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Guest Post: Why Gold Has a LONG Way to Go
Why Gold Has a LONG Way to Go
By Jeff Clark, Casey’s Gold & Resource Report
A couple weeks ago, I had my TV tuned to a business show that loves to give predictions on the markets and the economy. On that day, one of the program’s regular guests declared it was time to “short” gold, that it had reached its top, and that the precious metals bull market was over. I’ll try to be nice in my rebuttal.
So, what was his reasoning: technical analysis of wave counts? falling demand? a telling ratio? sun spots? No, he noted that upscale department store Harrods in London began selling gold bullion and coins “over the counter,” ergo, the top was in. Nice try, “Bert,” but this is amateurish. You really shouldn’t be playing with the big boys if that’s the basis of your call.
Yes, gold will someday put in a top, and since the gold price is largely determined by psychology, the end of the bull run will be marked by behavioral types of signals. But calling a top in gold now is like declaring that WWII was over because the Allies won a small skirmish in early 1942. To have made such a statement, based on a small, isolated event, ignored the greater forces that had yet to play out and would have made any journalist or military strategist look foolish indeed.
And here’s why Bert looks equally silly today…
If the top were in, we’d be in the midst of an all-out Mania. Are we? Do you get the impression there’s a rush into gold by the greater public right now? Are headlines blazing the covers of major magazines pronouncing gold as the new investment king? Has Wall Street gone gaga over gold and silver? I ask because these are the true signs that a trend has entered its final blow-off top and would signal it’s time to get out.
I decided to put Bert’s prognostication to the test, and I invite you to play along.
First, I struck up casual conversations with my friends, neighbors, relatives, acquaintances, my wife’s co-workers – heck, even my seatmates on airplanes – angling to learn how much gold they were hoarding, about the killing they were making in gold stocks, and how they were getting rich from all their precious metal investments. (In fairness, I had to exclude my dad, who is an award-winning gold panner, but he’s the only one.)
I found no one – not one person – who is actively investing in anything gold or silver, let alone rushing to buy or hoard the stuff. I had two people who confided that they did own gold, but in both cases it was inherited. A few were curious how they would go about doing such a thing, and fewer asked if I thought they should. Most everyone looked at me blankly when I asked; they didn’t seem to know what I was talking about. When I got a reaction like that, it was pointless to ask about gold stocks. Of the handful I did ask, most had never heard of Barrick Gold, the world’s largest gold producer.
Now ask yourself the same thing: how many of your family, friends, neighbors, and co-workers are buying gold and silver coins? Are any of them giving you hot stock tips about a fantastic gold producer, or telling you about the latest gold discovery made by a company in China? Have any fellow investors told you they’re dumping their brokers because they can select gold stocks better on their own? Anyone telling you they’re going to night school to learn the gold mining business?
Next, I surveyed a large sampling of print media looking for some of these signals that Bert surely had spotted. Over the past couple weeks, not one of the major business magazines I reviewed had anything on the cover about gold or silver. Further, there were no articles on precious metals, such as the best ways to buy or store all this gold everyone is buying.
One magazine ran an article about ways to prepare for inflation, and gold wasn’t even mentioned! I did see an ad from the U.S. Mint in another, along with a couple small ads in the back that said they had the best prices on bullion (right beside the teasers for buying a Russian wife), but that was it. Even the portfolio allocation models recommended in the articles I read made no specific mention of precious metals (one recommended a “resource” fund, but their discussion of it was centered around energy investments).
Other than the articles you seek out, how many mainstream magazines do you see extolling the virtues of gold and silver on their cover? How many bestsellers are prominently displayed at your nearest bookstore that scream at you to buy gold stocks? Are you getting fed up with all the junk mail you get about gold and silver?
Last, I went out of my way to look for stories on gold and silver on TV and radio. About all I could find were the same ads that popped up after last year’s Super Bowl commercial by Cash4Gold. A couple programs quote metals prices, and I was able to find another that actually used the word “gold” in a sentence. It might just be me, Bert, but I can’t find any news anchors talking about the latest gold discovery or that “must own” gold stock. No in-depth special reports from investigative journalists on the hot Canadian junior mining sector. Nothing on my radio about the best ways to store all the silver every smart investor has been buying.
How about you – are you feeling bombarded by TV and radio ads and segments on precious metals? Do you have the clear impression gold and silver are the hot new investing trend around the world? Are you Tivo-ing certain TV shows because of all the great info they provide about picking the next great gold stock?
If we were in a Mania, Bert, all of this would be happening. But it’s not. Those who buy gold coins in the U.S. are still largely viewed as members of a fringe group. There is no public discussion on gold, no insider tips on the latest hot gold stock, no special reports on how to store all the bullion you’ve collected. The psychology isn’t on our side yet. One signal does not a Mania make.
Last and perhaps most important, Bert, are you sure the dollar is done falling? You’re absolutely convinced we won’t see price inflation? Our current debt load won’t pose any future problems? No more worries about foreigners buying all that debt? Obama and Bernanke really have saved the day?
Bert, send me your shorted gold positions, I’ll buy them from you. And although the gold price could see a correction in the near term, and several more along its journey to “the top,” remember that battle in early1942 and all that had yet to occur before the war was over.
And one more thing: when you finally become breathless to buy gold stocks, I just might be ready to sell them to you.
Are you convinced you have the right gold and silver investments for what lies ahead? For just $39/year, you can be sure you have the best gold and silver stocks, along with specific recommendations on the best places to buy bullion. Check out Casey’s Gold & Resource Report.
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I've been waiting on the sidelines for a while, but after this breathless rant, I'm loading up on shorts.
Hear, Hear....you'd think this idiot would recognize the fact that everyone he "interviewed" know you can't fucking buy bread with gold bullion so what use is it to them. Its a toy for the rich and too much of an obsession for the bugs. They act like its a cult.
"you can't fucking buy bread with gold bullion"
Yes you can. At the next bakery you go into wave a 1oz bar at them and see if they'll give you that $4 loaf.
