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  • yellowpooch1 yellowpooch1 Apr 16, 2004 11:43 PM Flag

    Dollar Short Squeeze

    This is a fantastic essay on the possibility of a dollar short squeeze, the potential triggers thereof, likely official counter-measures and the winners and losers of such a catastrophic event. It is a very sobering read, but one that is absolutely necessary for open-minded contrarians, i.e. some gold bugs....YP100+++

    [snip]

    �Many readers are probably wondering how we explain the sharp rise in commodities as it pertains to our call on the dollar. Commodities, particularly the metals, made a spectacular performance in 2003. To many observers, this is an indication of inflation and economic recovery. We disagree. The rally was ignited by weakness in the dollar then fueled by misleading signals of recovery indicated by a sharp rise in GDP late in 2003. We believe that the GDP growth figures of 2003 are the direct result of massive stimulation from the government and also due to the deprecating dollar. These conditions are not likely to last much longer. The rise in commodities went parabolic in early 2004 and now seems to be sustained by speculation and hoarding. As of this writing, the entire metals complex is making a sharp correction coincident with a sharp rise in the dollar index. Although not yet indicating a true trend change, this action supports our belief that a rising dollar will reverse the commodities rally. In fact, the rise in commodity prices may be the trigger for a recession and cause its own reversal.�

    http://www.gold-eagle.com/editorials_04/paulos041604.html

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    • Are u sure you are not rico_y_guapo? Perhaps you are upset that Raptor went long gold yesterday?? BTW, it is the ESF that manipulates gold prices, not the IMF. My mistake. Just switch "ESF" where I mentioned "IMF".

      kolorado

    • ECB's Trichet: We do not fine-tune the economy - Julius Baer
      D. Kohl, Economist at Julius Baer
      The ECB council meeting on April 1 gave us further reassurance that the central bank will stay on hold for the remainder of the year. ECB President Jean-Claude stated quit clearly that the current weakness in Euro-zone consumer demand, which the ECB is worried about, will not be addressed by lower interest rates.

    • does to me.. thx

      kolorado

    • [This is blatantly false. If you said this to just about anyone in finance at even a left wing university, they'd laugh you out. You can't make these kind of wild assertions if you want to be objective about what's happening. Don't believe me? When was the last time Treasury sold gold?]

      First of all I am right wing, not left wing. The treasury transferred ownership of it's gold to the FED many years ago, you can find all of this in the fed and treasury reports. So your statement about the Treasury selling gold is absurd.

      Alan Greenspan has stated on at least 4 occasions that he can and will depress the gold price "with the cooperation of friendly CBs" (I am paraphrasing). Now how do you suppose he can make that threat considering that selling any FED gold is illegal? Wait until the Blanchard suit settles and you will understand the connection between the FED and short interest in gold futures during the 1990s. The major gold BBs throughout the world maintained short positions in gold futures throughout the 1990s until several years ago. When the gold price went from 270-420 the balance sheets of none of these major short gold derivative holders were seriously impacted by the increase in gold price. That is because these derivatives represented no risk to those banks. They held bullion from a sponsor to offset each short position. If you think only the European CBs lent gold to those banks you are crazy. And don't tell me the miners lent 15,000 tons of gold to these BBs. None of the miners hoarded appreciable amounts of gold in the 1990s. It was all sold forward.

      kolorado

    • well...if you are asking what "my opinion" is...I honestly dont know what will happen

      my guess is that yes lots of stops were hit in Eur/Usd and it was too many folks in the trade and easy to blow their stops when 1.29 didnt break...

      dont really think they ever went "long" dollars..just cashed in alot of profitable trades..

      key is what is the interest rate differnetial outlook for ECB/fed this seems to be quite the focus of attention short term... its my personaly opinion that the ECB wont lower rates this summer based on current numbers and its my "opinion" the fed is not going to raise rates this summer and probably not till late this year

      its also my "opinion" that capital flow reports in 2 months will show a sharp dropoff in foreign investment ...mainly due to japan not buying the huge amount of treasuries.. and its my {"opinion" that data will weigh on the dollar as the size of current account deficit continues to grow and the funding of that deficit comes into doubt.

      however if my "opinion" is incorrect and the fed were to raise rates or signal a raise in rates and/or the ecb were to lower rates or signal a campaign to lower rates then the USD could definitely rally further as stop losses get hit and specs try to front run intl capital flows to the "high yielding real return country"


      all my "opinion"

      doesnt matter what I think

    • DB:

      Do you agree that the current dollar rally is caused by specs, hedgers, and Banks unwinding their short positions? If so, do you think it will end before 92 on the CEC index and do you think they will all go short again then?

      kolorado

    • the tail wags the dog quite often actually...


      across all markets


      hedge funds are front runningn the banks who are front running their customers

      CTA funds push commodity markets around every day

      futures specs force liquidation in many markets... happens alot in japan.. JGB market for one.. and the "authorities" respond by incresing margin requirements

      pick any market it happens...

    • International corporations are the instigators of currency transactions which are handled by their agents. brokers and banks. Some hedge funds engage in the speculation to which you refer, but I say again, it's peanuts. The tail does not wag the dog.


      they are all making a "bet" when they hedge their currency exposure

      would you prefer any discussion of the dollar focus solely on trade flows? or investment flows? what?

    • I was a trader. I know the machinery



      congrats... i was a futures trader myself

      do you want to argue semantics all day?

      what do you care if someone says "dollar short squeeze"? you know what we're talking about ...

    • [I did'nt make up the nomenclature for the markets.[

      But you invent concepts based on a misinterpetation of what those words mean. Your inventions then allow you to reach all manner of ridiculous conclusions.

      There is something of value to that though in that your expected return rises a little because you're allowing a random process to make decisions rather than using an intellectually concocted determination to so do. Calculation pulls down the expected return substantially from what is available to processes like coin toss.

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