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Peak Gold Is Upon Us
If you had any doubt about what the driver has been for gold’s meteoric rise to $1,300, take a look at the chart below showing the spike right at the Fed’s announcement that QEII was in the cards. With the speed of a mainframe running the latest algorithm, this bid spread to the other precious metals and commodities as well.
Last week, gold ETF’s purchased a staggering 16 tonnes of the yellow metal worth $582 million. The 800 pound gorilla, the (GLD) now owns $38.5 billion of the barbarous relic, making it the sixth largest owner in the world, ahead of Switzerland and China.
These are heady inflows into such a small space. All of the gold mined in human history, from King Solomon’s mines to the bars still in Swiss bank vaults bearing Nazi eagles (I’ve seen them) would only fill 2.5 Olympic sized swimming pools. That amounts to 5.3 billion ounces, about $6.3 trillion at today’s prices. For you trivia freaks out there, that is a cube with 65.5 feet on an edge.
Peak gold may well be upon us. Production has been falling for a decade, although it popped up to 83 million ounces last year worth $108 billion. That would rank gold 17th as a Fortune 500 company, along with Wells Fargo Bank (WFC), IBM (IBM), and drug store CVS Caremark (CVS). Total above ground reserves amount to only 16% of global public debt markets worth $39 trillion (click here for The Economist magazine’s global public debt clock at http://buttonwood.economist.com/content/gdc ).
That is not much when you have the entire world bidding for it, governments and individuals alike. Talk about getting a camel through the eye of a needle! We may well see the bull market end only when those two asset classes, government bonds and gold, see outstanding values reach parity, implying a sixfold increase in gold prices from here to $7,800 an ounce.
No wonder buying is spilling out into the other precious metals, silver (SLV), platinum (PPLT), and palladium (PALL), as well as copper (CU) and other hard assets. As much as I love the gold inlays in my teeth, and sometimes leave waitresses quarter ounce gold eagles as tips at restaurants, this is the reason I have been stampeding readers into the yellow metal for the past 18 months.
This is not a riskless trade here. Obviously, there is a lot more downside potential at $1,300 than there was at $800, or $34. So if you get involved at this late date, better to play with near money calls spreads.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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fizz sical is the only play worth playing
Not to be confused with a fizzsicle --- frozen fizz on a stick.
(Sorry, Merehuman, I couldn't resist! Not poking fun at you, though --- I always like reading your posts, and your unique viewpoint.)
Not only are we likely experiencing rising gold prices due to Peak Gold production, but the arrival of Peak Oil will only accentuate the costs of retrieving that annually diminishing mass of gold out of the ground,and hence add further pressure to gold's rising value. Throw in a collapsing fiat monetary system, and we face a Golden Perfect Storm.
JohnnyBravo, may you and your soulmate Jon Nadler bear the brunt of its fiercest gales!
(JB, if I receive one and only one junking for this post, I will know that it was you --- and smile.)
Is he still around?
Nope. Last post was a month ago. He left as promised when his wild-eyed predictions about the S&P and gold were blasted all to hell. Leaving as promised was the only honorable thing he has done.
bravo
(*Smile*)
Pretty sure everyone here who is gold friendly is a FOFOA reader. Some of us (me for sure) might also have read the entire series of Another's and FOA's writings on the original Gold Eagle site was it?
Add voices like MHFT here, the Bulgarian Prof. whose name I cannot remember...have been at this theme for years... this is a long, slow fuse burning.
Here in India, loans against gold schemes are flourishing, as banks and bank like loan-sharking companies, are coaxing gold out of the average Indian's hands, through excellent interest rates, so people can go an consume more crap.
That I think is what this latest rise is all about. Of course gold has it's natural need to rise in a sea of filth, but right now, at this price-range, it is firmly in the hands of the manipulators.
Here is a thought experiment. Imagine what will happen if there is a sudden and disastrous food price inflation. And Gold prices are still high. People will succumb. Food on table vs. gold as store of wealth is a no-brainer. Food will win.
Once enough physical has been weaned out from the common man's hand, then and only then, will see one final engineered crash, massive purchasing at the bottom by those left standing followed by Free Floating gold/silver/PM complex.
And in these accelerated times, we could be taking months here....
wheels within wheels within wheels.......
ORI
http://aadivaahan.wordpress.com
In the US, the people who would be short of food don't own any gold; in fact, only a tiny fraction of the population owns any gold.
Another=Mind Expanding.
Indeed! I loved the tone and the dry humor.
ORI
perhaps the dynamics in India are different than in the states
my perception is that the people buying gold are also putting aside food, guns and ammo
the people who will be most immediately and painfully impacted by a "disastrous food price inflation" don't own any gold and therefore, won't be able to sell any
they will however be trying to sell the Escalade, spinner rims, 52" TV, their sister, etc
Nothing sums this place up better than spinner rims.
DJ,
Bra, Is dat like pants on de groun?.
