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The New Gold Floor

Tyler Durden's picture




 

When two months ago we discussed the IMF's selling of one eighth of its gold reserves of which as most know by know half was recently acquired by India, we came to the conclusion that the IMF's proposed naive and subjective purpose for this disposition which was framed as "safeguarding against disruption in the gold market" would instead end up with "rioting in goldbugland." Based on gold price action over the past 3 days, we have been so far correct. And the concern for the IMF (and all Central Banks as well) is that India's example will be promptly followed by China, Russia and other sovereigns who are seeking to flee from their dollar holdings courtesy of continued madman-like behaviour out of the 3rd sub-basement at the Federal Reserve where all the Heidelberger Druckmaschinen are kept.

Because, as David Rosenberg points out, what India has done is it has established an effective floor in gold pricing:

Gold has broken out yet again and is up another 1% so far today as it begins to challenge the $1,100/oz mark (according to unofficial IMF estimates, the Reserve Bank of India bought gold at $1,045/oz. With the size of the purchase (8% of annual mined production) and at that price it certainly helps establish a floor! The fact that the yellow metal is accomplishing this with ongoing deflationary developments — Euroland PPI came out for September and showed a 0.4% MoM decline and a -7.7% YoY trend — suggests that other factors are driving bullion to new bullish heights. It’s called scarcity of supply relative to fiat currency.

Rosie has become much more vocal on gold lately, and it appears he now shares our view presented a month ago that the ever growing excess liquidity (read empty pieces of paper) are now directly translating into a ever rising bid for bullion, which has now detached from most (if not all) correlations with the DXY and the broader market. This means that unless the Fed is willing to see the next purchase of gold by a sovereign occur in the $1,100+ zone, and really activate gold's afterburners as it heads to $2,000, which would be monetary suicide for Central Banks everywhere, Bernanke will be forced to end his uber-liquidity scheme sooner rather than later.

Some more from Rosenberg on gold:

While the gold purchase by India’s central bank is widely viewed as the trigger point for the latest jump in the gold price, there are good reasons why bullion is in bull mode. It comes down to a fiscal policy in the U.S.A. that will stop at nothing to ensure that the economy embarks on an uptrend. Even with a fiscal deficit north of 10% of GDP, the article from yesterday’s WSJ that was titled Job-Creation Panel Leery of Spending really resonated. To wit: “So far, the White House and Congress have been weighing a range of short-term tax ideas to spur job growth, such as expanded refunds for big companies that suffered losses; extension of a first-time homebuyer tax credit; and a new tax credit for hiring.”

And this last tidbit:

Gold broke out to a new high yesterday of $1,084/oz (and continues to rally today). It did this despite the S&P 500 managing to tick up two points and despite the DXY index actually eking out an 8bps rise to 76.3. This is NOT just a U.S. dollar story — have a look at what bullion is doing in Euro terms. Very impressive. This is a broadly based breakout and that means a durable secular bull market.

Looking at the growth rates in fiat currency that central banks are creating to stimulate their economies and the amount of bullion that would be necessary to back up this massive global monetary infusion suggests that gold can at least double if not triple from here. If you missed the first 4x runup from the $250/oz lows a decade ago, don’t worry about it. It’s like worrying about how you would have missed the first half of the rally in the S&P 500 from 1982 to 1992 when the index was at 400 and still had 300% to go before finally peaking out and sputtering at the 1500+ highs eight years later. In other words, the cup is still half full — and still can be filled with gold eagle coins.

Looks like the gold bulls just acquired one more vocal member. Perhaps Rosenberg can now settle his bet with Joe Terranova in gold-indexed lunch futures.

 

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Wed, 11/04/2009 - 11:08 | 119539 Ivanovich
Ivanovich's picture

I still don't get how $2000 gold would be "monetary suicide for central bankers everywhere". 

Wed, 11/04/2009 - 11:24 | 119564 whydtinogo
whydtinogo's picture

Presumably $2k gold implies a significant loss in confidence in fiat currencies and consequently central bankers will be unable to "implement monetray policy". Should confidence be lost in paper currencies then some sort of return to a gold standard would be necessary to back the currencies and ultimately pay for the various bail outs.

Wed, 11/04/2009 - 11:47 | 119601 Anonymous
Anonymous's picture

Were that the case, then what would happen if, for example, instead of confiscating gold, the CB's just declared that gold could not be monetized, ie, they shut down all official gold exchanges and declared that banks could no longer exchange currency for gold, as gold trade would be legal only between CBs?

Of course there would be a black market, but it would be pretty hard for gold to be a threat to any currency, under that circumstance.

The goldbugs may become a victim of their own success.

Wed, 11/04/2009 - 12:23 | 119661 Coming Down in ...
Coming Down in Powdery Sparks's picture

Why bother confiscating it?  Just print up some money and announce you're going to buy gold for $5000 an ounce.  I think you might see some sellers at that point.  Not me, of course, but it would probably get some gold into the coffers.

Wed, 11/04/2009 - 17:13 | 120193 glenlloyd
glenlloyd's picture

And this is exactly why confiscation isn't likely. Since the dollar is no longer tied to gold there's no legitimate reason to confiscate and revalue the dollar, just print more dollars. That is unless we turn into a police state with a govt who has no other alternative but to seize the gold of the citizenry in order to fund their own rotting carcass because no one accepts the dollar.