Toy for the rich? So the world's most wealthiest families (Rothschild, Warburg, Rockefeller, DuPont, etc that make Bill Gates seem like a Zero Hedge anonymous day trader) hold a stunning amount of gold bars for good reason. It is not a 'bug' thing if you truly study precious metals over history. Ask yourself this, why do central bank hold gold and not diamonds, platinum, or some other physical investment item.
Your bread and gold comment brought a wonderful smile to me face as the fact is when Zim went, well, Zim there were people panning for gold to buy bread due to the extremely high currency devaluation.
Disclosure: i have a few trillion Zim dollars here in paper currency.
ADD much? PAY ATTENTION!
http://jessescrossroadscafe.blogspot.com/2009/11/how-can-you-tell-when-g...
Hi Jeff,
Thanks for the post. I just went to an emergency faculty meeting today. Our university is on life support via Obama money. We are using it to survive and it runs out in 2011. We have to figure out what to do next, we are already in a short fall, even still. Why post this here? Because the dean never said shit about what if things get worse, he kept talking about the recovery that he thought was going to happen by then.
Most folks are clueless how bad the problem is, never mind inflation/deflation and the price of PMs. THEY DON'T GET IT YET AND WHEN THEY FINALLY DO, THEN GOLD WILL BE OFF LIKE A MOTHERFCUKER.
We are academics for Christ's sakes, we are supposed to be smart. We as a group, are embarrassingly ignorant. Put that in your article!!! The public isn't awake yet, even those who are supposed to be smart (and there are some minds in the audience I respect).
What do you want to bet that guys with lead can take your gold?
What gold? Lost it all in a boating accident.
Which is why most people who own gold own lots of guns and ammo...and food...
Shhh! Don't Tell ANYBODY!
uhhh, can't they take ur dollars too ? is that a good reason for not having them ??
cuz somebody "could" take them ?...stooooopid dude.........
Agreed 1000%.
It reminds of a saying in motorcycling racing when you crash and slide across the pavement in your leathers, hoping the thick leather will protect your skin from burning off:
"If you can feel the burn, it's too late".
Yep, when you can feel the burn, it's already too late.
+1000
Perhaps you can tell them to buy Gold for the university with part (if not all) of the Obamabailout money. Now THAT will be one hell of a motherfcuking ATM machine!
GG - Thanks for putting the situation into proper perspective.
That was exceptionally spot on.
My wife's university is going through the same thing.
Am long a pretty aggressive Nov GLD call spread, and was saddened to hear that the latest $20B spending bill passed last night was actually paid for. But stimulus plans #8,9,10....N should definitely help the shiny stuff.
"THEN GOLD WILL BE OFF LIKE A MOTHERFCUKER"
To be a real gold bug you need to think about gold in terms of the amount of paper. Gold is static, its the amount of paper which is off like a motherfucker.
All you have to do is watch the silly gold pumping commercials on TV to know it's time to short this pig.
Such as: "Never has the value of gold ever fallen to zero," the guy says as he bashes real estate. Jesus, did real estate go to zero or something?
You gotta be pretty stupid to fall for all this crap. I guess that's why they play these ads on CNBC.
i will sell when you or someone like you proclaim that its time to buy....the biggest consumer of gold in the world and most cost concious by far buys 200 tones at 1045 an oz and you want to short..and that stat is the tip of the iceberg in terms of why gold will continue to go higher...and you want to short...go for it
Isn't it a little early to be calling that bet a success?
"All you have to do is watch the silly gold pumping commercials on TV to know it's time to short this pig."
Are you talking about cash4gold? Because that's the only commercial on TV I've ever seen.
Let me give you a hint: if gold was in a bubble/mania then the commercial would be wanting to SELL you gold, not buy it from you.
You would think that after the dot-com bubble and the real estate bubble that people would be able to easily spot a bubble. Yet, judging from this comment, some people still can't.
Just for clarification ... I have seen four other commercial selling gold, can't member a name. I think that gold commercials have doubled in the last two years. Someone should do a study on this issue.
You could say the same thing about the equity market, however, irrationality is keeping that one going up like it's being propelled out of a rocket. And frankly the Gold market has a lot more fundamental argument going for it than the equity market at this juncture.
Jesus, did real estate go to zero or something?
http://news.yahoo.com/s/nm/20091025/us_nm/us_usa_housing_detroit
You gotta be pretty stupid to fall for all this crap.
What, you mean real estate?
nice link!
Boy am I glad I live in Toledo
"Jesus, did real estate go to zero or something?"
Umm, actually, yes.
(See Detroit Mich)
Its only time to short gold when those silly cash4gold companies can't find anyone left to consolidate with in the industry.
THEY DON'T GET IT YET AND WHEN THEY FINALLY DO, THEN GOLD WILL BE OFF LIKE A MOTHERFCUKER.
Wow first time I have seen MsCreant curse on ZH----cant blame her though--tired of listening to the group of idiots that are complaining about no funds yet keep allocating projects because its what we do.
You know what--THEY DON'T GET IT YET AND WHEN THEY FINALLY DO, THEN GOLD WILL BE OFF LIKE A MOTHERFCUKER.
+100
we have been hearing that same old fucktarded commentary about gold being overbought, too expensive, ready for a sell off since 2000 and it hasn't happened and it is not going to happen until supply and fiat problems resolve themselves....which is not any time soon....
gold is easily worth 1300 usd now even though crooks running lbma and comex show it at 1090usd or so....
gold is in permanent and severe backwardation....get on the gold plane now or you will be hitch hiking for a long time biatch....
Tyler, can I post a couple of personal jpeg images of the AngloGold Ashanti, Obuasi Mine, Ghana ? I think you will get a kick out of the massive gold vein...no, really.
please post here
ok, here it is;
http://www.youtube.com/watch?v=AbKSLsW3uAg
I have no idea what TV or radio this guy watches or listens to but I see/hear a gold commercial about once an hour and have for the past two years.
If the risk assets correct, gold will correct. It will have nothing to do with a negative opinion on gold but everything to do with having to sell something others will buy when you have a margin call and need to deleverage.
Gold is the modern-day tulip bulb. Enjoy the mania!
Its only a mania in so far as it is a massive bet on inflation, just like 80$/barrel for WTI in the midst of a severe recession.
