Guest Post: Debunking Anti-Gold Propaganda

Over the weekend, Dian Chu proposed the "precious metals (and specifically silver) are a bubble" argument to a rather vociferous reaction from readers. Today, to keep the argument balanced, we present the counterpoint from Doug Casey: basically, there is no spoon...or bubble.

Submitted by Doug Casey of Casey Research

Debunking Anti-Gold Propaganda

A meme is now circulating that gold is in a bubble and that it's time
for the wise investor to sell. To me, that’s a ridiculous notion.
Certainly a premature one.

It pays to remain as objective as you
can be when analyzing any investment. People have a tendency to fall in
love with an asset class, usually because it’s treated them so well. We
saw that happen, most recently, with Internet stocks in the late ‘90s
and houses up to 2007. Investment bubbles are driven primarily by
emotion, although there's always some rationale for the emotion to latch
on to. Perversely, when it comes to investing, reason is recruited
mainly to provide cover for passion and preconception.

In the same
way, people tend to hate certain investments unreasonably, usually at
the bottom of a bear market, after they've lost a lot of money and
thinking about the asset means reliving the pain and loss. Love-and-hate
cycles occur for all investment classes.

But there’s only one
investment I can think of that many people either love or hate
reflexively, almost without regard to market performance: gold. And, to a
lesser degree, silver. It’s strange that these two metals provoke such
powerful psychological reactions – especially among people who dislike
them. Nobody has an instinctive hatred of iron, copper, aluminum or
cobalt. The reason, of course, is that the main use of gold has always
been as money. And people have strong feelings about money. Let’s spend a
moment looking at how gold’s fundamentals fit in with the psychology of
the current market.

What Gold Is – and Why It’s Hated

Let
me first disclose that I’ve always been favorably inclined toward gold,
simply because I think money is a good thing. Not everyone feels that
way, however. Some, with a Platonic view, think that money and
commercial activity in general are degrading and beneath the “better”
sort of people – although they’re a little hazy about how mankind rose
above the level of living hand-to-mouth, grubbing for roots and berries.
Some think it’s “the root of all evil,” a view that reflects a certain
attitude toward the material world in general. Some (who have actually
read St. Paul) think it’s just the love of money that’s the root of all
evil. Some others see the utility of money but think it should be
controlled somehow – as if only the proper authorities knew how to
manage the dangerous substance.

From an economic viewpoint,
however, money is just a medium of exchange and a store of value.
Efforts to turn it into a political football invariably are a sign of a
hidden agenda or perhaps a psychological aberration. But, that said,
money does have a moral as well as an economic significance. And it’s
important to get that out in the open and have it understood. My view is
that money is a high moral good. It represents all the good things you
hope to have, do and provide in the future. In a manner of speaking,
it’s distilled life. That’s why it’s important to have a sound money,
one that isn’t subject to political manipulation.

Over the
centuries many things have been used as money, prominently including
cows, salt and seashells. Aristotle thought about this in the 4th
century BCE and arrived at the five characteristics of a good money:

• It should be durable (which is why, say, wheat isn’t a good money – it rots).
• It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change).
• It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value).
• It should be consistent (which is one reason why land can’t be money – each piece is different).
• And it should have value in itself (which is why paper money leads to trouble).

Of
the 92 naturally occurring elements, gold (secondarily silver) has
proved the best money. It’s not magic or superstition, any more than it
is for iron to be best for building bridges and aluminum for building
airplanes.

Of course we do use paper as money today, but only
because it recently served as a receipt for actual money. Paper money
(currency) historically has a half-life that depends on a number of
factors. But it rarely lasts longer than the government that issues it.
Gold is the best money because it doesn’t need to be “faith-based” or
rely on a government.

There’s much more that can be said on this
topic, and it’s important to grasp the essentials in order to understand
the controversy about whether or not gold is in a bubble. But this
isn’t the place for an extended explanation.

Keep these things in
mind, though, as you listen to the current blather from talking heads
about where gold is going. Most of them are just journalists, reporters
that are parroting what they heard someone else say. And the “someone
else” is usually a political apologist who works for a government. Or a
hack economist who works for a bank, the IMF or a similar institution
with an interest in the status quo of the last few generations. You
should treat almost everything you hear about finance or economics in
the popular media as no more than entertainment.

So let’s take
some recent statements, assertions and opinions that have been
promulgated in the media and analyze them. Many impress me as completely
uninformed, even stupid. But since they’re floating around in the
infosphere, I suppose they need to be addressed.

Misinformation and Disinformation

Gold is expensive.

This
objection is worth considering – for any asset. In fact, it’s critical.
We can determine the price of almost anything fairly easily today, but
figuring out its value is as hard as it’s ever been. From the founding
of the U.S. until 1933, the dollar was defined as 1/20th of an ounce of
gold. From 1933 it was redefined as 1/35th of an ounce. After the 1971
dollar devaluation, the official price of the metal was raised to $42.22
– but that official number is meaningless, since nobody buys or sells
the metal at that price. More importantly, people have gotten into the
habit of giving the price of gold in dollars, rather than the value of
the dollar in gold. But that’s another subject.

Here’s the crux of
the argument. Before the creation of the Federal Reserve in 1913, a $20
bill was just a receipt for the deposit of one ounce of gold with the
Treasury. The U.S. official money supply equated more or less with the
amount of gold. Now, however, dollars are being created by the trillion,
and nobody really knows how many more of them are going to be shazammed
into existence.

It is hard to determine the value of anything when the inch marks on your yardstick keep drifting closer and closer together. 

The smart money is long gone from gold.