Sun, 11/08/2009 - 08:01 | 123802 Slewburger
Slewburger's picture

Yea its called the emergency banking act.

Wed, 11/04/2009 - 12:27 | 119668 Anonymous
Anonymous's picture

While that's a good point, I fear a move like that could really piss off countries that had been purchasing the gold and driving the rally (Russia, India, China etc.). That might even be grounds for war since it's essentially massive theft on an international scale.

Wed, 11/04/2009 - 12:49 | 119707 Anonymous
Anonymous's picture

That would be like trying to outlaw sex or alcohol. A lot of people are always going to use real money, no matter what. Right now those people include: at least India and Japan, the two largest countries in the world; many people in every other country which produces some gold, including the USA; and lots of people who have saved some money and don't want a CB eroding their savings.

Wed, 11/04/2009 - 12:55 | 119723 Damage Inc.
Damage Inc.'s picture

See the Prohibition of Alcohol for what a black market can do.

Wed, 11/04/2009 - 18:45 | 120290 Big Red
Big Red's picture

How about that War on Drugs?

Wed, 11/04/2009 - 13:18 | 119755 chumbawamba
chumbawamba's picture

Yeah, I'm really scared about central banks re-declaring their fiat currencies.  Talk about paper tigers.  Ha.

I am Chumbawamba.

Wed, 11/04/2009 - 13:33 | 119779 Gwynplaine (not verified)
Gwynplaine's picture

I doubt there will be any confiscation of gold this time around.  I bet lots of politicians have gold holdings of their own.

When FDR signed that executive order, it must have been a real surprise.   These days there would be lawsuits and complications that would make it practically impossible to replicate.  Back in 1934 there was a lot more patriotism and a feeling that the government was ultimately acting in your best interests.   I suspect there was much more voluntary compliance.

Wed, 11/04/2009 - 13:52 | 119823 chumbawamba
chumbawamba's picture

From what I understand compliance was limited.  Only those unfortunate enough to have had their gold stored in bank saftey deposit boxes go robbed.  And only idiots volunteered it.

I am Chumbawamba.

Wed, 11/04/2009 - 14:04 | 119846 Anonymous
Anonymous's picture

In 1933, the Americans held more gold per capita than any country on earth. This was primarily in the form of 22 carat gold coin.

FDR confiscated this coin, made bars of it and sent it to Ft Knox.

At the same time the FR Act was coming to an expiry. The original act was only in force for 20 years, 1913 to 1933. Not many people remember this.

The threat to the US was dramatic. People were going to the bank trying to shed their FRNs and replace them with USNs. The former is elastic, the latter is not. You can imagine the threat to the banking system.

When FDR came to office, the first thing he did was extend the FR Act. The second thing he did was confiscate the main competitor, gold coin, these were part of the same act.

According to Feteke, FDR, in his haste, did not bother to refine the confiscated coin. For this reason, much of the US gold reserves are 22 carat, not 24 carat, and therefore cannot be used to settle exchange contracts.

Wed, 11/04/2009 - 14:15 | 119875 dhengineer
dhengineer's picture

Any gold confiscation within the United States would loudly tell the rest of the world that the dollar was indeed heading down in flames and that the crew had just bailed out.  Gold confiscation is the act of a desparate financial system.  They may call in gold, but they will destroy the rest of the paper-money system in the process, unless they turn around and back dollars with the newly-acquired gold.  And we know that ain't gonna happen, not on Benny's watch, anyway.

In contrast, China is actively encouraging gold and silver investments by the public.  If only a tenth of their population each bought one ounce of gold, that's 120 million ounces, or about 3750 tons.  With that much gold in the country floating around freely, not to mention the unknown tons of Chinese central bank gold, how long would it be before China could declare that the Yuan was now effectively a gold-backed currency, and a candidate for world reserve status?  Bye-bye paper dollar, hello gold Pandas.

A US-centric gold confiscation would be first met with a collective guffaw from the rest of the world.  Then, they would actively compete to unload their now-worthless green ink-stained paper.  Oil and every other world commodity would be repriced in gold, not dollars.  Exports into the US would also be priced in gold.

The race to unload dollars in favor of world gold would become a bloodbath as everyone dumped dollars in favor of hard assets.  Zimbabwe would look like the paragon of fiscal virtue in comparison.

Gold confiscation isn't going to happen.

Wed, 11/04/2009 - 11:34 | 119579 Quintus
Quintus's picture

Because the entire Fiat Currency Ponzi scheme is completely dependent on nothing more substantial than confidence.  The CBs have devoted a lot of time effort and money shepherding J6P away from Gold and Silver and into paper, which is much more amenable to tinkering and debasement by the monetary 'Experts'.  Gold is, in effect, the 'Anti-Currency'.

Gold price suppression (to conceal the hidden tax of inflation) has been a key element of this effort.  An exploding gold price reveals, for all to see, the utter fragility of the Fiat currency system.  Imagine if the effects of every bailout, boondoggle and money printing episode was reflected instantly in the Gold Price.  The debasement of the currency, and therefore the public's savings and investments, would be writ large in a way that anyone can grasp.

There is also the problem that JPM, Barclays, Deutsche Bank and a handful of other entities are massively short Precious Metals (at the behest of the Treasury).  If Gold and Silver explodes, so will these banks.