The TV commercials indicate the early stages of a bubble, you'll know its topped when its on the cover of Forbes.
I understand the whole inflation fear bubble thing. I just don't really understand - why gold? It's just a piece of shiny metal that's used to make jewelry. (Please spare me the "gold is real money" diatribe) The only reason people are willing to pay $1,100/oz for gold is because they BELIEVE it's worth that much (and since someone else just paid that much). At $170/oz, it would still be 10X the price of silver. In my book, it's a confidence game, like tulip bulbs and dotcoms, only not quite so crazed yet. Good luck.
It makes absolutely no sense to receive a small amount of fiat dollars in exchange for either a day's work or a truckload of harvest when vast sums of these same fiat dollars are effortlessly clicked into existence at the whim of one man.
Which is more irrational to accept as valuable:
1. A piece of paper with ink sprinkled on it that requires legal tender laws and men with guns to enforce its value
2. A shiny bit of metal dug from the ground which cannot be easily duplicated and which has been recognized as valuable by humans for thousands of years
Try to be more rational.
SWR - I refer you to an excellent link Careless Whisper provided. After all, it is nearly impossible to be rational with someone in denial.
http://blainn.com/abuse/denial.html
Why do so many people believe that gold has no intrinsic value?
1) Gold is indestructable (Do you not realize the importance of this?)
2) Gold can not be manufactured (Do you also not realize the importance of this? Here is a hint it takes work to get it out of the ground, it takes work to shape it into a coin and when ben bernake prints money it doesn't effect how much gold you have)
3) Gold is finite
So you can believe all you want that paper money has value when all logic points to the exact opposite conclusion, just like people who believed that the earth was flat, or that the sun revolved around the earth, but it doesn't change the fact that you are wrong. Keep denying the evidence and enjoy being a serf.
You appear to have an intellectual understanding of the tulip mania, but I very much doubt you have a gutteral one. If this was a mania, you wouldnt be so cocky.
Gold is valuable today ... and tomorrow because three billion people in the world believe that it is valuable and desire to get their hands on it. It is only the sophisticated investors in the West and Central Banks that have no use for gold.
I am a silver person but I some how doubt central banks will let gold get away from themselves - so it seems unlikely that gold will run up from here without at least a test of all the emotional spec longs. To me the strong stock mkt and activity in UUP spells temporary trouble for both gold and silver. I hope we get a dip because like every other idiot who thinks they know what they are doing I have sold out and am I am waiting for talk of an interest rate rise that is intended to show the FED suddenly got religeon to give a drop for the best buying opportunity for silver in a long while.
I was waiting on a nice buying dip, been expecting it for lo these two weeks, finally caved and bought another heap of gold & silver a couple days ago. Caught a bit of the India runup effect so came out a bit ahead, but only b/c our markets are open a day ahead of the US. If that dip comes then you'll be laughing and I'll be self-flagellating. Won't be the first time I've had a scarred back. :-)
Naughty Reni! ;-)
hehehe damn I thought I'd get away with that...
I wasn't able to tell you the other day how much I enjoyed your story, about the man with the smile. That was beautiful!!! But unfortunately it was a day later that I saw it and the convo had sorta passed by then. :-)
I hope you write in your spare time, not just academic articles...
Nah baby, you wanted to be caught, you minx you. You'd be sad if we let that go.
Another conversation about men on another gold thread. Of course now, so many of the threads are about gold. We like gold. We like men. It just all seems to make sense!
My academic writing is, for the most part, a stark contrast to my industry. My work is not academic enough for some. Thanks for the compliment.
I don't know what I think about gold all the time. I like how you try not to fall into the groove, while you groove, if you follow. Contrary but not for contrariness sake alone. Thoughtful.
Sneaking over to ZH is my spare time!!
hahaha minx I love it! I was actually considering 'minxie' for a screen name at one point but I thought it might sound too much like a fur coat.
I've been waiting for a Robo/Andy-Dufresne thread full of girlie pix to put up a few male appreciation posts, hopefully directed at you or lizzie or another well-written well-dressed girl who might be pulled into drifting the thread!
alas, he's been posting only animals lately so I'm still thwarted. when the time comes, though, I have a few choice babilicious picture links to test run...! :-P I don't know if it's the blog or only a few of you more outspoken posters who bring out the CheekyBitch in me...!
"CheekyBitch"
Very cute!
I see a thong involved in this, don't know why....
i'm waiting for a dip too- been 50% in, 50% out because precious metals are tough to call. if it goes up i'm happy, if it goes down i'll load up. i'm getting a bit of vertigo here near $1100...
silver unable to break $18 has me thinking there's a little downside yet to be seen sector-wide. i hope i'm right because it will be a great opportunity. down the road, leverage silver into gold...
on the other hand, the times i've really kicked myself was when i waited, cheap bastard that i am, hoping for a better entry that never came. we'll see...
I hear the usual suspects are shorting silver more aggressively than gold these days. Which tells me it's a metal to watch...
http://www.caseyresearch.com/displayGsd.php
Plus long cut'n'paste below to show Ted Butler article:
Ted Butler CommentaryOctober 21, 2009
Outrageous
(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
After a three-day delay, the Bank Participation Report (BPR) for October was released by the CFTC today, October 12. The report, for positions held by commercial banks as of October 6, covers all commodities regulated by the Commodity Futures Trading Commission. It is the companion monthly report to the Commitment of Traders Report (COT), which is issued weekly. The new BPR indicates that the largest one or two US banks dramatically increased their short positions in COMEX gold and silver in the reporting month.
For silver, in particular, the increase was shocking. The largest US bank (thought to be JPMorgan), or banks, increased its silver short position by more than 28%, or by 8,487 contracts to an all-time record of 38,375 contracts. Expressed in equivalent ounces, the US bank(s) increased its silver futures short position by 42,435,000 ounces to 191,875,000 ounces. With a short position of almost 192 million ounces, JPMorgan appears to be short 29% of the annual world mine production of silver (660 million oz). Never in history has one (or two) entities held a more concentrated position, long or short, in any commodity of finite supply.