This
is an interesting assertion that I find based on nothing at all. Who
really is the smart money? How do you really know that? And how do you
know exactly what they own (except for, usually, many months after the
fact) or what they plan on buying or selling? The fact is that very few
billionaires (John Paulson perhaps best known of them) have declared a
major position in the metal. Gold and gold stocks, as the following
chart shows, are only a tiny proportion of the financial world’s assets,
either absolutely or relative to where they've been in the past:

Gold is risky.

Risk
is largely a function of price. And, as a general rule, the higher the
price the higher the risk, simply because the supply is likely to go up
and the demand to go down – leading to a lower price. So, yes, gold is
riskier now, at $1,400, than it was at $700 or at $200. But even when it
was at $35, there was a well-known financial commentator named Eliot
Janeway (I always thought he was a fool and a blowhard) who was crowing
that if the U.S. government didn’t support it at $35, it would fall to
$8.

In any event, risk is relative. Stocks are very risky today.
Bonds are ultra risky. Real estate is in an ongoing bear market. And the
dollar is on its way to reaching its intrinsic value.

Yes, gold is risky at $1,400. But it is actually less risky than most alternatives.

Gold pays no interest.

This
is kind of true. But only in the sense that a $100 bill pays no
interest. You can get interest from anything that functions as money if
it is lent out. Interest is the time premium of money. You will not get
interest from either your $100 or from your gold unless you lend them to
someone. But both the dollars and the gold will earn interest if you
lend them out. The problem is that once you make a loan (even to a bank,
in the form of a savings account), you may not even get your principal
back, much less the interest.

Gold pays no dividends.

Of
course it doesn’t. It also doesn't yield chocolate syrup. It’s a
ridiculous objection, because only corporations pay dividends. It’s like
expecting your Toyota in the driveway to pay a dividend, when only the
corporation in Japan can do so. But if you want dividends related to
gold, you can buy a successful gold mining stock.

Gold costs you insurance and storage.

This
is arguably true. But it’s really a sophistic misdirection to which
many people uncritically nod in agreement. You may very well want to
insure and professionally store your gold. Just as you might your
jewelry, your artwork and most valuable things you own. It’s even true
of the share certificates for stocks you may own. It’s true of the
assets in your mutual fund (where you pay for custody, plus a management
fee).

You can avoid the cost of insurance and storage by burying
gold in a safe place – something that’s not a practical option with most
other valuable assets. But maybe you really don’t want to store and
insure your gold, because the government may prove a greater threat than
any common thief. And if you pay storage and insurance, they’ll
definitely know how much you have and where it is.

Gold has no real use.

This
assertion stems from a lack of knowledge of basic chemistry as well as
economics. Yes, of course people have always liked gold for jewelry, and
that’s a genuine use. It’s also good for dentistry and micro-circuitry.
Owners of paper money, however, have found the stuff to be absolutely
worthless hundreds of times in many score of countries.

In point
of fact, gold is useful because it is the most malleable, the most
ductile and the most corrosion resistant of all metals. That means it’s
finding new uses literally every day. It’s also the second most
conductive of heat and electricity, and the second most reflective
(after silver). Gold is a hi-tech metal for these reasons. It can do
things no other substance can and is part of the reason your computer
works so well.

But all these reasons are strictly secondary,
because gold’s main use has always been (and I’ll wager will be again)
as money. Money is its highest and best use, and it’s an extremely
important one.

The U.S. can, or will, sell its gold to pay its debt, depressing the market.

I
find this assertion completely unrealistic. The U.S. government reports
that it owns 265 million ounces of gold. Let’s say that’s worth about
$400 billion right now. I’m afraid that’s chicken feed in today’s world.
It’s only a quarter of this year’s federal deficit alone. It’s only
half of one year’s trade deficit. It represents only about 5% of the
dollars outside the U.S. The U.S. government may be the largest holder
of gold in the world, but it owns less than 5% of the approximately 6
billion ounces above ground.

From the ‘60s until about 2000, most
Western governments were selling gold from their treasuries, working on
the belief it was a “barbarous relic.” Since then, governments in the
advancing world – China, India, Russia and many other ex-socialist
states – have been buying massive quantities.

Why? Because their
main monetary asset is U.S. dollars, and they have come to realize those
dollars are the unbacked liability of a bankrupt government. They’re
becoming hot potatoes, Old Maid cards. But the dollars can be replaced
with what? Sovereign wealth funds are using them to buy resources and
industries, but those things aren’t money. And in the hands of
bureaucrats, they’re guaranteed to be mismanaged. I expect a great deal
of gold buying from governments around the world over the next few
years. And it will be at much higher dollar prices.

High gold prices will bring on huge new production, which will depress its price.

This
assertion shows a complete misunderstanding of the nature of the gold
market. Gold production is now about 82.6 million ounces per year and
has been trending slightly down for the last decade. That’s partly
because at high prices miners tend to mine lower-grade ore. And partly
because the world has been extensively explored, and most large,
high-grade, easily exploited resources have already been put into
production.

But new production is trivial relative to the 6
billion ounces now above ground, which only increases by about 1.3%
annually. Gold isn’t consumed like wheat or even copper; its supply
keeps slowly rising, like wealth in general. What really controls gold’s
price is the desire of people to hold it, or hold other things – new
production is a trivial influence.

That’s not to say things can’t
change. The asteroids have lots of heavy metals, including gold; space
exploration will make them available. Gigantic amounts of gold are
dissolved in seawater and will perhaps someday be economically
recoverable with biotech. It’s now possible to transmute metals,
fulfilling the alchemists dream; perhaps someday this will be economic
for gold. And nanotech may soon allow ultra-low-grade deposits of gold
(and every other element) to be recovered profitably. But these things
need not concern us as practical matters in the course of this bull
market.