Yes. Big FO3A fan here. Read Another's words and worked my way to the present time. The clarity with having done that means that I hold physical in my hands, nowhere else.
They are very different Bronzie. Probably chalk and cheese like different.
The need/want spectrum are probably inverted. Also, a huge difference from a Physical standpoint, Indian gold ownership is wide and shallow (relatively speaking). The US probably has it narrow and deep (few own lots).
In the end though, we're all on the same boat here!
ORI
http://aadivaahan.wordpress.com
Regarding those Escalades, 245" TVs and innumerable i-gizmos, I think a lot of mindless consumerist zombies are soon going to be receiving a very pointed and painful lesson in the meaning of the phrase "white elephant(s)".
$
akak,
I think they will learn the True costs of Materialistic living.
A close relative just got a new C300 given to her at her work, as a bonus.(usually get's a cash bonus).
She did not need it,she had a new car.
I told her, sell the Mercedes,( before you drive it) and invest it in gold..she said NO WAY.( I look way too cool).My words not hers....
My son,and daughter make great money, but not 1 ounce of PM's.
Every toy under the sun.(no boat).
I stopped preaching to my adult kids long ago.They are going the feel a lot of pain, before Pop's allows some relief.
And it won't be fiscally.It will be food, and a place to sleep.
Adrian Douglas(GATA) was on "Money Rocks" on Fox Business tonight. He was laying it all out. It was excellent.
Willie on Max keisers site. nice expose. i cheered in conclusion.
I'll have to check that out. I hope Fox Business puts that interview up on their site soon. I couldn't believe it when I saw Douglas on there haha. Ron Paul was on too. Here's his interview: http://video.foxbusiness.com/v/4354239/ron-paul-on-eliminating-the-fed/?...
max and jim...
http://maxkeiser.com/watch/on-the-edge/episode-71-17-september-2010-guest-jim-willie/
Now that the pseudo-omnipotent CB's are being so stingy, squirting out a measly ton or two into the peon market, we can all voyeuristically watch peak gold's erection drive PHYS into orgasmic states, or we can join the orgy.
The CBs learned long ago selling it only temporarily delays price spikes, with the spikes being greater the larger the quantity sold. Now they make weak attempts with these small sales, but fail because they have been doing it for so long. They do not even have the gold they say they do! JPM and their damn short contracts, COMEX and LBMA are blasted at 100 to 1. The banksters must know, they have to know, this gig is up. Come get your desserts everybody, it is on the table.
With oil peaking in production, it will be even harder to get the sunny stuff out of the ground too.
madhedgefundtrader:
"The 800 pound gorilla, the (GLD) now owns $38.5 billion of the barbarous relic, making it the sixth largest owner in the world, ahead of Switzerland and China."
You trust that GLD actually has the physical it claims?
CEF and PHYS in my IRA only, I wouldn't touch GLD, read their own legal disclaimers.
Real, Hell, read Sprotts............
OR BV's,I am sure there are tons of folks here that can afford 400 oz bars, but there are likely less that can.
And, PHYS will only deliver physical at 400 oz bars.
BV, will deliever Physical with a 10% penalty on your TOTAL net worth in holdings............kiss my rosy!.
So,. basically for J6P,you keep your own(smartest move anyway), or plan on geting paid in Fiat.
What's the point.
Its pretty much a slam dunk that they only hold paper contracts, may possibly hold 2-5% as physical, no requirment to disclose their holdings...
You know, "TRUST US!".
Sure!
Actual physical gold trade on LBMA market is 1% or less of the total "traded gold" which are only paper contracts. You can buy paper or you can buy gold, and paper is not gold its just paper.
GLD is buying paper. Its playing like a commodity buyer VS commodity trader, that is all. They are selling it as a means for "Doctors, Lawyers and Indian Chiefs" to "invest in gold", like they invest in REITs.
The question is, what happens when GLD owns the paper market after accumulating a major minority of the paper (relatively speaking)? Who are they going to sell to when redemption fever strikes?
IMO GLD is just one more rip off scheme to part professional idiots from their money.
GLD legal disclaimers... oh, like GLDs MOSTER COUNTERPART RISK as seen in their 10-k filing?
www.spdrgoldshares.com/media/GLD/file/10-K_11_25_09.pdf
RUN, do not walk away from GLD and all ETFs imho. Smart investors hold phyical gold as when you hold the actual investment you have no risk of the usual paper promises offered by Wall Street types.
PS: And Sprott is very smart, yet let me just say have very close friends who know Mr. Sprott personally and while i trust Sprott more than GLD.... get physical.
"like GLDs MONSTER COUNTERPARTY RISK as seen in their 10-k filing?
They are doing what they know best, leveraging something that could be tied up in court for a century. In the end, the sovereign can claim ownership of anything, they do afterall make the rules up as they go along...LOL.
Last I checked, the insiders of GLD hold exactly zero shares.
Agree 100% with your analysis...take physical possession...NOW.
+1000