In gold, there was also a dramatic increase in the short position of one or two US banks to the second highest short position on record. The one or two US banks increased their gold short position by more than 41,000 contracts to 116,790 contracts. Foreign banks were also notable shorts. It is clear that the big short has not been pulling in its short position on the rally in gold and silver prices.
A while back, there was evidence that JPMorgan was retreating from the market, and I speculated on that development. I said I would follow up on my speculation as continuing data rolled in. With the latest BPR, I can state now that I was wrong about them moving to cover their shorts. The data reveals that they did close out many of their gold short positions a month or two ago, at prices around the $950 level, but reinstituted those shorts on the price rally. They never did close out silver shorts back then, but greatly added to their silver short position on the current rally. The net result is that JPMorgan covered and replaced a big chunk of its gold short position and added to its silver short position at higher and more advantageous prices to them. I might say good for them, but I’d be lying.
As offensive as I find JPMorgan’s dealings in silver and gold, I would imagine there might be someone else even more offended. I speak of the chairman of the CFTC, Gary Gensler. What JPM did in the past month is contrary to everything that Chairman Gensler has spoken out against since he has been in office. The current and forever silver investigation came as a direct result of the Bank Participation Report of August 2008 and my urgings for readers to write into the Commission. This new BPR is much worse than that one. JPMorgan is now short almost 30% of world silver production. This at a time when mining companies are retreating from hedging their production. Chairman Gensler must know this is wrong. He is too smart not to know. He must know that the price of silver and gold would have been much higher than what they are now, if it were not for JPMorgan’s concentrated and excessive short-selling. In my estimation, if JPMorgan did not short sell more than 8,000 contracts, or 40 million ounces, silver would have been over $30 an ounce right now.
JPMorgan’s concentrated and uneconomic silver short position has placed the market at risk. I am aware on no legitimate reason why this position is allowed to exist. It undermines the credibility and lawful functioning of our markets. It is nothing short of an outrage. It bothers me greatly to have to make these accusations of manipulation. If there is a good explanation for why this is not the crime in progress that it appears to be, it is time for the Commission to offer that explanation. Enough is enough. For subscription information, please go to www.butlerresearch.com
http://freedominion.com.pa/phpBB2/viewtopic.php?p=1423827
Wow ... if the banks are short so must ... all my taxes go to US Gov then to banks then to the CFTC for shorts in SI and GC. They have to unwind these for Dec.
When they unwind these they can lose billions and no one will ever know ... they'll just claim that they are MBS and sell them to Uncle. If not, 192 million onces may not be material enough to make their balance sheet.
About 110,000 contracts of GC are traded each day, so the banks will not be in any trouble unless there is a concerted effort to take delivery of the physical.
Right now it's all about December deliveries, isn't it?
As I sit here reading the Zero Hedge posts each day, patiently waiting for the total collapse of the dollar into a risk asset and safe asset sucking massive black hole, my mind keeps slipping back into the glorified subject of owning gold and the claims of the gold bugs that they will be the only financial survivors in America at a time when the ever so intelligent gold trading Chinese have taken over America and have begun to feed us our own dogs and cats. I stay in unceasing amazement when, post after post, comments by the gold bugs declare gold as money and without it, no person will be able to survive the total chaos that will ensue following the collapse of all fiat currencies. According to the gold bugs, only they will be able to buy food, have guns, and own the latest iPods. So, what is to become of the people who have no gold? How will they survive? What will be the value of gold to these people and how will the gold bugs react? An uncomplicated scenario of what the gold bugs might face may give us an idea of how it could all go down. First, a hungry gold bug will approach a farmer and offer the farmer gold for food. The farmer, amused by the gold bug’s short sighted view of reality, explains that he needs fertilizer and diesel fuel and, that he has no need for gold. The farmer tells the gold bug to go buy the products the farmer needs and he will trade food for those products. The gold bug flutters back into the village of chaos and finds the dealer of fertilizer and fuel. He offers the dealer gold for the products required by the farmer. But the dealer tells the gold bug he does not need gold, he needs warm clothes, boots and blankets and, if the gold bug can bring him those products, he will trade them for the products required by the farmer. The now starving gold bug flies over hill and dale until he finds a store selling warm clothes, boots and blankets. He offers the store owner gold for the products desired by the dealer. The store owner, who is also very hungry, tells the gold bug he needs food, not gold. Bring him food and he will trade it for the products the gold bug needs. The gold bug is now so weak; he can no longer fly at all. He sits down by the side of the road, dials in his favorite Bruce Springsteen songs on his iPod and stares down the barrel of his gun. It has finally come to this- death by gold. Just as he is about to pull the trigger, he sees a truck coming down the road. As it gets closer, he sees that it is a China man driving a brand new Silverado pulling a trailer full of caged dogs and cats. The China man stops to see what the matter is with the gold bug. The gold bug explains he is starving to death and no one will trade anything for his gold and therefore he cannot trade with the farmer for food. Gold! Exclaims the China man, how much you got? The gold bug shows him the 10 one ounce coins he owns. Oh says the China man, that good for two dogs and three cats- take your pick. There are three types of people who own gold. The first type buries the gold in the backyard for safe keeping- waiting on gold to rise to $10,000 an ounce. But, on the day this person wakes up dead, not only have they become useless but so has their gold. The second type of person sells his gold for the fiat currency flavor of the month. He buys the newest electronic gadgets on the market and uses them to draw women to his crib. He has a good time for awhile until he wakes up one morning and finds ever drop of blood in his body has been sucked out through the jugular. The third type of person uses the gold to secure a discounted loan, payable in lump sum at the end of 12 months. He takes the loan proceeds and invests them in Chinese restaurants. At the end of the loan period, he takes the capital gains earned from the stocks and buys his gold back from the bank. He then takes the remaining funds from the sale of the stocks and buys more gold. The downside for this person is that they will eventually own more gold than they need for collateralizing loans. At that point, the excess gold becomes useless.
"I stay in unceasing amazement when, post after post, comments by the gold bugs declare gold as money and without it, no person will be able to survive the total chaos that will ensue following the collapse of all fiat currencies."
This is what is known as a strawman.