You should have only a small amount of gold, for insurance.

This
argument is made by those who think gold is only going to be useful if
civilization breaks down, when it could be an asset of last resort. In
the meantime, they say, do something productive with your money…

This
is poor speculative theory. The intelligent investor allocates his
funds where it’s likely they’ll provide the best return, consistent with
the risk, liquidity and volatility profile he wants to maintain. There
are times when you should be greatly overweight in a single asset class –
sometimes stocks, sometimes bonds, sometimes real estate, sometimes
what-have-you. For the last 12 years, it’s been wise to be overweight in
gold. You always want some gold, simply because it’s cash in the most
basic form. But ten years from now, I suspect that will be a minimum.
Right now it’s a maximum. The idea of keeping a constant, but
insignificant, percentage in gold impresses me as poorly thought out.

Interest rates are at zero; gold will fall as they rise.

In
principle, as interest rates rise, people tend to prefer holding
currency deposits. So they tend to sell other assets, including gold, to
own interest-earning cash. But there are other factors at work. What if
the nominal interest rate is 20%, but the rate of currency depreciation
is 40%? Then the real interest rate is minus 20%. This is more or less
what happened in the late ‘70s, when both nominal rates and gold went up
together. Right now governments all over the world are suppressing
rates even while they’re greatly increasing the amount of money
outstanding; this will eventually (read: soon) result in both much
higher rates and a much higher general price level. At some point high
real rates will be a factor in ending the gold bull market, but that
time is many months or years in the future.

Gold sentiment is at an all-time high.

Although
gold prices are at an all-time high in nominal terms, they are still
nowhere near their highs in real terms, of about $2,500 (depending on
how much credibility you give the government’s CPI numbers), reached in
1980. Gold sentiment is still quite subdued among the public; most of
them barely know it even exists.

Some journalists like to point
out that since there are a few (five, perhaps) gold dispensing machines
in the world, including one in the U.S., that there’s a gold mania
afoot. That’s ridiculous, although it shows a slowly awakening interest
among people with assets.

Journalists also point to the numerous
ads on late-night TV offering to buy old gold jewelry (generally at
around a 50% discount from its metal value) as a sign of a gold bubble.
But this is even more ridiculous, since the ads are inducing the
unsophisticated, cash-strapped booboisie to sell the metal, not buy it.

You’ll know sentiment is at a high when major brokerage firms are hyping newly minted gold products, and Slime Magazine
(if it still exists) has a cover showing a golden bull tearing apart
the New York Stock Exchange. We’re a long way from that point.

Mining stocks are risky.

This
is absolutely true. In general, mining is a horrible business. It
requires gigantic fixed capital expense to build the mine, but only
after numerous, expensive and unpredictable permitting issues are
handled. Then the operation is immovable and subject to every political
risk imaginable, not infrequently including nationalization. Add in
continual and formidable technical issues of every description,
compounded by unpredictable fluctuations in the price of the end
product. Mining is a horrible business, and you’ll never find
Graham-Dodd investors buying mining stocks.

All these problems
(and many more that aren’t germane to this brief article), however, make
them excellent speculative vehicles from time to time.

Mineral exploration stocks are very, very risky.

This
is very, very true. There are thousands of little public companies, and
some are just a couple steps up from a prospector wandering around with
a mule. Others are fairly sophisticated, hi-tech operations.
Exploration companies are often classed with mining companies, but they
are actually very different animals. They aren’t so much running a
business as engaging in a very expensive and long-odds treasure hunt.

That’s
the bad news. The good news is that they are not only risky but
extraordinarily volatile. The most you can lose is 100%, but the market
cyclically goes up 10 to 1, with some stocks moving 1,000 to 1. That
kind of volatility can be your best friend. Speculating in these issues,
however, requires both expertise and a good sense of market timing. But
they’re likely to be at the epicenter of the gold bubble when it
arrives – even though few actually have any gold, except in their names.

Warren Buffett is a huge gold bear.

This
is true, but irrelevant – entirely apart from suffering from the
logical fallacy called “argument from authority.” But, nonetheless, when
the world’s most successful investor speaks, it’s worth listening.
Here's what Buffett recently said about gold in an interview with Ben
Stein, another goldphobe: "You could take all the gold that's ever been
mined, and it would fill a cube 67 feet in each direction. For what
that's worth at current gold prices, you could buy all – not some, all
– of the farmland in the United States. Plus, you could buy 10 Exxon
Mobils, plus have $1 trillion of walking-around money. Or you could have
a big cube of metal. Which would you take? Which is going to produce
more value?"

I’ve long considered Buffett an idiot savant – a
genius at buying stocks but at nothing else. His statement is quite
accurate, but completely meaningless. The same could be said of the U.S.
dollar money supply – or even of the world inventory of steel and
copper. These things represent potential but are not businesses or
productive assets in themselves. Buffett is certainly not stupid, but
he’s a shameless and intellectually dishonest sophist. And although a
great investor, he’s neither an economist or someone who believes in
free markets.

Gold is a religious statement.

Actually,
since most religions have an otherworldly orientation, they’re at least
subtly (and often stridently) anti-gold. But it is true that some
promoters of gold seem to have an Elmer Gantry-like style. That,
however, can be said of True Believers in anything, whether or not the
belief itself has merit. In point of fact, I think it’s more true to say
goldphobes suffer from a kind of religious hysteria, fervently
believing in collectivism in general and the state in particular, with
no regard to counter-arguments. Someone who understands why gold is
money and why it is currently a good speculative vehicle is hardly
making a religious statement. More likely he’s taking a scientific
approach to economics and thinking for himself.    

