.

6. AP and the Whitehouse acted commendably fast. AP sent out another tweet within a couple of minutes saying the tweet was bogus. The Presidential press secretary was out telling the reporters and live feeds going into the news services who are always hanging about the press briefing room in what seemed like less than 10 minutes. Also a large number of journos picked up on strange language (in announcements, press people always say "The President" and not the name of the President, for example.) even quicker than that.

7. Most of the drop came back very quickly. All of it and more came back over the next couple of hours.

Plenty of things broken here in my view. What's your list?

frankrider
24 Apr 2013, 09:44 PM
If you trust your money, gold or otherwise, to any bunch of faceless suits you deserve to lose it in the years to come. Leaving it in bank deposit boxes back in the 1930's proved disasterous and today the financial structure is vasty more corrupt. Most people advocating these other options are probably in the financial industry, in one form or another. They see things in light of their own position and assumed credability but the average person in the street has an entirely different view of these "financial experts" now they have seen their super smashed. They are for the most part just parasites feeding on the life savings of hard working folks.

If you don't hold it you don't own it.
Frankrider, I hear you. Of course holding physical gold in a capped poly pipe buried somewhere has its own risks.

It's all about a balance. What percentage of your assets should you have in your armageddon hedge?
Edited by miw, 24 Apr 2013, 10:40 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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miw
24 Apr 2013, 10:37 PM
A very good question to which there are many answers. I'll just give my understanding of what happened, and you can make up your own mind what was broken, OK?

1. Someone hacked into AP's official twitter account and sent out a tweet that went something like: "Breaking: 2 explosions reported at the Whitehouse. Barack Obama injured."

2. This was retweeted about 1600 times in the first minute or so.

3. It was obviously picked up by a lot of traders, but I think it was picked up even quicker by trading bots that pick up keywords.

4. The whole world hit "sell" on almost everything. They hit "buy" on GLD, SLV and lots of put options. As a result gold and silver and the VIX all spiked. The VIX spike was pretty awesome. - about 10%. I, not being a bot, just watched with my jaw on the ground as my portfolio lost nearly $5k in 30 seconds and then got back $4k of that almost as fast. And I have hedging (short calls) in place on many of my positions. Note that this kind of hedge is good against a price drop but works against you with a spike in volatility, so it was less effective than normal in the very short term. I also have long VIX calls, but they don't really kick in as a hedge until things get much worse. Still, it gives me a nice fix on a good hedging ratio in an armageddon situation. VIX went up by 10% when the market went down quickly by 1%.

5. Once the bots hit sell on the keywords, different bots picked up the sell-side volume and also hit "sell". Then that would have triggered stop-loss orders on a lot of accounts and caused more selling. I have no confirmation of the next bit, but I also suspect that some of the bots that are supposed to be acting as market makers withdrew from the fray and stopped offering nbbo which made things even worse.

6. AP and the Whitehouse acted commendably fast. AP sent out another tweet within a couple of minutes saying the tweet was bogus. The Presidential press secretary was out telling the reporters and live feeds going into the news services who are always hanging about the press briefing room in what seemed like less than 10 minutes. Also a large number of journos picked up on strange language (in announcements, press people always say "The President" and not the name of the President, for example.) even quicker than that.

7. Most of the drop came back very quickly. All of it and more came back over the next couple of hours.

Plenty of things broken here in my view. What's your list?


Frankrider, I hear you. Of course holding physical gold in a capped poly pipe buried somewhere has its own risks.

It's all about a balance. What percentage of your assets should you have in your armageddon hedge?
At the end of the day your theory seems as plausible as anything else I have heard.

More interested in the action rather than the reason, quite a few risk models will be trashed in the next few days.

Can anyone still trade against the algo's? The rip in the vix was brutal.




Enjoy The Ride!

The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.”
― Friedrich A. von Hayek


"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.


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miw
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24 Apr 2013, 11:23 PM
Can anyone still trade against the algo's? The rip in the vix was brutal.



Nobody can beat the algos in the short-term cut and thrust. The day trader is almost extinct.

But people can still compete with the algos on periods longer than a day I reckon.