Your premise is based on gold-BASHERS, not gold-bugs. Gold bashers like to say that the only reason to own gold is if everything collapses, and in that case what you would really want to own is guns and canned food anyway. Thus there is never a good reason to own gold.
In fact, any historian and gold bug can point out countless times that fiat currencies have collapsed, or been dramatically devalued, without a collapse of society.
That has to be a run-on. Seriously.
No, cut & past from Word hits like this. I thought about editing it but did not. Cannot get back after so many minutes to put in the paraqraphs.
Umm...the "goldbug" you describe...did he have a sign around his neck saying "Your wish is my command" or "I am your slave" or "I will provide whatever the fuck you want" or...I think you get the picture. Seriously man, the dude could have found another farmer sensible enough to stock up on supplies (that his very livelihood requires, no less) in advance and taken his Gold in exchange for food. That is what Gold is - A F--KING MEDIUM OF EXCHANGE. If you think that is worthless, you might just as well burn all your FRN's right now.
Hey GG:
Isn't gold more a store of value than a medium of exchange? Not being a smartass, just wondering being fairly new to the scene. Wouldn't gold be a store of value (being a product of labour/resources), of which paper is a medium of exchange (being a mere representative); and all the trouble started when paperbugs began mistaking paper as being a store of value in and of itself?
Personally I like just the physical form because their is no possible fraud in that manner. The only problem with that would be the purchasing of goods that could not be made in person. However there would be many ways to get around the kind of difficulties that would exist currently because there isn't any demand to have a walk in place for many purchases because of credit/debit cards.
I would say for the least amount of fraud in a system stick strictly with physical
Paper certificates, or digitized gold accounts wouldn't be such a bad idea but they would pave the way for a 1920's style bank fraud (although far less fraudulant than out right fiat currency).
Yeah, BB, I feel that way too. For my own personal hoard that is.
But I was just thinking in more 'universal' terms...one really can't realistically walk around with heaps of gold/silver coins in one's pocket buying milk & bread, you know? I know they used to back in the day but the cumbersome problems with that are I think why goldsmiths first started with the paper...
I think paper is a good system, albeit yes subject to fraud, but only if it's kept as REPRESENTATIVE (ie, asset-backed to whatever degree). Acknowledged it will inevitably become more corrupt over time, eventually collapse, and need to begin again. I sort of see currency itself as moving in cycles. Maybe I'm getting too far afield and opaque here.
Of course, fraud is always possible in any system. Regulation and enforcement will always be needed. (Can we say 'tungsten' boys and girls.)
PS: Is it weird to say that I also prefer metal just 'cause it's lustrous and seductive in one's hand!! :-)
I disagree that every system is fraudulent. Fiat paper is fraudulent by nature because to believe in its value is an act of fraud in itself. Not to mention Fiat paper must be managed properly in order to continue to exist at all because of the incentive for the producers of such a currency to just print as printing does nothing but to benifit the printers. That their intails the underlying problem with fiat currency, idealistically it would work, but the world is not an ideal place and such is the problems with all Utopia's etc. Centralized planning simply does not work, it in fact is destructive towards work by working against what would other wise be succesful.
Gold doesn't create these problems because of the inherent nature of gold, it doesn't need to be regulated because no one can control it. Anyone can go to a gold bearing river and pan some out of the river or dug up out of a mine so the means of value are owned by the people who produce things because when you trade gold for something you are trading essentially work for some other form of labor as all things are produced from labor.
Fiat money on the other hand you give value to those who produce nothing. And in doing so you reap what you sow, i.e. nothing. The collapse of the free market is not just a collapse of credit, that just being a symptom, it is a collapse of production due to burdens carried by producers from regulators.
And I do think you could walk around with gold, its not like you have to carry an ounce around with you everywhere you go you know. All you have to do is fractionalize gold into small quantities, especially since an ounce of gold is a lot of "money", maybe I should use the term "value"?
I agree about the cycle, however I see it as a human social cycle. But politics is very closely linked to economics anyway I guess.
Hey BB
Sorry, I wasn't clear - didn't mean every system is fraudulent, just that every system is open to some degree of fraud (however small). Or, that within every system, there will be fraudsters who take advantage of the innocent/ignorant.
BUT, I agree with you that the fiat system ITSELF IS fraudulent. And that asset-backed currency systems (gold, silver currencies) represent REAL wealth.
Not going to address the rest of what you said b/c I agree and I don't want to distract from it. :-)
I agree that fraud would exist with Gold it is just that the frauds commited are much more obvious and much more personal making the deception far more contained in my opinion. Where as no one notices money missing from their wallet when Ben Bernake prints more money.
This video is either fraudulent or proves otherwise. It certainly COULD be done, what's to stop it except the Government?
This video is either fraudulent or proves otherwise. It certainly COULD be done, what's to stop it except the Government?
http://www.youtube.com/watch?v=wo1hX-QMQy0
Gold would not be used for everyday purchases, more so to pay for large items, like 300 or more gallons of diesel, or 4 Percherons, or acres of land. Silver could be the medium to use for everyday purchases, and is readily available in small quantities, even in the poorly-named "junk silver" coins of the US. Of course, gold has been and is a very useful store of wealth, much more than any fiat money or stocks and bonds.
I would strongly encourage the reading of any devotee of the Austrian school of economics, one such book right now is Meltdown by Woods.
I know of no one buying gold who does not purchase silver. I do know of many who purchase only silver, say in this week... ;-)
Isn't silver in fact the constitutional currency of the USA?
From what I understand I believe it was first Gold then changed to Silver. I might be wrong though.
To those who think Gold and Silver have already topped...good luck. You will need it.
I am a member of the J.S Kim CIO program. I have physical gold and gold stocks screaming out my back end. I think my best response to you is a blog name I use at another site,
Al LeGory.
This nonsensical rant reminds me of what Ferdinand Lundberg said in "The Rich and the Super-Rich". Basically, most Americans are lacking in a study of Epistemology, or the theory of knowledge. A little clear-headed thinking mixed with some logic might do wonders.
Sir, if you've invented the next-best-thing to a perpetual motion machine - a greaseless engine - then cut me some of the action. You and me are gunna be RICH!