So Where Are We?

So
these are some of the more egregious arguments against gold that are
being brought forward today. Most of them are propounded by knaves,
fools or the uninformed.

My own view should be clear from the
responses I’ve given above. But let me clarify it a bit further.
Historically – actually just up until the decades after World War I,
when world governments started issuing paper currency with no relation
to gold – the metal was cash, and it was used as money everywhere, on a
daily basis. I believe that will again be the case in the fairly near
future.

The question is: At what price will that occur, relative
to other things? It’s not just a question of picking a dollar price,
because the relative value of many things – houses, food, commodities,
labor – have been distorted by a very long period of currency inflation,
increased taxation and very burdensome regulation that started at the
beginning of the last depression. Especially with the fantastic leaps in
technology now being made and breathtaking advances that will soon
occur, it’s hard to be sure exactly how values will realign after the
Greater Depression ends. And we can’t know the exact manner in which it
will end. Especially when you factor in the rise of China and India.

A
guess? I’ll say the equivalent of about $5,000 an ounce of today’s
dollars. And I feel pretty good about that number, considering where we
are in the current gold bull market. Classic bull markets have three
stages. We’ve long since left the “Stealth” stage – when few people even
remembered gold existed, and those who did mocked the idea of owning
it. We’re about to leave the “Wall of Worry” stage, when people notice
it and the bulls and bears battle back and forth. I’ll conjecture that
within the next year we’ll enter the “Mania” stage – when everybody,
including governments, is buying gold, out of greed and fear. But also
out of prudence.

The policies of Bernanke and Obama – but also of
almost every other central bank and government in the world – are not
just wrong. These people are, perversely, doing just the opposite of
what should be done to cure the problems that have built up over
decades. One consequence of their actions will be to ignite numerous
other bubbles in various markets and countries. I expect the biggest
bubble will be in gold, and the wildest one in mining and exploration
stocks.

When will I sell out of gold and gold stocks? Of course,
they don’t ring a bell at either the top or the bottom of the market.
But I expect to be a seller when there really is a bubble, a mania, in
all things gold-related. There’s a good chance that will coincide to
some degree with a real bottom in conventional stocks. I don’t know what
level that might be on the DJIA, but I’d think its average dividend
yield might then be in the 6 to 8% area.

The bottom line is that
gold and its friends are no longer cheap, but they have a long way – in
both time and price – to run. Until they're done, I suggest you be right
and sit tight.

Comments

[Atomizer]

USD index is muff-diving, currently at 73.98.

Tomorrow morning, Obama must have a meeting with the teleprompter. Later in the day, we shall learn about those nasty gas pricing thieves overcharging us. I'm sure he'll remind us to buy a new auto considering the inventories are bloating from the seams.

As an added incentive, free marshmallows and hot dogs for the first 2,000 Chevy Volt buyers.

[Caviar Emptor]

Yes: Major Strasser has been shot. Round up the usual suspects: speculators (evil ones, that is), rumor mongers and naked shorts. 

[SuperRay]

If you want to buy a 1 oz Silver American Eagle at APMEX, it will cost you over $53...

[Long-John-Silver]

If you order the 2011 Silver Eagles it could take weeks, months, or a fiat refund because the US Mint is out for Silver.

[DosZap]

Really, how much you want?.

Tulving has them, and Mapes.

[Long-John-Silver]

The buy back price is already past the Hunt Brothers high.

[KinorSensase]

yep.  it took a while but it finally settled into my thick skull today that I should be looking at ebay, etc. to see where physical prices are.  it's almost sad to see the hunt for the Hunt Bro's high is over.  or not.

[monopoly]

I really do wish silver would slow down for a while. Of of course, when it has its short term correction it can start at 55 or so and drop to 45. So, am holding on. Long of course.

[mynhair]

Why is the Yen down?

[thames222]

don't trip, it's only temporary...expect it to skyrocket in the coming weeks

www.forecastfortomorrow.com

[Smiddywesson]

This is like the fall of the USSR baby!  There are going to be drug lords selling US battleships on Ebay.  

The currency can't survive this much longer, so the price everything tangible will go through the ceiling.  Gold will climb the most, because you can't find a place to store your lifetime savings when it's converted into copper.  I can't wait for the tortuous arguments about how surrendering your gold to the government is patriotic and the stories of people turning in their neighbors for holding onto it.  

[Caviar Emptor]

The drug lords will only want gold. Passport office too. Same with your local grocer, he's no fool

[sellstop]

Regarding Buffet.

I think his point could be that he has faith in human nature and is optimistic of the ability of humans to work out their problems and move forward.

Gold doesn't make you rich. it is just a means to save. Unless you are trading, in which case you must judge when it is overvalued and sell it.

But owning gold. Sitting on it, is not productive in a real sense. It is hoarding.

gh

[UninterestedObserver]

The "system" isn't really productive either

[DosZap]

sellstop,

Hoarding?.

What is every wealthy person on this planet doing when they have 100-500 million dollars in a Bank?.

Just sitting because they have everything they want or need?.No, it's insurance(in my OLD life it was).

Is that hoarding or saving?.

In Golds case it's self preservation..............for 99% of the folks here.

I wish I did not have one ounce..I AM FORCED to hoard it.

[blunderdog]

Nobody really has 100 million "in the bank."  Not in the sense us po'folk do.  That's the problem that got us here in the first place.

[gwar5]

Buffet is an ass. His father was a congressman who knew gold was a restraining order on government spending and was a big proponent.

Baby Buffet knows it, too, but could care less about the little people protecting their lifesavings from being confiscated by the government through inflation while they sleep in their beds.