Wed, 11/04/2009 - 11:55 | 119618 Ivanovich
Ivanovich's picture

The bank short argument is probably the most virulent argument I can see.  As for the "it'll show the world" argument, I'm not sure Central Banks give a crap.  I know Banana Ben doesn't.

Wed, 11/04/2009 - 12:50 | 119714 Anonymous
Anonymous's picture

Hidden tax of inflation = hidden theft via inflation.

Wed, 11/04/2009 - 13:06 | 119736 Anonymous
Anonymous's picture

And when one of the precious metals ETFs is exposed as a front for central bank manipulation a whole host of dominoes would fall.

Wed, 11/04/2009 - 19:04 | 120323 Anonymous
Anonymous's picture

Yeah I've been wondering about the gold shorts.

Back in 2001 I read lots about gold leasing by bullion banks from CBs at crazy low rates. The standard GATA conspiracy was that selling this gold into the market was designed to suppress the price of gold. The bug in the ointment was that Treasury had leased out all "their" gold and unless the bullion banks could get physical delivery then Treasury would never get their gold back.

So what has happened to all this gold leasing? Have the bullion banks simply rolled over their positions with ever increasing unrealised losses? How does this play out when gold is $1000 let alone $2000? It was ~$250 in 2001.i

Wed, 11/04/2009 - 11:12 | 119545 Anonymous
Anonymous's picture

ABX set the floor on gold pricing when they withdrew their hedges

Wed, 11/04/2009 - 12:05 | 119632 SWRichmond
SWRichmond's picture

Yes, this was the tipping point; when Barrick, the world's largest central-bank gold agent, gives up on capping gold, it's time to give up capping gold.

I am still not convinced there's not a "risk-off" move coming.  I am gently buying into this move but I still remember $147 oil.

I am the worst market timer imaginable.

Wed, 11/04/2009 - 12:33 | 119679 DiverCity
DiverCity's picture

I'm right there with you.  I and others had expected one last hurrah for the "cappers," but either it didn't happen or their efforts were futile, as the FRN price of gold barely dipped last month.  I'd still like to see it hit the FRN$900 level one more time so I could add more, but I think I might have to start buying in as well.

Wed, 11/04/2009 - 13:25 | 119764 chumbawamba
chumbawamba's picture

$900/ozt gold is history.  Maybe on the next fiat cycle...

I am Chumbawamba.

Wed, 11/04/2009 - 17:03 | 120168 Anonymous
Anonymous's picture

The floor is 1046 as IMF defined.

Wed, 11/04/2009 - 12:56 | 119725 Anonymous
Anonymous's picture

Its important to note the spike in volume of ABX shares starting on 8/31, the day we learned of chinas derivative default n deals with western banks. The smart money moved to gold immediately and the MSM never mentioned chinas intentions. A week later china moves its physical gold from london to hong kong and offers to buy all the IMF Gold. I'm afraid what we may be seeing is a flight to safety before the DERIVATIVE DEATH STAR EXPLODES! Proton torpedos away!

Wed, 11/04/2009 - 11:26 | 119566 vanderrook
vanderrook's picture

I hope your gold is buried in the backyard- one of their best moves will be saved for last...the confiscation of all gold, just like '33. Then they'll reset the price back to 20 or 30 bucks an ounce again- sell it back after that. Pure profit for them.

"I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order"

Section 9. Whoever willfully violates any provision...may be fined not more than $10,000, or, if a natural person may be imprisoned for not more than ten years or both...

 

Wed, 11/04/2009 - 12:10 | 119645 SilverIsKing
SilverIsKing's picture

Can you pay the $10,000 fine with worthless fiat?

Wed, 11/04/2009 - 12:31 | 119676 bilbert
bilbert's picture

+1

Wed, 11/04/2009 - 13:17 | 119753 vanderrook
vanderrook's picture

Negative; Not even they will want their own FRN's. You must pay in property- of course, if you have none, they'll just throw you in a camp somewhere...an enemy of the state!

Wed, 11/04/2009 - 14:39 | 119929 Hephasteus
Hephasteus's picture

Camps and prisons are places for authority to punish people who accept authority. War and shootouts in the streets are what will happen. In the 30's they demanded citizens turn over gold to central banks. If I have to take a trip to a central bank I'm bringing guns, a belt sander, lemon juice, razor blades, rope. Not gold.

Wed, 11/04/2009 - 13:28 | 119768 chumbawamba
chumbawamba's picture

What a load of unserious hog droppings.  First of all, by the time they would even be considering the confiscation of gold they will be on the verge of losing any power or legitimacy that they had.  I'd like to see someone's hand get shot off just as it reaches for my fucking gold.

I am Chumbawamba.

Wed, 11/04/2009 - 15:51 | 120051 vanderrook
vanderrook's picture

Ouch! I will not obey either....

 

...but, it has happened before...

Wed, 11/04/2009 - 11:30 | 119569 LoneStarHog
LoneStarHog's picture

Ponder this:  India has been a depository of IMF gold and it is well known that India WAS a whore of the U.S. Government, as WAS Japan.  It is also well known that the U.S. has been supressing the price of gold by supplying the physical market, as part of Rubin's scam of a Strong Dollar Policy.

Is it possible that the gold that India supposedly purchased does in fact NOT exist?  That the gold was used as part of the price supression scheme?  That in order to cover the fact that there is NO physical gold, India is provided with the money to supposedly purchase the gold that is already in its care?  Is this possibly WHY India got the purchase rather than China, because the physical gold DOES NOT exist for actual sale?