Either that or I'll be fully invested in mule stocks by this time next year, courtesy of all these people with stacks of goods to barter and no intact spines to lug them on
LoL you have the pretence to mock the idea of trading gold? Let's see here is why the farmer will trade gold and silver for food.
A)Inflation (a kind of tax)
B)No record of transaction (can't be taxed)
So the reason that a farmer or anyone would want to trade in gold is rather simple, to not have pay out hand over fist of your personal wealth to the government. It would benifit anyone to trade gold and silver over paper dollars for the specific reason that the dollar has lost 94% of its value since the creation of the FED, the money supply was recently doubled (thus purchasing power reduced by 50%), and a budget deficit plus future liabilities for the US that is multiples of the world GDP.
What do you not get about the benifits of trading with currency that is an actual store of wealth, because its indestructable, and isn't burdened by so much associated theft? The US dollar is nothing more than Disney Dollars but for the US, Disney like the US can print their own bonds, hell you can print your own bonds and charge people your "dollars" as debts in your house hold. How do you not see the scam in all this?
Believe it or not, Mediums of Exchange will still be employed by skillful post-apocalyptic merchants. Gold will be acceptable to many elite people who control vast stockpiles of clothing and food and ammo and fuel. Myself for one. Deal with it ;)
lbma tries to settle a contract with substandard gold, jpm offers a 25% premium to settle gold contract for frn's, tungsten filled bogus bars, barrick struggling to close out their short positions, global production in decline.india buys 200t @ spot. Im a newbie, all this info has been reported in the last few months. oh yeah wha tabout jpm has short positions on 5X yearly gold production amount. wheres the extra gold gonna come from if someone wants to take delivery. and then theres the fact that the gold etf's are not required to hold physical gold, and a futures contract can be delivered with etf shares ? I'm no einstein, but it looks like it wouldn't take much for demand to overwhelm supply. all that said, I think silver is a better play.
You said: "but it looks like it wouldn't take much for demand to overwhelm supply"
Doesn't that portend a squeeze and significant price increase? So why choose SI?
For every commercial I see selling gold coins I see 5 "we buy your gold" commercials. Of all the people I talked to about gold at 500, 600, and 700 not a single one has come back to me and talked about all the money they made or how impressed they have been with the move and are going to buy now. The best response I got was basically "ya its gone up quite a bit, you got lucky I guess, but its too high to buy now" - interestingly the same thing i heard back at 700.
Everyone wants to be a contrarian and proclaim gold is "crowded". Sure it's crowded in internet gold-bug land, but what is that a couple 100k "fringe" types? I have news for you: the long gold trade has always been crowded in internet gold-bug land. The reason why you fade crowded trades is because there aren't enough new potential buyers to push it higher(tech stocks, real estate etc). This is not the case for gold, whether it's private investors or large institutions, there is trillions in cash looking for a home but scared to leave treasuries, MMs, CDs etc; self-conscious about being labeled a gold-bug; or worried about not earning interest.
Everything that is being said about gold now is the same thing I heard at 500, 600, 700, 800, 900, 1000... there has been no parabolic blow-off yet, the chart looks NOTHING like 1979-1980. we made it through the near collapse of the global financial system and all that managed to happen to gold was a year long correction/consolidation before grinding higher. Markets that grind continue to grind, with brief hardcore shakes. Gold has been in a quiet bull market for a decade and unless you see it start to go limit up, and start getting calls from uncle joe and aunt betsy (both living on a fixed income) asking how to get in on the gold trade we're probably nowhere near a top.
Oh and the more people who excoriate me - for "not getting it" or "not understanding the deflationary impact of credit contraction" or whatever other rehashed, blogosphere trope you've (or some random "expert" on the internet) come up with to convince yourself that an indebted government and financial establishment's last refuge and recourse is not its (the gov) power to issue claims on itself - the more I realize how much more this trade has to run.(That my friends is how you neutralize potential disagreement)
the fourth type of pm investor manages to preserve a portion of his wealth, when every other asset class is manipulated to turn him into a pauper. there will always be someone who will be in a position to redeem your pm's that have retained most if not all of their historic value. theres just not that much gold and silver, compared to paper assets. pm's are more of an insurance policy. we will not be trading our gold for dogs and cats, but I can see trading some for a golf cart.
Entertaining but I have to say, this article seems a bit thin on analysis and is kind of doing what they're accusing the TV ads of. I love gold silver platinum shinies of all kinds, but honestly, is laughing at a guy who's shorting gold b/c of a Harrod's ad, any better than longing(?) gold b/c there are not enough ads/herd chitchat/MSM swooning? Maybe I'm not as astute as some but I really can't see how uninformed herd behaviour is indicative of anything.
The herd ran after houses. For awhile, they were profitable b/c the herd was buying them. Then predictably, they weren't. Leading the trend is better than following it, but really, does a true contrarian even care that much what the uninformed crowd is doing or talking about? Does s/he take the opposite side, *just* to be on the 'less-crowded' trade? (Buggy whips are a less crowded trade, too.) Did John Kennedy *really* sell only b/c of a shoeshine boy's chatter, or was it analysis of fundamentals/inside information but the shoeshine 'herd' chatter just made for a better story?
Gold sold at Harrod's - so what. To me, it's more important what the forex is saying, how fiscal policy is tending, how REAL supply-and-demand from large buyers is looking - I started buying gold a few years back ONLY b/c I was learning a lot of scary stuff about the fiat cycle, not b/c I cared what Harrod's was selling. Why should I care now? I mean, I don't even watch TV. I knew housing was in a bubble only b/c I could see that prices had laughably outstripped incomes, not b/c too many people were talking about it.
Well, I guess it was an entertaining article but I think too much focus on the herd tends to generate more heat than light.
Want to see economic collapse (or better said collapse in economic activity) with simultaneous currency collapse? There are many (Russia, Zimbabwe, Argentina, Yugoslavia, Germany, come to mind).
Want to see economic collapse with simultaneous currency appreciation in a FIAT monetary regime?
Can't. NEVER HAS HAPPENED IN THE HISTORY OF THE WORLD! (Not EVEN ONCE).
Are you all REALLY that freaking dense?