[gwar5]

Buffet is an ass. His father was a congressman who knew gold was a restraining order on government spending and was a big proponent.

Baby Buffet knows it, too, but could care less about the little people protecting their lifesavings from being confiscated by the government through inflation while they sleep in their beds.

[plata pura]

A GSR of 29.77 be intolerable!

[GOSPLAN HERO]

Raid your local antique mall for silver and gold.

[thames222]

haha there we go, nice thinking.  Do you ever wonder who owns those companies that advertise about buying gold and silver to melt?  they're probably toasting Coronas in the bahamas right now

www.forecastfortomorrow.com

[sellstop]

And then there is that "debunking the anti-gold propaganda" thing. It just wouldn't be a pro-gold argument without the conspiracy theory thing, would it?

The tone is pretty shrill around here. It doesn't sound confident to me. Let's see how things go when the fed starts to tighten....(in 2020) LOL....

gh

gh

[Caviar Emptor]

Been confident in gold since $500. Nothing's changed as far as I can tell. If anything, there's even more reason to feel confident as everything seems to be going according to plan. 

[gwar5]

When the Fed tightens:

1. stock market craters to 6000

2. bonds crater

3. Housing craters

4. new record in food stamp applicants and unemployed

5. USA deficits 2.0 Trillion per year, every year, because no one is paying taxes and interest to finance debt is unsustainable

6. We will be the new Greece without the islands

[akak]

SellStop stated:

And then there is that "debunking the anti-gold propaganda" thing. It just wouldn't be a pro-gold argument without the conspiracy theory thing, would it? 

So now you are claiming that it is just a "conspiracy theory" that anti-gold propaganda exists and is disseminated by the political-financial Establishment and their loyal minions?  Do you claim that there is no such propaganda?  May I introduce you to one Jon Nadler of Kitco.com?

[BlackholeDivestment]

                                [[[Mene    Mene   Tekel    Peres]]]

                       Mene=Fed Fiat Zer0         V       Mene=Labor  

 Peres= Gold Bitchez - Labor + FFZer0   V      Tekel=2011 + Labor - FFZer0

 (QEternity)Babylon is Fallen ...is fallen  V     Labor of the Harvest is Risen

                                 Death                   V                Life  

           http://www.youtube.com/watch?v=SuDjeo-_Wbk&feature=related

[Atomizer]

·         Investment Price vs. Investment Value

·         Investment purchasing power = Investment value

·         Dow Jones Index is a ratio to

o   US Dollar : Dow Jones

·         Dow Jones/US Dollar vs. Gold/US Dollar

o   What is the value of Dow Jones/Gold?

In 2000, Dow Jones was 11700 and the value of gold was $285/oz.  11700 divided by 285 = 41 oz. of gold to buy one share of DJ stock.

In 2007, Dow Jones was 12500 and the value of gold was $650/oz.  12500 divided by 650 = 19 oz. of gold to buy one share of DJ stock.

In 2011, Dow Jones was 12505 and the value of gold was $1512/oz.  12505 divided by 1512 = 8.2 oz. of gold to buy one share of DJ stock.  

Are you beginning to see the scam?

I really do care about the ZH members. Sometimes its a real bitch on leading you to the watering hole. 

[yabs]

seems many people now get it about silver

found this new blog promoting silver to crash JPM as well

http://thetruth-jules.blogspot.com/

[Atomizer]

For the Kooks reading my above post. Please instruct all financial MSM outlets to tell the viewers your selling all gold/silver holdings tomorrow.

We in turn will buy everything up. No one wants to purchase your toxic debt vehicles. Once you liquidate all your gold & silver holdings, you'll blow away like a crumbled leaf.

Please force a PM correction. Thank you.

[Stuck on Zero]

The only asset of real value is naked women and gold pressed latinum.

[Old Poor Richard]

Naked green women.

[Verstehen]

The United States is now in a very precarious situation. Here are some "hard facts" about the true situation of the economic super power.

1. The total debt (government, households, enterprises) is around 50 trillion dollars.
2. In 2019 700 billion dollars (17 percent of the total budget revenue) is required solely for debt service.
3. The Fed extended their total assets to around 1.4 trillion dollars since mid-2008. The policy of easy money increases the risk of inflation.
4. Shopping malls have the highest vacancy rate since 1992.
5. The office vacancy rate is nearly 20 percent.
6. The refinancing of several hundred billion dollars of commercial real estate loans will reach its peak at the end of 2013. In the next few years, bankruptcies will pile up, the profits of investors, among them major banks will fall further.
7. Given the dramatic rise in (unofficial) unemployment and the decline in disposable income, a large portion of these loans will not be repaid. 65 percent of the pending mortgages are at risk. Thus, 40 percent of all U.S. banks are facing threats to their existence.
8. Falling commercial real estate prices also mean collapse in profits for hedge funds, banks and pension funds.
9. The crisis in the U.S. housing market is far from over: In late December 2009 the U.S. government guaranteed real estate finance companies Fannie Mae and Freddie Mac a full coverage of losses to 2012, thus replacing the previously promised 400 billion dollar guarantees. The government justified these measures by the need to protect the real estate market, that means in plain language, not to let the real estate market to collapse once again.
10. The banks that are still suffering under the heavy losses in home mortgages will not be able to catch the next wave of losses in commercial real estate. There's a danger that hundreds, if not thousands of medium-sized banks have to be closed.
11. According to the Federal Reserve, Banks threatened by losses on commercial properties currently have an emergency fund equal to only 38 cents for every dollar of bad loans.
12. The government deposit has a deficit.
13. The (unofficial) unemployment rate (especially for unskilled workers) will remain high much longer as in previous recessions. The official overall unemployment rate climbed within four years to 14 million.
14. 40+ million U.S. citizens (compared to half the population of Germany) are dependent on food stamps.
15. About 50 million Americans receive government support so they can go to the doctor.
16. About one-third of U.S. households have little access to mortgages and credit cards. This third live from paycheck to paycheck which often is shrinking due to declining hourly wages and hours of work.
17. A record number of small businesses go bankrupt. The same is true for households because millions of weaker and poorer borrowers can not pay their mortgages, credit cards and consumer loans.
18. The economic base continues the rotting process because corporations continue outsourcing which is worsening the trade deficit. A loose money policy will not heal this process.
19. Most U.S. citizens pay into pension funds. About 20 trillion dollars are waiting to be paid to U.S. retirees. But where to get?
20. The federal government has liabilities that are 90 percent of economic output in the country. If taxes (or inflation) are increased the overall health of the economy will worsen.
21. The decline of the U.S. currency could force more and more countries to dump their dollar reserves (which China, India, Mexico and other countries already do). The time of the U.S. dollar as reserve currency seems to be over.