The gold market is the most manipulated and corrupt market on planet Earth.  Think about this before you discount it.

Wed, 11/04/2009 - 11:36 | 119581 Catullus
Catullus's picture

Awesome! I like where your heads at.

Big question: "is will the gold being transferred to India?"  If I'm just moving it on the IMF balance sheet to India's account at the IMF, who cares? 

Wed, 11/04/2009 - 11:46 | 119598 tip e. canoe
tip e. canoe's picture

i agree...something's fishy about this so-called 'purchase'.  india used SDR's that were allocated to them just 2 months ago to buy it.

Wed, 11/04/2009 - 11:50 | 119607 whydtinogo
whydtinogo's picture

Assuming they get the gold wouldn't you buy something hard and shiny rather than keep the book entry item.

Wed, 11/04/2009 - 12:14 | 119650 tip e. canoe
tip e. canoe's picture

fyi, the suspicion does not come from looking at it from india's POV.
(and yes, agreed, they got a great deal all considering)

Wed, 11/04/2009 - 14:06 | 119859 Anonymous
Anonymous's picture

One of the Rueters stories yesterdays says India did NOT use SDRs, but purchased the gold with "hard currency".

Wed, 11/04/2009 - 14:40 | 119931 faustian bargain
faustian bargain's picture

golly, so they bought gold with gold?

Wed, 11/04/2009 - 19:40 | 120373 geopol
geopol's picture

Special Drawing Rights are the same as FRN's worthless paper... No such thing as Hard Currency.

 

But I get your point..

Wed, 11/04/2009 - 14:09 | 119862 Joe Sixpack
Joe Sixpack's picture

One of the Reuter's stories on the India gold purchase stated that India did NOT use SDRs,  but used "hard currency". Can you verify they used SDRs?

Wed, 11/04/2009 - 23:42 | 120536 tip e. canoe
tip e. canoe's picture

http://www.zerohedge.com/article/gold-ignores-dollar-strength-rushes-new...

courtesy of the india times via puffin.  just checked: as of yet, no correction to the article.

you say hard currency, i say SDR.
you say reuters, i say india times.
dollars, gold, sterling, silver
let's call the whole thing tinfoil

Wed, 11/04/2009 - 13:22 | 119759 Gunther
Gunther's picture

Lone Star, you are not alone thinking that.

http://harveyorgan.blogspot.com/2009/11/nov-309-commentaryvery-important...

The argument made in that blog is that while the trade was settled no delivery of metal took place.

 

Wed, 11/04/2009 - 13:37 | 119795 LoneStarHog
LoneStarHog's picture

Yes, as I stated, India has been a custodian of IMF gold.

Wed, 11/04/2009 - 11:32 | 119571 Moe Speeks
Moe Speeks's picture

GOLD GOLD GOLD

HIGHER HIGHER HIGHER

Wed, 11/04/2009 - 11:33 | 119576 RowdyRoddyPiper
RowdyRoddyPiper's picture

I love a good conspiracy about an alleged conspiracy.

Wed, 11/04/2009 - 11:34 | 119578 Anonymous
Anonymous's picture

This market action theoretically prevents central bankers from furthering their race to the bottom in global currency markets. Which of the monetary-policy-distorted export market bubbles collapses first, then? My poe's on China. Remember that Rosie's other favorite thesis is that "decoupling" is a myth.

Wed, 11/04/2009 - 11:40 | 119588 TumblingDice
TumblingDice's picture

Gold: it never goes down.

And by the same logic...it never goes up either. The most boring savings play ever and yet people love talking about it to death. I'll make a bet with the goldbugs...oil will outperform gold for the next two, five or ten years. Any takers?

Wed, 11/04/2009 - 11:50 | 119606 hack3434
hack3434's picture

Yeah! Hold physical oil... 

Wed, 11/04/2009 - 12:05 | 119634 whydtinogo
whydtinogo's picture

If I lose can I pay up in SDR?

Wed, 11/04/2009 - 12:06 | 119635 LoneStarHog
LoneStarHog's picture

Gold and especially silver has been suppressed (manipulated) for years.  As with anything that is suppressed, pressure builds.  Price suppression schemes can only last for a finite period of time.

Had these metals not been manipulated, they would have been a good store of wealth.  Gold began breaking free in 2000 and silver in 2003.

This is what makes these two metals the items from which wealth will be made, as those of us who moved all of our net-worth into them in 2000/2003 are beginning to realize.  They have been a store of wealth and will soon become the best investment in history.

It is the explosion upward from the suppression that will create phenominal wealth.

Either study the gold/silver markets in depth, or realize that your comments are nothing more than mainstream (read clueless) think.

Wed, 11/04/2009 - 12:41 | 119687 TumblingDice
TumblingDice's picture

It is the explosion upward from the suppression that will create phenominal wealth.

Either study the gold/silver markets in depth, or realize that your comments are nothing more than mainstream (read clueless) think.

This kind of subjective, semi-religious and at times sophmoric talk has really brought down the level of discussion here regarding gold. I dare say something relatively(!) negative about gold and people jump out of the woodwork and call my comments clueless. FYI, while I can never study these fascinating markets enough, I have dedicated plenty of time to the cause in the past.