(Just asking, because it certainly seems so.)
I am a goldbug - and I think 1500 is perfectly realistic. But when the ultimate moron ("the Hills" assclown Spencer Pratt) tweeted Mebane Faber and said "I hope you bought gold like I told you to", I sold half my position. If ever there was a bad sign for gold, this was it....
So, I guess in WW2 it would have been better to slip a guard a puppy and kitten in order to run through the woods to safety? Gold, silver and PM's are like abortion. Each feels strongly thier way about it.
Half my IRA is in GLD, which I got in around $89. A pretty good profit for me considering what a lousy investor I am, but not really that impressive compared to others. However, articles like this make me want to sell. I bought into gold because I was thinking there was going to be a huge crisis and the US dollar would plummet and we would get hyperinflation, but I just don't see that happening anymore. The Armageddon scenario is off the table. And guess what, people still keep buying US debt. Until they stop doing that, until it comes to a complete halt, gold will remain as it is, a speculative device which will go up and down.
People keep on dreaming about gold at $2000, but I just don't see that happening anymore. It will take a complete crisis in confidence, and the US has mind control powers greater than anyone could have ever guessed. Everyone continues to buy Treasuries, and no one wants to move away from the dollar. It's unbelievable, it's infuriating, but it's the truth.
Instead of selling out, though, I'm just going to write calls, I've already written calls on 20% of my holdings (Dec $110) for a couple of bucks extra profit and I can afford to see it go down to the $90s because I bought it hoping it will go to $200. If it's not going to $200 in the next year, then I'd rather put my money somewhere else. I'm moving my money from GLD to TBT, which has a more realistic expectation of increasing in value if the economy recovers, which it eventually will, and hold it till at least $70 with a stop at $41. If there is inflation, the long bonds will drop as well, but the only risk is if we get into another Armageddon scenario and there is another flight to safety, which seems unlikely at this point.
Guys, gold isn't magic. It's like every other commodity. It will go up and down, just like everything else. As Warren Buffett said, sell when people are buying and buy when people are selling.
You forgot to say, ha-HA!
(I'm Phil Ken Sebben. You don't know me, but I have twelve billion dollars saying that you'll vote for me regardless...)
Good post and commentary. Some comments:
- If you were serious about having gold to hedge a dollar meltdown, you probably already know GLD would the first to blow up (vs bullion). You probably already know this and for whatever reason went with GLD anyway, so I won't harp on this.
- I like your bit about people buying treasuries as "infuriating, but the truth", but realize that buying could easily evaporate if/when the next stimulus appears and/or when our incompetent congress is unable to muster the discipline to cut spending or raise taxes to shrink the deficit in the coming years. Ask yourself: do you see the clowns on the hill ever running a budget surplus? Ever? If you take that in, the only question remaining is: will the US grow herself out of her debt? That's another discussion, but I personally believe that unless we stumble upon tabletop fusion or a fuel cell technology that offers 2-3 orders of magnitude more than where we're at now, the growth just isn't going to come. So, given that, the only question remaining is how long until the world wakes up to the fact that those 30 year treasuries are just about worthless past ten years out or so.
- I'd do yourself a favor and if you're going to own "gold", own it for real at a trading bank such as Monex where they give you a serial number that points to physical asset in their vault. Delivery is for the birds, especially since you generally have to pay a higher markup and you obviously won't be able to easily trade back into the market it if you so choose.
Again, I'm sur you already know this stuff, but I thought I'd mention it.
No, actually I have no idea why GLD would blow up relative to bullion. I'm your classic uninformed investor. What is the reason behind this? Because GLD can issue more shares and dilute shareholder interest? I have no clue otherwise...
Yah pretty much Jed, why do you think their were run on the banks in the 1930's? Too many paper reciepts chasing not enough hard assets.
If mine were in paper instead of the actual physical, I'd start smoking again - heavily, and then might have to reach for some barbituates-well, I'd have to get some of those, too.
Oh, and we all know how safe Safety Deposit Boxes are, I mean, nothing has happened in the US recently, say California and the redistribution of wealth there by state thievery, one doesn't have to go back all the way and reference FDR and his theft of citizen holdings.
I don't have the link but they did it last week in UK, arguing they were looking for guns, money, and drugs from criminals. I'll see if I can find the link.
Found one article, there are others:
http://www.dailymail.co.uk/home/moslive/article-1222777/The-raid-rocked-...
http://www.youtube.com/watch?v=VWcciJGHs9s
I get a kick out of people bashing gold and silver. I started out buying silver in 2002, thousands and thousands of ounces in Engelhard and Johnson-Matthey bars and rounds of all sizes. I quit buying late in '03 when I realized I was gonna have to have a porter or a mule to help me lug the stuff around when the shit hits the fan. I bought it all on Ebay, where at the time they were basically giving the stuff away. I never paid over spot for any of it. 10%-20% under spot every last bit of it. Average for the whole damn lot under $4 per oz. Then I started in on the gold, all those coins sure are purty and so much more compact than silver. Freaking 60 pounds hardly takes up any room at all. $375/oz when I started buying, quit buying at around $600/oz, 'cept for a bout of weakness longing for more in the $800's.
Everything I read years ago that led me to buy the barbarous relics, has come to pass. When something like that plays out according to the scenario you read about years ago, why wouldn't you hang in for the long haul, awaiting the grand finale?
Are we gonna experience TEOTWAWKI? Is TSGHTF? Lord only knows. Maybe I'll wake up dead like the poor soul in the cautionary post above and all my baubles will be worthless.
But I'll have slept like a baby, my friend, slept like a baby............
Will you marry me?
Congrats! Wish I had your insight. The term Goldbug does you a disservice, trivializes the accomplishment. I started @ 800 (most of what I have) and feel better. If you were me, would you buy now??? I am not yet 50%, last buy was at $1050. I won't hold you to it, just curious...
Yes, MsCreant, I think it's safe to buy now. I'm not, but solely for the reason that what I've accumulated and stored, is what I consider being "all in", a full position. I have the utmost faith in the predictions of folks who were considered (and in many cases still are) lunatics for their thoughts on gold. I'm going to suggest it's an easy double from here and probably not that far out in the future. Ultimately, I'm in the camp that thinks today's prices will be looked back at as a bargain. I don't want to put a number to the upside, plenty of others have done that, I'd suggest it's far North of where we are today.