Conclusion of this disastrous balance sheet: Adios, USA!

[Caviar Emptor]

Somebody needs to press the reset button. But TPTB would cut that finger off if it tried. Hence the conflict. Stay tuned. 

[Caviar Emptor]

Duplicate

[Instant Karma]

Just looking for a place to sneak in this comment. There's an ad running on ZH for Pinnacle Gold Group urging people to buy silver, with a picture of a US Platinum Coin. Someone should help them clarify their message.4

[Jim in MN]

Shiny shiny drool drool....caveat emptor

[pan]

Let's get this bank run started!

[Old Poor Richard]

Do you suppose TPTB called their bitch in the White House at about 6:10 tonight and asked him what the fuck he and his minions are going to do about $48 silver?  I'll bet there's a whole bunch of pissed off people right now.

[illyia]

Nice rebuttal.

[beanieville]

Gold is headed to $36,000, same with Dow Jones:

http://bettertrading.blogspot.com/2011/04/gold-to-36000.html

[Jim in MN]

Gold:Dow 1:1 will be at 5000, not 36,000.  But it will come. 

[plata pura]

The precious going silly all up in London; it's lessor cousin gold showing stability too.

[What_Me_Worry]

$47's, AND ITS GONE.

[SilverRhino]

Goodbye 48!!  48.35 and rising ....

[MCHedgeHammer]

anti gold propaganda?  gold and silver are easily winning the PR battle right now.  Its the dollar that needs a new PR team. 

[faithfulwatchman]

Try 48.56......close to Hunt Bro High

[fuu]

Straight up rocket ship $48.81! Wait $48.91! $48.97!

[Bubbles...bubbl...]

$48's, AND ITS GONE.

[RmcAZ]

Wtf is going on... silver appears to be heading up exponentially... Kitco is reporting that it is up $2.25 to $48.88.

[fuu]

$49.19! $49.21!

[JPDG]

$49 on Silverseek!!!  WTF?!!!

[Let them all fail]

meanwhile, silver going apeshit, now at 48.97 after jumping $1 in that last 15min, my portfolio approves...

[Let them all fail]

meanwhile, silver going apeshit, now at 48.97 after jumping $1 in that last 15min, my portfolio approves...

[Let them all fail]

now at 49.27, probably at 50 by the time this posts given my slow-ass computer...insane...

[dogbreath]

if that is the shorts covering then tomorrow is gonna be an epic day.

[mr_T]

SILVER 48.87!!! my JUNE 50's are Dynomite... ya ya'll.....
I pity the fools shorting AG...

[mr_T]

SILVER 48.87!!! my JUNE 50's are Dynomite... ya ya'll.....
I pity the fools shorting AG...

[UncleFurker]

$49.19

I can't go to bed while this shit is going down.

[latizziforchizzi]

goodbye $48...

[RmcAZ]

Goodbye $49... this is incredible. Almost seems like an error/misprint.

[fuu]

$49.27!

[latizziforchizzi]

me either. I just want to peak at the price!

[JPDG]

What's the record high again?  $49 and change? 

[plata pura]

At this second it be $153.77usd per 1 ozt of .999ag would be the all time high; however that figure be rising as endless easing occurs from the Jekyll isle compact. Look for the 1 usbbl of light sweet trade for 1 ozt .999ag; that be when things really start getting interesting. 15-25% swings in precious trading will occur.

[fuu]

$49.81!

[youALREADYknow]

EPIC NIGHT!!! 49.75!!

[chet]

W.  T.  F.

[What_Me_Worry]

What a run.  Time to breathe.

[fuu]

Aaand just as fast back to $48.96.

[latizziforchizzi]

49 and change is about right. I think silver peaked at $54 and change back then...

[JPDG]

Paper pushers just came in and spanked it down!  

Did silver break it's all-time record? 

[mr_T]

is this going to be the epic squeeze we have been waiting for???

feels like we are approaching a Thelma & Louise moment for silver this week...

[Korrath]

Holy shit!  

I feel like I want to call every fucking person I know and start yelling.

[What_Me_Worry]

+49.xx.  I laughed.

[dogbreath]

me too.  I was the crazy guy at the bus stop ranting about gold and silver to all the strangers in 2002-4.

tomorrow is going to be interesting.  Monday morning slap down or the chinese bitch slap market wake up call.

[tomster0126]

love it---and now you're stinking rich and laughing in their faces?  Anxious for tomorrow morning and this week.....

www.forecastfortomorrow.com

[dogbreath]

no I am not am am not.   friday runups are aften followed by monday dropoffs.