A couple of quick corrections Mr. Hog: gold can't create wealth. Your labor creates wealth, utility creates wealth. As you aptly put it, gold stores wealth. It's a shiny metal that sits in your safe and it doesn't do anything but watch the number of FRNs out there increase in quantity while its quantity stays relatively constant. It is not an investment, since it is not a bet on an increasing utility, but rather a move towards saving against decreasing utilty of FRNs. (Ergo, it can't be the best investment in history, unless you believe in complete collapse where the ebst move will be to save, and even in that case there are better investments to make than gold, for example water filters, guns and ammo, seeds and fertile land)

Oil on the other hand, is constantly decreasing in quantity. Plus, oil has utility, which is helpful in any kind of scenario: inflationary, or deflationary apocalypse.

But anyways, congratulations on your savings play from 2000/2003. It has proven to be the right play for the timeframe. If I were you though, I would stop (accumulating) saving and start investing.

Wed, 11/04/2009 - 12:52 | 119716 LoneStarHog
LoneStarHog's picture

Gold/silver are an investment since the prices have been manipulated downward. Until the metals reach equilibrium, they ARE an investment.  This is where the wealth is created, that being price appreciation ABOVE that of inflation. Wealth is created from work and investing.

Is this simple concept too cerebral for you?

Wed, 11/04/2009 - 13:29 | 119756 TumblingDice
TumblingDice's picture

By your logic, anything that returns above the rate of inflation is an investment, while everything else is saving. This is wrong. Also, by your logic, holding anything with a price that has been "manipulated down" is an act of investing...an extension of this logic is that when I hold dollars whose price has been "manipulated down" (relative to other currencies or goods) I am also investing...fail again (I don't hold dollars btw)

Invest in yourself and learn what distinguishes saving from investment from these two good articles by JD Swampfox:

http://www.zerohedge.com/article/what-makes-us-save-more

http://www.zerohedge.com/article/what-makes-us-invest-more

Anyways, I don't have time to continue this fine debate as I have to go to sleep, but onelast thing I have to add is that there is no such thing as equilibrium. There is of course the strive towards equilibrium, the same as the strive towards truth, but that doesn't mean that either one exists. I believe that they do, but I can't know for sure.

Wed, 11/04/2009 - 13:37 | 119790 chumbawamba
chumbawamba's picture

Really, no such thing as equilibrium?  That is an amazing statement.  Perhaps you can supply us with the amazing treatise to support such an amazing statement?

I am Chumbawamba.

Wed, 11/04/2009 - 13:41 | 119803 LoneStarHog
LoneStarHog's picture

Since there is no equilibrium, then someone better tell all the ships at sea that they should be sinking; all the aircraft should be falling; all the planets should be falling into the Sun; etc.

It is a good thing that he went to bed, as I believe he needs some sleep.

Wed, 11/04/2009 - 22:29 | 120520 TumblingDice
TumblingDice's picture

The opposite view is the one that needs defending. When have you ever seen an economy in equilibrium? Keep in mind, in equilibrium there is no reason for the economy to leave its current state. Everything is in perfect balance. This has never happened before. The only way equilibrium will ever be reached is in the event of a total thermonuclear war; things truly won't change after that.

Otherwise the only equilibrium we are going to be living in is the one made up by economics professors. Mind you, it is helpful; learned it in college and can use it now to approximate models for the real world, and even then it is only usually only handy in a micro environment.

The world is way too complicated and dynamic to ever reach equilibrium while we occupy its surface.

Wed, 11/04/2009 - 13:57 | 119829 chumbawamba
chumbawamba's picture

You should go tell the electronics industry that gold has no utility.  Or if you truly believe that, stop using your computer, your cell phone, your television, your car, and maybe your teeth.

I am Chumbawamba.

Wed, 11/04/2009 - 20:15 | 120388 geopol
geopol's picture

Gold in computers, to a lesser degree, as we no longer use edge connection technology into backplanes. Most of the interconnect technology today is cable tin pins.. The real commodity for computers today comes from the Congo,,it's called, Coltan is the colloquial African name for columbite - tantalite.

Capacitive material mined by 10 year old kids so we can walk around with cell phones that make pancakes...

 

Confessions of an Economic hit man... My friend from Boston

Wed, 11/04/2009 - 13:33 | 119780 chumbawamba
chumbawamba's picture

Yeah, I'll take that bet, but you'll need to put 100ozt of assayed gold (I want to see the certificate) in third party escrow.  I'll stockpile the same amount of oil in my warehouse.

I am Chumbawamba.

Wed, 11/04/2009 - 11:39 | 119589 Anonymous
Anonymous's picture

TD, nice post. I am more convinced than before that you are transferring to goldbug from paperbug. Thanks.

Wed, 11/04/2009 - 12:46 | 119705 Anonymous
Anonymous's picture

Exactly, annoying so.

"and at that price it certainly helps establish a floor".

The floor is zero Rosendummy, zero. Anyone want to bet that Canada is also going to chase Rosenberg out and he'll be in Iceland next!!

What shocks me the most is how production being completely constrained, or is it? One twist of the valve that is constraining extraction from the earth and you'll be crying tears of gold.

Won't you be surprised when you find out that the mines are extracting at a fevered rate and stockpiling but claiming that it's business as usual.

Wed, 11/04/2009 - 13:38 | 119799 chumbawamba
chumbawamba's picture

What an ass.