Durable orders farted in our general direction this morning, turning a +0.22% futures into -0.1% in short order. It will be interesting to see if the market can shrug this one off today.
Edited by miw, 24 Apr 2013, 11:39 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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frankrider
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miw
24 Apr 2013, 10:37 PM
Frankrider, I hear you. Of course holding physical gold in a capped poly pipe buried somewhere has its own risks.

It's all about a balance. What percentage of your assets should you have in your armageddon hedge?
For most of the last 50 years or so a prudent advisor (to a wealthy client) would have said 10%, but it all depends on the time in history you are living in and where you are living, ie: well off cypriots having 50% or more are probably quite happy tonight.

BTW, $50,000 in gold coins is about 35 coins the size of fifty cent pieces. You could unbolt the vice from your work bench, router out a small cavity in the timber, put the coins in and re-attach the vice above them. The security options are endless I assure you.
Edited by frankrider, 25 Apr 2013, 12:03 AM.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
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Enjoy The Ride
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miw
24 Apr 2013, 11:36 PM
Nobody can beat the algos in the short-term cut and thrust. The day trader is almost extinct.

But people can still compete with the algos on periods longer than a day I reckon.

Durable orders farted in our general direction this morning, turning a +0.22% futures into -0.1% in short order. It will be interesting to see if the market can shrug this one off today.
Falling Chinese PMI was met with a 1.3% rise a couple of days ago.

So I think a miss on durables is worth 2%. Most of the action this afternoon.

Disclaimer- Please don't trade this unless it proves to be right.
Enjoy The Ride!

The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.”
― Friedrich A. von Hayek


"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.


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miw
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24 Apr 2013, 11:47 PM
Falling Chinese PMI was met with a 1.3% rise a couple of days ago.

So I think a miss on durables is worth 2%. Most of the action this afternoon.

Disclaimer- Please don't trade this unless it proves to be right.
:lol :lol :lol :lol :lol
Edited by miw, 24 Apr 2013, 11:54 PM.
The truth will set you free. But first, it will piss you off.
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miw
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Interesting discussion of paper vs. physical gold from someone who seems to know his stuff here. I don't necessarily agree with his extrapolations, but the basis of his argument at least seems sound to me.

Physical Gold Vs. Paper Gold: The Ultimate Disconnect
The truth will set you free. But first, it will piss you off.
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Quote:
 
Perth Mint feels gold buying frenzy

April 30, 2013 - 11:10AM

Perth Mint, which refines nearly all of the nation’s bullion, says that demand has jumped to the highest level in five years after prices plunged, with the factory kept open through the weekend to meet orders.

There’s been strong interest, including from the US, with buyers speculating that the metal will rebound from the decline, Ron Currie, sales and marketing director, said.

‘‘We worked all weekend to keep the factory running to make more stock and that was only to fill orders,’’ Mr Currie said from the facility founded in 1899. ‘‘We’re being inundated with people buying products.’’

Bullion fell 14 per cent in the two days to April 15, the most since 1983, spurring buyers to increase physical holdings.

‘‘We haven’t seen levels like this since the 2008 global financial crisis,’’ Mr Currie said yesterday. ‘‘Compared to March sales, April sales have doubled or tripled,’’ he said, without providing figures.

Gold for immediate delivery traded at $US1473.05 an ounce this morning. While prices have gained 11 per cent from a two-year low on April 16, they are still 5.7 per cent below the April 11 close before the rout.

‘‘We’re seeing people are coming into the market because the price has come down, they think they can afford it now and expect that it will go up again,’’ Mr Currie said.

‘‘The US has got the money to purchase metal and is doing so as a hedge,’’ he said, referring to individual investors. ‘‘It’s extremely busy for us in the US.’’

Coin sales by the US Mint are set for the highest month since December 2009, while premiums to secure supplies in India rose to five times the level before the slump.

Read more: http://www.smh.com.au/business/markets/perth-mint-feels-gold-buying-frenzy-20130430-2ipyo.html
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frankrider
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And the gold bull is over? Just getting started imo. We are well past the stealth stage, time to pump and dump.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
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Count du Monet
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The Jewelry market buys gold as a commodity. Investors buy gold when real interest rates are negative. Presently rest interest rates are minus 5% or so in the major currencies. Until real interest turn positive, Gold ain't leaving the building!
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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