[latizziforchizzi]

I'm gonna piss myself if it hits $50, then wake my wife up & scream!

[UncleFurker]

Peaked at 49.73921 at xe.com

[fuu]

I saw $49.81 on Kitco for 3 refreshes then the crazy bounces started.

[gwar5]

Holy shit! Silver is going nuts!  49.++++++

$48.... we hardly knew ye.

[chet]

Kitco has it bouncing all over the damn place.  Not sure what's up.

[chet]

$2 dollar swings in 10 minutes.

[e_goldstein]

I don't want to say that Dian Chu is the Tokyo Rose of the Ag market; 

but I might have seen her french kissing Jon Nadler...

[latizziforchizzi]

The alarm clock woke up the shitbag cartel banksters up. I guess there going to gear up for monday morning manipulation dip!

[gwar5]

Holy shit! Silver is going nuts!  49.++++++

$48.... we hardly knew ye. Must have been some resistance at $48 and skipped right over it.

[Cruzan Stomp Revival]

Jeebus... silver is making a run at the Hunt high tonight. I almost feel sorry for those poor, silly bastards who are short 700+ Moz on Comex with no metal on hand. How in the hell do they bail on those outsized positions? Throwing more unbacked paper shorts at the longs is like pouring gasoline on a fire.

We could be looking at the greatest short squeeze in history folks...

[SilverRhino]

http://www.bullionvault.com/gold-price-chart.do : 48.90 down from a high of 49.63

APMEX: 48.91 ask

KITCO SLV chart : 48.80 and dropping from a high of 49.75.  

This is getting CRAZY.

[Ecoman11]

>>>WATCH SILVER GO PARABOLIC IN REAL TIME http://www.semmo.net/streaming-real-time-quotes-gold-spot-price-silver-s...

[latizziforchizzi]

Jamie Dimon is gonna have a heart attack. I wonder how close the JP Morgue is to throwing in the towel?

[artinlight]

http://www.youtube.com/watch?v=LrtdPYiTcB8

[DollarMenu]

Thanks for the video link.

The guy is right up front with his internal battles.

There is another video he has about trust & value which I also enjoyed.

He says he is an artist which is maybe why his presentation is so honest and raw.

Only on ZH do we find these many pathways to truth.

[Korrath]

Goddamnit, how the hell am I supposed to get to sleep now?!  

That was a main-line shot of pure adrenaline.

[Bubbles...bubbl...]

It was better than sex, and I made money for a change.

[Get_to_the_choppa]

Exactly what I was just thinking...how the f#$@ am I supposed to sleep with this going down. 

[Captain Planet]

can someone please provide a link to an up-to-date dollar index.

[fuu]

http://www.marketwatch.com/investing/index/dxy

That is wht I use.

[Ecoman11]

Seriously, no sleep for me tonight.

[werealldoomed]

Yea, there's no way. ZH party tonight.

Time to get some beers..

[DollarMenu]

I miss Marla and ZH Radio.

[New Survivalist]

APMEX has blown though 18,000 oz. of 2011 SAE's in the last 24 hours.

On a HOLIDAY weekend.

Eat me, RoboTrader.

[akak]

LOL!

But I wouldn't lightly make such an offer to MomoTrader --- given all his abysmal trades lately, he may just find himself forced to take you up on it.  Either that, or fricasse some tasty Lululemon stocks --- you can eat them after all, you know, they're just not particularly tasty or nutritious.

[SilverDoctors]

Silver short squeeze going down NOW!!!!!   $49.80!

http://silverdoctors.blogspot.com/2011/04/silver-passes-4850.html

[Ecoman11]

I hope Tyler isn't sleeping through this...

[Korrath]

Tyler's going to wake up to this in a few hours and spew coffee all over his keyboard...

[latizziforchizzi]

dollar index 74.063...

[latizziforchizzi]

My bad. Here is a link....

http://www.bloomberg.com/apps/quote?ticker=DXY:IND

[Papaneuf]

Gold & Silver, Bitchez!

http://www.youtube.com/watch?v=ZNGe7iK1O-4

[Pool Shark]

Somebody at Kitco has a sense of humor;

They're quoting the Gold/XAU Ratio at "INFINITY"

LOL!

[Korrath]

Hahaha, just saw that.  :-D

[Ecoman11]

I doubt the media can leave this event out of the headlines. Now they have to report it or they look stupid.

[Drag Racer]

they already look stupid

[latizziforchizzi]

I also liked "For a few dollars more"...

http://www.youtube.com/watch?v=mLXQltR7vUQ&feature=related

[plata pura]

Brethren calm thyself for this be but a pop corn fart in a cat 5 hurricane. The sovereign wealth fundBD7 pit team arrived and spent their bonuses vowing to take the physical.

[Dr. Porkchop]

I'm guessing we'll see some pullback this week, a few dollars down before getting ready for the next leg up. Which means we should be seeing the PM trolls come out of the woodwork on wed or thu.

[plata pura]

Should be a good morning here in the colonies once the pit opens for trade. Russia looks to be on the ask with entente of Germany and Russia fast tracking large water cleaning facilities for next generation computer chips. IBM Vermont will have some competition.

[ivars]

This article just support the nearing of the top, when such articles that create theories to support bubbles start to abound, and are enthusiastically greeted by traders who is by now acting as almost one with regard to suggesting buying physical silver at any price, and support this by :

1) silver is scarce

2) silver is used in industry (as if it was not before April 2010 when gold to silver ratio was 60:1)

3) Every chinese peasant and governments are buying up silver, etc.

4) USD is on its way to be devaluated by QEx NOW ( not true, the debasement of world reserve currency will happen later and with much pain before it does).