I am Chumbawamba.

Thu, 11/05/2009 - 01:40 | 120638 defender
defender's picture

"One twist of the valve that is constraining extraction from the earth and you'll be crying tears of gold."

One problem with that.  The best mines in the world are only in the grams of gold/ton range.  In fact I recently saw an article that said cell phones have more gold per ton then mines do.  The reality is that you can only move so many tons of earth in a day, and the mines only have a certain amount of gold anyway.

Wed, 11/04/2009 - 11:41 | 119594 drbill
drbill's picture

I said it before, and I'll say it again.

Central banking: The real "barbarous relic".

Wed, 11/04/2009 - 11:53 | 119614 Anonymous
Anonymous's picture

Not Indian Reserve Bank.. It was and is the most decent Central bank in the world

Wed, 11/04/2009 - 12:29 | 119672 Anonymous
Anonymous's picture

or the most stupid one (after British)

Wed, 11/04/2009 - 12:26 | 119665 Anonymous
Anonymous's picture

To paraphrase Mr. Varley: central banking is utterly satanic.

Wed, 11/04/2009 - 12:06 | 119636 SWRichmond
SWRichmond's picture

Tyler, forgive me, but as I recall the rioting in goldbugland you predicted was in a prediction of downside, was it not?

Wed, 11/04/2009 - 12:35 | 119684 Gordon_Gekko
Gordon_Gekko's picture

I think so too.

Wed, 11/04/2009 - 12:06 | 119638 Anonymous
Anonymous's picture

Just look at the charts folks!! What goes up must come down. The herds in India and China are being screwed buying high and in the future having to sell it low ;)

Wed, 11/04/2009 - 12:37 | 119685 Gordon_Gekko
Gordon_Gekko's picture

The real bubble is in "short the shit out of equities" and "the dollar will soon rise to da moon" camp.

Wed, 11/04/2009 - 13:41 | 119804 chumbawamba
chumbawamba's picture

Sure, but who says it will come down on your preferred timeline?  It certainly won't be tomorrow, or next week, or next month, or even next year, probably not even next decade.

Give it a rest, you anonymous central bank schills, will ya?  You pukes are fucking pathetic.  Your fiat currency is toast.  Just accept it and deal with it already.  Go see a counselor if you need moral support.

I am Chumbawamba.

Wed, 11/04/2009 - 12:08 | 119641 Anonymous
Anonymous's picture

what I really do not understand - why goldbugs are excited about the fact that IMF SOLD gold.
another question - were they as excited when IMF bought it at ard. 350?
and second question, who do you think is a better investor CBI or IMF. does the history repeats about blackstone and chinese?

sumhow I really suspect gold marks important top around these days. JMHO

Wed, 11/04/2009 - 16:31 | 120120 Apocalypse Now
Apocalypse Now's picture

Do you even know who owns the IMF or what they do?  Paper is pushed around between countries, but every country knows the value of gold.  The IMF is a front organization for the fed and other central banks to promote debt (slavery), and most likely pushed gold India's way for some geo-political reason or favor.  We want India as an ally against China, Russia, and Iran (like Japan, a good shield).

Wed, 11/04/2009 - 12:22 | 119659 Anonymous
Anonymous's picture

After having a lengthy discussion last night with well informed friends, I have come to the conclusion that, you ready for it, NO ONE KNOWS WHAT IS GOING TO HAPPEN. I personally see a spike, then a violent shift down as the DOW begins to test the March lows. The DOW collapse will take gold and silver with it...however this will be short lived as the dollar collapse continues.
So holding gold and silver should be good until, as pointed out above, TPTB make gold illegal.

Wed, 11/04/2009 - 12:34 | 119680 Gordon_Gekko
Gordon_Gekko's picture

"Bernanke will be forced to end his uber-liquidity scheme sooner rather than later."

It is too late. His ending that scheme or beginning a new scheme or doing anything else will not stop the rise in Gold price.

Things have played out exactly as I predicted in my last essay:

It is only and only a bull market in real money i.e. Gold – the correlations with equities or USD – real or imagined - will keep changing, reversing or completely falling by the wayside according to whatever favors Gold at the moment as this bull fully expresses itself in due course of time.

http://www.zerohedge.com/article/gold-whats-next-0

Wed, 11/04/2009 - 12:54 | 119722 Anonymous
Anonymous's picture

blah, blah, blah, FAIL!

Wed, 11/04/2009 - 13:25 | 119762 Gordon_Gekko
Gordon_Gekko's picture

Well, why am I not surprised that you are pissed Mr. Prechter?

Wed, 11/04/2009 - 13:43 | 119808 chumbawamba
chumbawamba's picture

Seriously, that guy needs an enema so he can put his head back where it belongs.

GOLD, BITCHES!

I am Chumbawamba.

Wed, 11/04/2009 - 13:58 | 119833 ghostfaceinvestah
ghostfaceinvestah's picture

"Bernanke will be forced to end his uber-liquidity scheme sooner rather than later."

Anyone involved in the MBS market (like me) knows that there is no way Bernanke will be able to stop buying Fannie/Freddie MBS in March.  It just ain't gonna happen, no way, no how.

At most he will stop for a month, see spreads explode, then step back in.

But, this time next year he will be printing dollars to buy Fannie/Freddie paper, guaranteed.

