Morning Gold Fix: June 14, 2010

Tyler Durden's picture

Courtesy of

Last week in an appearance before the House Budget Committee Federal Reserve Chairman Ben Bernanke was asked what he thought about the recent highs in gold. Bernanke replied that he didn’t really know but suggested it wasn’t from inflation, noting “the spread between and nominal and inflation-indexed bonds, the break even, remains quite low, suggesting the markets expect about 2 percent inflation over the next 10 years.”

He further elaborated that “Other commodity prices have fallen recently quite severely, including oil prices and food prices. So gold is out there doing something different from the rest of the commodity group.” Which we think is silly. First, as a rule, Bernanke rarely says he “doesn’t know” unless he knows and doesn’t want to say. 

Second, Gold is not a commodity (at least lately); it is a competing currency.  I thought Ben looked like he was swallowing a canary when he answered that question. To quote Jim Rickards, of LTCM bailout fame, one of many who feel the same way, “This will help end confusion: Gold's not a commodity. Gold's not an investment. Gold is money. If you'll need money in future, get gold.”

To add: the spread between TiPs and Treasuries is not representative of inflation, it’s representative of CPI expectations, a data point managed by the Government…Argentine redux coming soon perhaps? Our own explanation for why gold and Bonds are strong simultaneously lies in the belief Bonds are being bought for liquidity, not safety. Sovereign debt of ANY nation is not a safe haven. Right or wrong, the world is getting short governments, and the U.S. may be the tallest pygmy, but it’s still pretty short. People are buying U.S. bonds as a flight to LIQUIDITY. They are buying Gold as a flight to safety. There is a difference.


Resist: 1240.64-1242.47 ST Trend: Up Swing Target: 1272.60 (1230.20) Supprt: 1219.95-1216.77 Swing Point: 1234.19 Range Reversal: 23.42

August gold was down 2.1 to $1228.1 per 100 troy ounces as of 7:59 AM EDT, this morning. The June U.S. dollar index was down .992 to 86.525. July platinum was up 21.0 to $1556.0 per 50 troy ounces. Silver was up 17.9 cents to 18.410.

For Market Prices Click Here

-Elizabeth Thawne

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goldfreak's picture

trollus maximus stupidus repeattitus

akak's picture

Veritas.   In Gluteus Maximus Caput Insertus Est.

Gold...Bitches's picture

You know, if you just put a little more effort into pushing your head further up your ass it might just go all the way through and pop out again.

septicshock's picture

A temporary pullback will surely ensue from the bogus afghan find(meaning not really a substantial sum... as you can see from my post in the 1 trillion dollar afghan find headline).

A pullback of 10% before smart money rushes to get their money back in.  Paulson, Soros, etc.. are not all idiots when they place a significant chunk of their investments in gold.

quintago's picture

afghan find is meaningless until you figure out a way to extract it without dying.

monmick's picture

"I don't fully understand movements in the gold price," Bernanke said on Capitol Hill last week.

I guess he could have gone on to say: "The part about the massive take-downs orchestrated by the Fed and carried out by the bullion banks, I understand; but I don't have a clue about the rest..."

Pegasus Muse's picture

She nailed it in just a couple of sentences.  Liquidity versus Safety.  Temporary parking of assets versus long term preservation of wealth.  Good stuff.

falcomadol's picture

Gold is not liquid, gold does not have an approximately fixed price over the short to mid term horizon (/me looks at the chart), gold is not usable as a medium of exchange in 99.99% of transactions, including barter transactions (try to get some eggs and bacon at the farmers market for a gold nugget, you'd be better off with a bag of rice to swap).

Gold is a store of value (but so is a pile of aluminum).

Gold is not a currency.

Buy it if you want, but don't pretend it's cash, especially when you know better because you understand that it isn't liquid and that it doesn't have a widely agreed upon exchange price (if you even consider these market quoted prices reflective of actual physical gold, don't expect that on the street).

Sabremesh's picture

You think aluminium is a store of value? Let's look at the stats - gold is 7x denser than aluminium and over 20,000 more expensive. This means that whilst you could store a $1million of gold in a small safe (37cm cubed), you would require 145,000 similar small safes to store $1million of aluminium at current prices. Do you now see why aluminium is not used a store of value?

monmick's picture

I disagree. Aluminium is a store of wealth for individuals who don't have much wealth to store. If you try to store $10's worth of wealth using gold, you could very easily lose it...

Sabremesh's picture

There was a typo in my original post - $1 million in gold would be about 30cm cubed (not 37cm). The value of aluminium required to fill a safe this size would actually be worth about than $7. In other words, your safe would be worth far more than the aluminium inside it. 

A Nanny Moose's picture

Does nobody consider silver anymore?