While I believe gold is not in for a major correction ( may be 10-20%) temporarily as USA starts to tighten monetary policy, silver definitely is on its way to contract about 40-50% short term, and stay below todays value for about 1-1,5 years.

Long term silver and gold ownership is sound, as they will increase again the very near (2013-2014) day when the USA debt will get an immense haircut.

That said, here are few graphs that tells the story of silver bubble and outcome better than words:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...

And current daily oscillations together with 10 year log periodic ones:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...

The speed of growth is still increasing, hence the finite time singularity is nearing. Things are getting noisy as well with price fluctuating in 1USD range per hour.

[blunderdog]

Ok, yeah, thanks ivars, that's it, I'm totally convinced now.  Those extra line-breaks after the post are very compelling.

[Dr. Porkchop]

That extra space gives you time for the horror to fully sink in.. scary piano music would help too.

[hamurobby]

Ivars, I see an opportunity to buy some slv puts about right here, to cover my physical holdings and lock in the price for the next month or so. If the price of slv were to fall, would then take any profits and buy more pm. If I loose value in the put options, it will be more than covered by my pm holdings. Its just as you said, the long term outlook for pm is great. My goal is to gain wealth in this corrupt system until it fails, but it may take a while for it to go belly up.

[Ecoman11]

I bet this is Bernanke's new QE3 program http://www.businessinsider.com/microsoft-employees-surprised-by-raise-bu...

[tomster0126]

Don't sell, don't sell, don't sell..........total propaganda, good call-out Tyler, hopefully the rest of the morons actually will get rid of theirs for the time being and we can swoop more!  Zerohedge FTW

www.forecastfortomorrow.com

[Get_to_the_choppa]

First mainstream article I could find officially calling it the all time high.

http://www.businessweek.com/news/2011-04-25/silver-surges-to-all-time-hi...

[tellsometruth]

silver = $49 right now

[Bubbles the cat (not verified)]

Gold. Silver. Metals. Yeah...but....what about paper? Somethin that's really worth the...um....the paper it's printed on.

[FinanceSeer]

A bunch of shitheads with nuffin to say. Jeezus! The article is no better. All of that as a treastise for GOLD FOR DUMMIES! Gold is GOD to those who believe in it (much like the traditional GOD in the sky, except this is in da ground). Thus, like most anything the  perception is that it has value (uh, it does not....kinda like DIAMONDS in that way). You want peeples to invest at $1500? Near the top? Why? Do you have a MINE or something? Haaaa? You got the KOCHS(suckas) cornering da market (once mo), and a few congloms gobbling up GOLD RESERVES, thus, driving up price--and YOU think this means GOLD is a GOOD BUY?! Wake up and smell the IMPURITIES mah friend! Buying GOLD is nuffin butt an easy way to throw money down the MINESHAFT! (emphasis on SHAFT). The VALUE is gonna drop outta of Gold so quik its gonna make the scary rides at 6 FLAGS seem like a merry-go-round! Stay Tooned.

[Bubbles the cat (not verified)]

Read somethin similar when gold broke 1000. Could be near the top. But it ain't there yet (written while fondling my bars).

[Marty Rothbard]

According to my chart, the Hunt high is broken!  Silver Bitchezzzzzzzzzzzzzzzzzzzzzzzz!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  Hard to be sure, but it looks like about 49.70.  The Hunt high was 49.45.

[thames222]

I wonder if Tyler woke up and spewed coffee all over his keyboard...it was only a matter of time before the public idiots started catching on.

www.forecastfortomorrow.com

[Bubbles the cat (not verified)]

Yeah. Nuthin worse than the public idiots who know next to nuthin about markets or the value of assets, let alone how to run finance and banking. Leave it to the experts eh? (see 'Inside Job' for more details).

[brandy night rocks]

Given what this site has become over the past year, it is absolutely fucking hilarious that you think there's a need to put up yet another Casey Research (sic) post to "balance" the incredibly infrequent Zero Hedge bearish metals opinion. 

[cantabrian]

Doug Casey states "Gold is the best money because it doesn’t need to be “faith-based” or rely on a government.""  I'd like to know where in the last century gold has been used as a widely-recognized means of exchange.  You may not have to rely on a government for its value, but trust certainly shifts to the person paying you for goods and services in gold.  Tell me, anybody on ZH, if we move to gold coins, how do you verify you are receiveing 100% gold and not some alloy or gold-plated BS?  Same with silver.  Which was the last country to utilize gold/silver as the primary medium of exchange?

[akak]

Tell me, anybody on ZH, if we move to gold coins, how do you verify you are receiveing 100% gold and not some alloy or gold-plated BS?  Same with silver.  Which was the last country to utilize gold/silver as the primary medium of exchange?

There is utterly no way to know if a coin is real or not, doubt would reign rampant in all transactions, thousands of years of history of metallic coin is irrelevant, and all commerce would instantly grind to a halt and freeze up without the guaranteed, counterfeit-proof, stable-in-value fiat currency that we are so blessed with and fortunate to use today.

OK, putting aside the sarcasm, just like with anything else, becoming familiar with something, through repeated use, is the best way to detect and avoid forgeries.  I dare say it is easier to counterfeit a $100 bill than it is to make a convincing fake gold coin --- and there are technologies that could be widely and easily used, such as electronic and ultrasonic verifiers, to ensure the authenticity of gold or silver coins, at least as easily as fake paper currencies can be detected.

[mayhem_korner]

Further info on APMEX, for those who haven't seen it. 

http://www.shtfplan.com/precious-metals/top-online-dealer-we-will-buy-any-quantity-of-gold-silver_04262011