Wed, 11/04/2009 - 12:40 | 119692 Anonymous
Anonymous's picture

Anon, there are some other data points you might want to consider. I began investing in gold (to any significant degree) in first quarter of 2002 when gold was around $280. Since that time, we've seen several central banks sell heavily. Some of them were selling at $400/ounce or less. Huge amounts of gold. They did not sell with accurate prescience.

I love Zero Hedge, but one idea I sometimes see with which I disagree is that the stock market will tank because of the weak dollar. That's not necessarily the case. It will tank in inflation-adjusted dollars, sure, but it is not a certainty that it would have to drop in nominal dollars. In fact, our leaders want that scenario. They can then say, "Because of my our actions, the stock market is up." Too many citizen investors (think 401K types) get lost by even that one simple level of analysis.

And everyone these days (not including folks here) seems so devoted to a political party. They are more than happy to pick up false, but logical-sounding (barely), soundbites and repeat them.

Wed, 11/04/2009 - 14:01 | 119838 ghostfaceinvestah
ghostfaceinvestah's picture

Well said.  I have predicted myself that we will see the S&P at 2000 by the end of next year, and gold at $5000.

The money printing is not going to stop anytime soon.

Wed, 11/04/2009 - 14:50 | 119958 faustian bargain
faustian bargain's picture

I think the stock market should tank less because of a devalued dollar and more because its price is way higher than its value, in terms of any money. I.e. equity bubble, either gonna pop or deflate...unless by some miracle the US production base grows to fill the space that bubble occupies.

Which is not likely, given our economic and monetary policies.

Wed, 11/04/2009 - 13:12 | 119742 Reductio ad Absurdum
Reductio ad Absurdum's picture

"behaviour" ???

I've had my suspicions about "Tyler Durden" -- is he finally showing his true colors? Hey TD, what country do you come from? or more to the point, what government do you work for??

Wed, 11/04/2009 - 13:13 | 119746 chumbawamba
chumbawamba's picture

The next time someone uses the phrase "the yellow metal" I am going to pull their nuts up through their throat and leave them dangling out of their mouth.

I am Chumbawamba.

Wed, 11/04/2009 - 13:29 | 119771 Anonymous
Anonymous's picture

so as to maintain the proximity betwixt me gonads and me unit, to which term do you, Mssr. Wumba, do you prefer in reference to the afformentioned metallurginous substance?

Wed, 11/04/2009 - 13:59 | 119835 RockyRacoon
RockyRacoon's picture

Sort of a reverse tea-bag effect, eh?  Ouch!

Wed, 11/04/2009 - 20:12 | 120405 geopol
geopol's picture

Well,,,Now that I know your soft underbelly of rage,,,

Wed, 11/04/2009 - 13:17 | 119752 Anonymous
Anonymous's picture

GO BANANA !

Wed, 11/04/2009 - 13:28 | 119767 Chignos
Chignos's picture

Nothing I can see anywhere in the news or on any financial horizon convinces me the central bankers have a clue about how to create wealth/prosperity through their fiatsco tricks.  That said, why wouldn't the price of gold just keep going up until they get a clue?  Seriously all, do you think their getting a clue is anywhere close to the near term horizon?  I don't.

Wed, 11/04/2009 - 14:04 | 119845 Anonymous
Anonymous's picture

Oh, they have a clue. The hard thing to come to terms with is that they will destroy everyone and everything to enrich themselves and acquire ultimate power and control. They care little about the devastation that occurs. You have the viewpoint of a human being who has concern about justice. That is not what central banks are about, they are about total control. They are completely aware of the threat that gold represents, but there is a greater need to knock out the United States USD, because it is standing in the way of a single world currency, which would enable complete control in the hands of the central banks. There biggest problem is the possible loss of control in shorting the market, and the other perhaps more serious situation is widespread distrust of governments and banks ramping up worldwide.

Wed, 11/04/2009 - 13:50 | 119822 chumbawamba
chumbawamba's picture

Sure, gold could probably be manufactured today, but considering how much it would cost in terms of energy and money, it would just be cheaper to go dig it out of the Earth atom by atom.

I am Chumbawamba.

Wed, 11/04/2009 - 14:03 | 119843 RockyRacoon
RockyRacoon's picture

A great Twilight Zone episode. 

Sort of the alchemist's wet dream, and the goldbug's nightmare.

Wed, 11/04/2009 - 13:49 | 119821 Chignos
Chignos's picture

Nothing I can see anywhere in the news or on any financial horizon convinces me the central bankers have a clue about how to create wealth/prosperity through their fiatsco tricks.  That said, why wouldn't the price of gold just keep going up until they get a clue?  Seriously all, do you think their getting a clue is anywhere close to the near term horizon?  I don't.

Wed, 11/04/2009 - 14:28 | 119901 Anonymous
Anonymous's picture

What exactly does "create wealth" mean? "Wealth is created" means what?

As best I can tell it means "average standard of living increased." And that doesn't have all that much to do with movement of capital. I am not saying none, but not much. Not enough to let the tail wag the dog ala Goldman Sachs and the rest of the Wall Street industry. There is WAY too much intermediation cost to feed me amorphous bunk about "creating wealth."

Wed, 11/04/2009 - 15:23 | 120003 Anonymous
Anonymous's picture

Buy gold. Then "when there is blood in the streets. Buy land."

