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« SK OptionsTrading Makes 43.20% in 14 Days by Shorting the Gold Miners | Main | Gold Drops Below Cash Cost, Approaches Marginal Production Costs »
Tuesday
Dec032013

Gold Price Manipulation And The Dog Track

Background

What follows is a light hearted ‘take’ on the current situation in the gold and silver space.

Many of our readers refer to the manipulation of the gold price for the reason that gold isn’t trading a lot higher than it is today. If you believe that the price of gold is manipulated by the ‘powers that be’ in order to drive prices lower then let’s indulge our imaginations by way of a visit to the dog track.

The Dog Track

Let’s assume that you have been invited out for night of fun at a dog track racing event. You go with your pals and when you get there the word is that dog number five is going to win the next race. Much enthusiasm and frivolity follows as the countdown to race start time builds to its climax. Now you are aware that everyone thinks that the race is rigged, knowledgeable friends are sure that number five will indeed win this race.

It is decision time for you. You can either avoid this race as you know the result may have been tampered with or you could place a small wager on the said grey hound in the hope that your pals are correct. Alternatively you can study the form as they say and decide to place your small wager on dog number three as it looks the part and has a good track record etc.


The chances are that you will be swayed by the superior knowledge of your friends and go with the flow and back dog number five.

Gold

The situation is similar for the gold market; you are convinced that the gold market is rigged and gold is being forced down and is therefore losing its value. You know that gold has been going down for past two and half years or so, despite the many factors that suggest it should be trading at a much higher price level. You are in a similar position to that of the dog track in that must try and decide what the appropriate action is, in order to make a profit.


The recent history of gold prices is littered with false dawns and rallies that have struggled to gain any sort of meaningful traction before petering out.

Should you go with the flow and position yourself accordingly or should you buck the trend with the view that gold is about to win today and you will be the beneficiary.

Conclusion

There are many answers to the above dilemmas and I can only give you my very humble personal view on both situations.

When it comes to gold I will go with the flow, which is bearish, even though I am a gold bull at heart. Now isn’t the time to imagine what gold should be doing, now is the time to trade according to the trend. Rigged or not the gold price is going down and has been for some time now and those who are long are getting battered financially.

When the trend changes so will our trading strategy; as retail investors we are small enough and nimble enough to reverse course completely and set sail in a new direction.

Finally the dog track decision; I would probably place a tiny wager on a dog which had the same name as my favorite Auntie or if it was wearing a racing jacket with ‘go-faster’ stripes or some other frivolous nonsense would sway me. But above all else the wager would not be much more than the price of a drink, as my knowledge of racing dogs is non-existent and I have never actually been to a dog track racing event.

Dogs are for fun, gold is serious, so get serious and see the situation as it is and not as you imagine it should be and trade accordingly.

Got a comment, fire it in, especially if you disagree, the more opinions that we have, the more we share, the more enlightened we become and hopefully the more profitable our trades will be.

Take care. 

In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us atStock Trader our premium investment service.

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Reader Comments (4)

Setting up for another short??

December 4, 2013 | Unregistered CommenterP

Bob,
Everything else is rigged so why would't gold be? We live in a sinister Orwellian world
where white is black, or white is black. People can be made to believe anything, no matter how preposterous, which is why the markets are still climbing, but it is like musical chairs, and suddenly the music will stop. That's when you want to be in gold bullion.

December 4, 2013 | Unregistered CommenterPeter

Bob:

I am a "gold bug", and I see the situation differently. I look shor-term, medium term, and long term.

The dog track is a bet, you win or lose. The gold decision is a purchase of a timeless, proven commodity, which you will have in your hand (assuming you did not buy paper gold) for as long as you wish to hold it. At this point in time, we are far closer to a "bottom price" than to a top. Sure, it may drop further, but you always have the gold. And given what governments have been doing lately, it cannot end well for the fiat money.

If I had no gold, I would get into some gold. If I had some gold, and had cash flow positive, I would continue to buy more on any drop, and space it so you have cash to purchase all the way down to, say $700-800, every hundred dollars, or every fifty. With the current chinese demand, and Indian elections coming in May, and the financial mess in US/Detroit/etc, no place for gold to go long term but up. I would do the same with silver.

Don't trust the government, and don't trust the dollar. Both are going to hell.....

December 4, 2013 | Unregistered CommenterJim

You are right I'm a major owner of PMs and a survivalist. I know this paper economy is doomed, but for now, I'm back in the darned stock market because that's where it's at for a couple of years. Yuck!

December 4, 2013 | Unregistered CommenterMiles

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