TheDriver's picture

> gold is not usable as a medium of exchange in 99.99% of transactions

In the last year alone, I've exchanged gold and silver for several services: home renovation, equipment repair, and tree work. I think if you were to put your therories to the test in the real world, you would be surprised at your findings.

thesapein's picture

Just pulling out a gold coin in a public setting catches many eyes. Everyone wants to touch it and hold it in their hands. So precious.

I wonder if we were paying with gold and silver if people would be less likely to part with their money. Handing over a gold coin is hard. So whatever you trade for, you're thinking, man, this had better be worth it.

A Nanny Moose's picture

indeed. The psychology behind FRN's is far different. Get rid of them before they devalue.

Henry Chinaski's picture

The old definition of money from my copy of the Webster's New International Dictionary 1924 printing:

money  1. Metal, as gold, silver or copper, coined, or stamped, and issued by the recognised authority as a medium of exchange; coin in general.

You won't find that definition in any recent dictionary.

thesapein's picture


Does it define counterfeit money, too?


Hephasteus's picture

You should start a show. Blueless Clueless.

Spitzer's picture

Gold can be exchanged for any fiat  currency in the world.

Gold is the most marketable good, not rice.

aluminum gets consumed

Gold is money

There has always been a market for gold.          


doolittlegeorge's picture

this is speculative but terrifying if you believe it to be true--using treasuries as a source of liquidity.  obviously the US gives new meaning to the word "profligacy"--still the dollar has soared in value as well.  This is the source of the "confusion" of course.  How can interest rates in the US be basically zero and the dollar soar?  We're the biggest debtor nation in historyand our currency is soaring?  I mean we're not talking mere "mind-bender" here.  This is more like "falling up" stuff.  Only comedians can make sense of it in my view.

thesapein's picture

lol, comedians as experts, love it. More cleverness and wit to you!

unwashedmass's picture


gold doesn't seem to be dropping.....why?

you mean the trillions and trillions in gold the taliban are sitting on? they aren't ours?

the trillion we have spent almost two trillion trying to steal? its not impressing people this morning?

you mean california, new york, new jersey, illinois...they might go broke before we can mine afghanistan?

hello? that is not right.

Kina's picture

But you cant eat gold!


I think most of Asia would be laughing at the blind stupidity behind that statement, and know from it that one day they will rule the west.

swamp's picture

I think that "one day" began yesterday.

trav7777's picture

Bernanke is an idiot.

He thinks that the rate spread between bonds HE'S BUYING is indicative of anything?!?!

Let the freakin USTs float, you dumbass, then we'll see what REAL expectations are.  The moron forgot that HE IS the bid.

Attitude_Check's picture

He didn't forget.  He just forgot he remembered!

Hephasteus's picture

Even worse he thinks the double dip was caused by a mistake. Raising interest rates from 1 percent to 3.5 percent in a week then quickly droping it back down. It was no mistake it was simply to force further liquidation as it wasn't ever going to recover. You can't create new or different or better if you are facing a lifetime of paying off the old.

mephisto's picture

Quick comment on gold

I am hearing of lots of stop losses being triggered today - not in USD but in EUR,GBP - where there has been a lot of buying recently from new accounts not used to holding gold. Weak hands getting washed out, I think.

IMO thats the selling pressure this morning, its FX related. Calmer FX markets after the london close should see more stability.

Don't be fooled by the short squeeze - still no confidence around over here in Yerp.

JonTurk's picture

would be buyer @ 1198-1205 range if i could... looking to 1320-1340 zone (reverse head & shoulders target) w/ another selloff in risk assets next week..

Kina's picture

Indeed if they keep pushing the AUD up and gold down I will be in for some more.

Ted K's picture

Maybe Tyler should get Bernanke a baby's seat next to his trading chair and they can get a closed caption video feed of Bernanke next to Tyler sent to Congress and Tyler can give him cues before he answers questions on Gold.  Or he could give him half the proceeds from ZH ads.  Tyler can buy him this chair for the testimony next to Tyler's seat, it's perfect.|B0010WGPJM&CPNG=baby&ref=tgt_adv_XSG10001

Duffminster's picture

So how long until someone with deep pockets and long term goals realizes the three leverage points in Gold.

Silver is a long lever for Gold.

Silver is a miniscule market with massive paper derivatives being played on it.

By Taking Delivery of Physical Silver (which is 1/6th of its inflation adusted high price) you drive it up to its actual value.

By driving Silver to its actual value (with just a few billion dollars) - You get huge leverage driving gold up to its actual fair market value.

Hulk's picture

"All safe deposit boxes in banks or financial institutions have been sealed...and may only be opened in the presence of an agent of the IRS." - President F.D. Roosevelt, 1933

Insert witty title's picture

Hey does anyone know whether this was actually passed / enforced? Any records of actual physical confiscation? Yes i'm being lazy i will try and find out myself but hopefully someone here has some nice stuff.

=) cheers