Wed, 11/04/2009 - 15:25 | 120004 faustian bargain
faustian bargain's picture

My questions now, since I'm kinda slow, are:

  • Why did the IMF take SDRs in payment for the gold, and not dollars?
  • If the SDRs were meant as a new world reserve currency, don't they want to keep those SDRs 'out there'?
  • Or are they going to loan the SDRs to Latvia or somewhere...and if they do, what good will that do Latvia (or whomever)?
  • Or, does the IMF think there's more of a market for SDRs than there is for gold, so they're planning to exchange them for [xxxxx] currency to loan out? I don't get it.
Fri, 11/06/2009 - 02:49 | 121919 faustian bargain
faustian bargain's picture

or am I just being dense.

It doesn't make sense to me, why would the IMF essentially just give India all that gold? It seems like they would have said 'no, you can't pay us in SDRs, you have to pay us in ____(yen? euros?)'

I must be missing some essential piece of information, or have wrong information. I could understand, if the IMF needed 'money' for loaning out, they sell some gold for dollars. But I thought the SDRs were not used as loans...? It's like they just wanted to create movement in SDRs, despite the fact that they merely made a round trip to India and back.

If someone knows the answer...I never took econ in college, please be gentle.

thx

Fri, 11/06/2009 - 09:32 | 122038 tip e. canoe
tip e. canoe's picture

faust, i think your density is much more a reflection of the opacity of the sale than your so-called economic ignorance.   unfortunately, i too have only questions about this with no answers to be found...anywhere.  let's keep asking shall we?

Wed, 11/04/2009 - 17:13 | 120190 Anonymous
Anonymous's picture

At the end of year 2012,how much you would like to pay my 1oz gold coin? Will I make that exchange?

Wed, 11/04/2009 - 17:26 | 120213 Anonymous
Anonymous's picture

Two shares of Google or 1 oz gold coin, your pick?

Wed, 11/04/2009 - 18:46 | 120291 Anonymous
Anonymous's picture

An Au book entry for/swap with Ag

Wed, 11/04/2009 - 22:13 | 120511 Duffminster
Duffminster's picture

The Majority of Central Banks played along with the US in the long term gold price supression scheme.  However, now that many of the central banks have been recipients of triple A rated junk and the double dealing operations from the top Fed member banks, and because they see the real supply and demand situation, they won't to hold something else in reserve besides US dollars.   Most of them don't have that much in gold compared to historical levels.

India was already a custodian for IMF gold from what I understand and I wouldn't be suprised if the there wasn't some quid pro quo to get some of India's hord of silver to to give the the major bullion banks some much needed physical to cover the smoldering imbalances in certain futures markets.

Those entities that beleive that the super short bullion banks are using silver sales and silver short positioning to dampen gold's rise or perhaps even trigger a sell off should be be taking the physical silver deliveries asap in my opinion.   Silver is a major lever for gold and in the case of both metals, taking physical delivery can ultimately beat the derivatives manipulators by playing outside of their sand box.  The terrain now becomes the physical world of real supply and demand.   

 

 

 

Thu, 11/05/2009 - 00:01 | 120580 tip e. canoe
tip e. canoe's picture

i/o/w:

  gold        ?
       <----
RBI    IMF    JPM
        ---->
        silver

???

well, reuters did say "hard currency"
that's using your noggin there, duff
nice 1...let's call it the burl ives theory

http://www.youtube.com/watch?v=oMlqn_Hjyi8

Thu, 11/05/2009 - 02:54 | 120649 faustian bargain
faustian bargain's picture

our old friend, Yukon Cornelius. :)

Thu, 11/05/2009 - 08:08 | 120692 tip e. canoe
tip e. canoe's picture

"we'll have to outwit the fiend with our superior intelligence"

Fri, 11/06/2009 - 02:35 | 121915 faustian bargain
faustian bargain's picture

aw man, now i'm getting psyched to watch that show again this christmas. Total nostalgia.

Wed, 11/04/2009 - 23:39 | 120566 Fibozachi
Fibozachi's picture

Great points by a great strategist / economist, David Rosenberg.  To every fundamental inflationista out there, please note how Rosenberg references the price of gold (pog) in not only a $USD denomination but also that of the EURO, which is not at a new nominal high in price.

Moreover, only the pog denominated in $USD is at such new, nominal highs.  This is an extremely insightful technically oriented fact with far-reaching implications for the intermediate / long-term direction, which has been seemingly overlooked within the fundamental short / intermediate term analysis of most mainstream analysts.

Possibly, just possibly, there very well could be a new floor under the price action of gold at the current price area, when denominated in rupees.  That said, at its Socionomic core, the Indian CB / gov't is no wiser or more foolish than that of the US Fed, ECB or BOE, who famously dumped all of their gold a decade ago at prices c. 25% of today's.  And in the same Socionomic vein, the Indian gov't is buying when their very citizens have become net sellers of scrap gold, creating an undeniably marked non-confirmation of the trend itself if not an outright negative divergence within its final throes. 

Thu, 11/05/2009 - 22:10 | 121700 Anonymous
Anonymous's picture

Gold hits its highest price in USD ever and it does not even make the national news, what a sham. CIT is the 5th largest bankruptcy filing in US history, it gets just 30 seconds on the national news, sham. What makes the news each night...US recession is over, economy is bottomed and everything is OK...sham. Gold and silver will save you, paper will do you in.

Mark
editor@dgcmagazine.com

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