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myavatar's picture

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m65's picture

It's like playing Hearts. The queen is the naked shorts used to depress the price of gold and silver. You flush the queen out by taking possession of the physical gold and silver. <a href="">m65</a> <a href="">kamagra</a>  <a href="">attorney</a> <a href="">lawyer</a>  <a href="">scrub</a> The Chinese have started doing that. If they keep doing it, the queen is sure to be flushed out. The more people join them, the faster the queen will be flushed out. Flushing the queen out is great fun, and everyone can help a little bit - even if that little bit is just buying a few nuggets from your neighbor after he has reopened his old mine.

Anonymous's picture

Interesting..But couldn't someone put the same effort into analyzing SILVER?
The counter-balancing argument is always GOLD is preserved in Vaults...
Whereas the real tipping point is Silver as a necessity for technological advancement...
Thus a better presentation would be all the above arguments applied to the production of Silver and then go one step further and compare it to the production of Gold ...
NOW that would really get my attention...

"The bargaining value is determined by scarcity...not by pricing..." - quote - ME ;)

orca's picture

Great article.
However, the statement "Japan's deflation didn't definitively end until 2007 or 2008." is not true, just last week the Bank Of Japan stated that deflation, at 2,4% (inflation of -2,4%, just to be sure everyone understands this) is at an all-time high.

Jay's picture

Much has been said of the 'Chinese put', but from March '08 to Nov '08 gold moved from about $1000/oz to $700. Where was the Chinese put then? The Chinese have already said they've been buyers for the last 8 years.

DrPsycho's picture

The Chinese have also made it clear they did not want to "disrupt the market" -- i.e., cause the price of gold to rise -- with their buying.   They were pretty skillful, and certainly were buyers all the way down.

"The IMF sells 400 tonnes" story has been around for at least a couple of years, and re-appears every time gold makes a new high, or seems to be about to.  The IMF has needed congressional approval on that sale, and now has it, as of earlier this year.


The consensus among people knowledgeable about gold, is that China will buy the IMF gold before it hits the market, with no effect on gold's price.

I bought into this gold market in '05, and added to my holdings massively during the '08 selloff, buying particularly at the Oct/Nov 08 lows in gold miners.

I have no losses during this recession as a result, but rather have made satisfying gains in my holdings.  I believe gold and other PMs will get me the rest of the way through this depression, not only preserving but likely increasing my wealth.

BTW, holding and selling gold within a Roth IRA will produce no tax liability.


Anonymous's picture

This might be a relevant post to all the commentary about Gold prices in inflation and deflation

Robert Prechter recently did an "in-depth" analysis of Gold and Silver. You can download his entire booklet here.
In the eBook, Prechter notes "All the huge gains in gold have come when the economy was expanding".
Mish countered in his blog by saying that : "All the huge losses in gold have come when the economy was expanding."
While Prechter went on to conclude his usual cash will be king and Gold and Silver will be buyable after they fall about 99.83%, Mish went on to conclude that Gold does well during environments of Credit-Stress (Stagflation, hyperinflation, or deflation), whereas direct inflation has zero correlation with Gold.
While on the surface their arguments make sense (as much sense as Prechter's arguments usually make), it is appalling to see that both our geniuses forgot the most important component of analysis of Gold Prices. The underlying currency.

When one makes arguments about the Gold Price and one does it while ignoring every currency in the world except the almighty USD, it shows how important the average American feels. Even the ones that think the US is doomed.

Anonymous's picture

It's like playing Hearts. The queen is the naked shorts used to depress the price of gold and silver. You flush the queen out by taking possession of the physical gold and silver. The Chinese have started doing that. If they keep doing it, the queen is sure to be flushed out. The more people join them, the faster the queen will be flushed out. Flushing the queen out is great fun, and everyone can help a little bit - even if that little bit is just buying a few nuggets from your neighbor after he has reopened his old mine.

vonchor's picture


what about:

On September 18, 2009, the IMF's Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one eighth of the Fund's total holdings.

12,965,649 fine troy ounces

Predicting the future is hard - not an arg 1 way or another for AU, but gold starts to look lika crowded trade. Also - don't forget when you sell it it's ordinary income tax, not cap gains,  no matter how long you hold it for.


gookempucky's picture

Thank you Chumbawamba for saving everyone valuable time in response to anon 87021.

Gold and its little sister silver have just reached 7 on the Beaufort scale--more to come as 12 is on the horizon---no hope or salvation or any form of chicanery will free fiat from its NO confidence- PERIOD.

AU 79 196.9665 is elemental

Anonymous's picture

Ken Fisher says not to buy gold. I will take his word for it.

Anonymous's picture

Ah yes, Ken Fisher the guy who said 2008 would a good year on the stock market and to invest in AIG

Anonymous's picture

There's some evidence that supply-demand fundamentals for gold don't support current prices.