The only problem I've got is, what the hell to do with it when the parabolic spike to some level, even I've scoffed at occurs? Into $Dollars? Heck, the whole point in buying was to eliminate the exposure to the tragedy of $Uncle $Buck. But, I think I've got time to ponder that question and I expect in due course, the answer will appear.
When I quit buying the physical stuff, I got into playing the equities of the miner's. Man, I love the gold/silver stocks. I don't know of any other sector where daily moves of 5%-7% are actually routine.
Good luck to you and grab some gold!
I think I will. Thanks.
probably shouldn't let people know that you're storying a bunch of gold and silver at your house in florida...
That's what the weapons are for.
+.223, 7.62mm, .50 BMG
Yes, it does have a long way to go; by my calculation, $1,330/oz. Folks will believe in what they want to believe in. If one has a portfolio without precious metals in these times, then one is a fool or an trusting idiot in a corrupt government and banking system akin to a banana republic.
Gold in turmoil. Gold when loss of confidence in government and financial institutions. Gold just prior to currency collapse or step debasement. Gold when supply is being consumed by big players when traditionally they have been suppliers and sell siders.
It's all a game. No absolutes. No pure protection. So we must be nimble and pick the best hedges.
Stocks, bonds, derivatives, currencies have shown that they can overnight become worth-less. Gold is volatile too. But its scarcity and recent trading confirm long term bull market.
Read your financial history too. Russian revolution, Weimar, end of WWII, Napoleonic wars.
Always gold.
When the sovereigns begin to default you will see the rush out of fiat.
The liquidity funnel stops at precious metal.
Prices are spectacularly high now. But just a tease of what is to come.
silver is a much rarer metal, and mostly mined as a by product of other metals. 90% of all the silver mined has been used. we'll run out of silver at some point in the future, but there will still be all that gold. someday the price of silver will be much closer to gold
Silver is the 'poor man's gold'.
For this reason alone I think it will do well.
I see this as the beginning of an era when the unsophisticated (no ivy-league, no MBA, no charting skills, no derivative experience, no 'first world' status) will begin to drive currency again. If the 'G8' PTB are planning a 'new world era' complete with global currency, I think these next few years will topple that vision like the biblical Tower of Babel. They have lost touch with the peasants and don't realise how much their goals depend on *global* peasant participation.
Chinese and Indian and Russian peasants will drive PMs higher, despite OECD governments (whose peasants are fatter and much more firmly in line). Chinese and Indian governments cannot afford peasant uprisings, which will occur if their populations' small wealth is lost to them. Hence the new 'floor' under gold, the Beijing and now Delhi puts. This is what so many commentators fail to understand: Washington and London are no longer calling the shots here.
Silver as an industrial metal or jewellery, is fine. Gold as jewellery or computer circuitry is fine. But gold and silver as peasant money - is a whole new ball game.
Over the next few years, I think this is what is coming. I think silver will be seen as 'peasant money', because gold is money for the rich. (Even now, in these early days, many people I know CAN'T buy a bar of gold, b/c they just can't raise a quick grand or can't bear to risk that much for something the size of a cufflink. But they can raise, and risk, $700 for a big bar of silver.)
I agree 100%
Silver is going to out perform Gold for the reasons you stated, its performs the same functions and is a fraction of the cost.
time to short gold...........
My dad fought in the Russian army in WWII. He saw a lot of crazy shit. He said people with gold were able to cross borders and get food. Those without did not fare as well. Not to imply things will get that bad here anytime soon, but I'm tired of these retarded "gold is no good if TSHTF" posts. They couldn't be more wrong.
i've talked to people who fled vietnam after saigon fell- the ones with gold made it.
i've talked to people who fled bosnia- those with gold and those with a cartload of cigarrets and booze made it. but only gold is easily transportable.
john nadler of kitco made it out of hungary because of a few gold coins.
people fleeing nazi germany- same story.
before the civil war some people buried their confederate banknotes, others buried gold/silver coinage. after the war the banknotes were useless as even toilet paper, while those with metal saw their wealth unaffected, even if the union army torched their farms. i have a confederate banknote hanging on my wall as a reminder- it, along with other antique banknotes does have some collector value but vastly less than the metal that used to back it.
the story goes on and on.
who knows, maybe everything is different this time- i sure hope so because our standard of living depends on it and if gold/silver crash we'll all be vastly better off. but if tshtf then those with metal have a good chance at starting over.
as an aside, last fall when tshtf the paper price of metal fell, but the premiums on physical skyrocketed. this i expect in the future, so rather than focus on the daily digital price, keep an eye on its analog (physical) premium and thus real value. if tshtf the premiums should more than make up for paper mkt fiction.
Jeff Clark obviously doesn't have much experience with bubbles if he thinks there isn't mania.
The 'cash for gold' adverts are a bearish indicator in the same way that japanese housewives driving the carry trade, were a bearish indicator.
Futures positioning is at extreme levels and the gold play is almost mirroring oil, where the peak oil theorists were in far too early. "It'll never go back through $100" we heard about oil.
There is no inflation, so the market runs a severe risk of a sentiment changing event, which will see the brutal unwind of hedge fund and etf positions.
Gold in a bubble??
Follow the link and scroll down to the graph.
http://www.gold-eagle.com/editorials_08/litle110409.html
The amount of gold as international reserve assets is at the low end. Sure it could go lower, but do the foreigners holding paper trust the paper?
The Indian CB said no by buying IMF gold, the Russian CB , Chinese CB, plus some more.
The value of real estate drops in ME too. From 158,500 to 500 is close enough to zero.
http://www.auction.com/auction_details_online.php?auctionID=O-005
"If the top were in, we’d be in the midst of an all-out Mania. Are we? Do you get the impression there’s a rush into gold by the greater public right now?"
....uuh what planet are you on? Have you seen the onslaught of infomercials? The overall gold hype is pretty much in full swing. They might be right...who the fuck knows...but this argument is straight stuuuuupid.