Much of the price rise is likely due to weakness in the US dollar...but how has it done in Canadian dollars, Aussie dollars, etc?

Fruffing's picture

Chumba, as the brothers Hunt showed us, silver's a thin market.   Any concern about it being gamed?

Señor Tranche's picture

I'm curious what people think about silver as an investment.  I own a good amount now.  What are its advantages and disadvantges relative to gold?

Marge N Call's picture

I own quite a bit of physical silver (mostly bars and eagles). It is definitely bulky, but I don't mind that so much. I like silver for the following reasons:

1) In the event of a total collapse, it is more "spendable" on small stuff than gold, i.e. I can buy small-ticket stuff pretty easily vs. using a 1 oz, or even 1/10 oz gold goin.

2) It typically lags gold in appreciation as a hedge (not all the time), so it can potentially still be a good buy even if gold rockets.

3) It is also an industrial metal so there is demand outside of investment/hedging.



Jay's picture

The main disadvantage of physical silver compared to gold is that it's heavy and bulky. It's almost 63 times heavier than gold for the same dollar amount.  Silver prices are much more volatile than gold also.

chumbawamba's picture

You should listen to this interview of Jason Hommel:

In it he makes a very good point that if/when gold and silver start being used as money again the banks and big funds and everyone will pile in because they'll want to make money on it.

Sort of not terribly relevant to your question, but at any rate silver is a terrific investment right now.

Here's my philosophy: gold is my store of wealth; silver is my investment.  When silver achieves lift-off I will start to trade my silver for gold.

Silver is money, and it is also an industrial metal these days.  There is a critical shortage of silver that is about to be established.  Not tomorrow or next week or probably not even next month, but various people are making this observation, and I concur (look at the charts for above ground silver's at a multi-year low).

There is also the historical ratio of 15 silver to 1 gold that some folks think silver will ultimately return to (currently it's at ~60:1).

Bide your time.  Sell at the peak, then move into gold.  Retire.

I am Chumbawamba.

Anonymous's picture

do you own silver paper or physical silver? to play the game you have to get the heavy stuff. the postman will love you and so will your wife......

Anonymous's picture

I like the analysis.

Adrian Burridge

Apocalypse Now's picture

Great article.

The one thing about the pyramid I question is that it states listed stocks are safer than corporate bonds. 

That depends on the environment, and when corporations are issuing more shares, P/E values are through the roof, and dividend yields are cut to nothing - having a real claim on something is safer = prefereds or bonds (equities and bonds are both subject to default risk, but in the event of a default at least a creditor might have a claim on assets).

Anonymous's picture

ok, so everyone wants me to think gold is going up. I don't buy it.

If one thinks that gold is going to 2000 dollars an ounce...I would perdict $500.


Gold is just getting pumped by too many comes down to supply and demand. Let's go back the last time when all the brokers were selling gold. Couldn't loose money on it. Well, in came the Russians and bang gold went to almost nothing. Gold can be one of the hardest things to get out of with a profit there is.

I look at the biggest gold mine in South of the biggest vains in all the world. Also, one of the deepest mines. Is it open...NO. A miner said if GOLD gets to $1000 dollars and the company thinks it will stay there for a good amount of time (5-10yrs) then -- open she will become.

We're at $1000 now...but, the boards are not coming down. I'm bearish until I see movement at the mine. I do think the prices have been manipulated...and don't want to be caught long. On the other hand I don't want to be caught short in case the manipulation reverses direction.

So, I don't beleive Gold will be a good investment over the next couple of years.

Anonymous's picture

I normally stop reading when I see "loose" instead of "lose".

Marge N Call's picture

So you are saying this mine has bigger vains than Madonna. NO fucking way dude...

Mr. Mandelbrot's picture

I "perdict" you are wrong and I "beleive" it's you who are going to "loose" lots of money.

chumbawamba's picture

You are anonymous, so I won't respond to your lame comments with any valid counter-argument.  I'll just respond by saying that you are dumb.

I am Chumbawamba.


Fruffing's picture

Cool Chumba.   A commenter on mining who refers to "vains" of ore is hardly worth responding to.

Anonymous's picture

is that you karl?

Anonymous's picture


Anonymous's picture

People always say to buy gold in recessions, but thats when it generally is peaking...

Anonymous's picture

gold isn't an investment - it is money pure and simple in its most divine and pristine form....

other entities rise and fall in terms of gold but gold lives on through the millenia....

once the gold cartel which has suppressed gold since the 1960s is broken, the worthlessness of those other fraud currencies will be exposed for all to see.....

at 1000 usd gold is a rip roaring bargain no matter what its short term visiscitudes may be....

buy early and buy often.....

Marge N Call's picture

Agreed. Gold doesn't necessarily make you rich as an investment, rather it preserves your purchasing power over the medium-long term.