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Perspectives On Gold Demand
In today's letter, David Rosenberg, among other things, answers the question of where demand for gold is coming from. For many this is rhetorical: a mere glance at ETF gold accumulation, and PHYS' recent follow-on are sufficient. Today, GLD alone bought 8 tons of gold to hit a new all time record of 1,306 tonnes. Yet for some, like the author of the WSJ's ongoing hit piece on gold, this is not sufficient, so here is Rosie, patiently explaining to the cheap seats, that even at record prices, demand for gold is not going away.
DEMAND FOR GOLD … COMING FROM MANY SOURCES
It is no longer about investor demand through ETFs and the like that have been driving the gold price — physical demand for gold coins and bars has also been very strong. The U.S. mint has been busy supplying investors with 23,000 American Eagles so far in June after a run of 190,000 in May. The Rand refinery in South Africa, according to the Financial Times, is running at full capacity. The World Gold Council is projecting a new high for investor gold demand in 2010 (after the 1,910 tons in 2009, which also was a record).
Moreover, demand is not just coming from private investors — remember, central banks have very deep pockets as well. We see in the WSJ that Russia bolstered its gold reserves by $1.8 billion in May and there are also unconfirmed reports that Iran has also been in buying the yellow metal.
Yesterday, two articles really caught my eye: Stimulus Talk Yields to Calls to Cut Deficits on the front page of the NYT and Martin Wolf’s editorial on the FT titled Fear of the Markets Must Not Blind Us to Deflation’s Dangers (also see today’s NYT editorial on page A26 — The Wrong Message on Deficits). Mr. Wolf concludes that “premature fiscal tightening is, warns experience, as big a danger as delayed tightening would be.” Meanwhile, the public opinion polls in the United States are revealing a groundswell of support for budgetary restraint. Meanwhile, policy rates are at 0%. This really only leaves the Fed balance sheet as the primary source of stimulus for the economy, especially when the next downturn occurs. This may well be what the gold bugs are sniffing out.
It may simply be a pure coincidence, but since mid-2007, the Fed’s balance sheet has ballooned from $850 billion to $2.3 trillion and during that time, the gold price has risen from $650/oz to $1,230/oz. In other words, about two-thirds of the bull market in gold has occurred in just the past three years.
And for an off topic bonus, here is Rosie taking the Fed lunatic to task:
Ben Bernanke made a statement yesterday that cannot go unchallenged, with all deference to his IQ and brilliance as an (academic) economist. To wit: “it appears to us that the recovery has made an important transition from being supported primarily by inventory dynamics and by fiscal policy towards a recovery being led more by private final demand.” What is he looking at? The chart below shows that this goes down as just about the weakest recovery ever in terms of real final sales growth, which has essentially been non-existent in per capita terms. Private payrolls grew in May at one-fifth the pace posted in April, it looks to us as if consumer spending stagnated for the second month in a row in May, and mortgage applications for new home purchases have sunk to a fresh 13-year low.
As for Mr. Bernanke’s notion that the economy is off life support, well, it’s time for him to climb down from his ivory tower. Food stamp usage just soared to a new record high — 40.2 million persons or 18.5 million households receive benefits. How is it possible that spending is going to drive the economy by any meaningful pace with so many people clearly in some stage of duress?
Mr. Bernanke, climb down from your ivory tower — the economy is not off life support
MARKET THOUGHTS
The critical 1,040 threshold on the S&P 500 has indeed held, but the question is for how much longer. Recall that the 1,0
65 flash-crash low was supposed to hold — we enjoyed a three-day rally that took the market up 5½% and that created a whole lot of renewed enthusiasm until the trap door opened again. Treat these intermittent recoveries very skeptically.
That the newswires could ascribe the market pickup to Ben Bernanke’s testimony to the House Budget Committee is almost laughable. Here is what the Fed Chairman said that supposedly got investors into a bit of a frenzy: “the economy — supported by stimulative monetary policy and the concerted efforts of policymakers to stabilize the financial system — appears to be on track to continue to expand through this year and next.” He added that “the effects of the [European] crisis on economic growth in the United States seem likely to be modest.” Talk about the proverbial kiss of death.
Back on March 28, 2007, he told Congress (the Joint Economic Committee) that “…the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” And his call on the economy, at the July 2007 semi-annual testimony to Congress was “the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.” Well, real GDP growth in the second half of the year was just a smidge below 3% so one would think that based on what he had to say back then, Mr. Bernanke’s view for 2008 would have been somewhere between 3% and 4%. Instead, we got 0.4% real growth in 2008 (and then -2.4% in 2009).
Sorry, David, when you put "economists" in charge of monetary policy, repeated historic collapses are guaranteed. You will have lots to write about over the next year as you are proven correct over and over.
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RAH! you go Tyler....
Where are the mainstream news commentators hiding out? What bar do they go to? What blogs do they read? I'm so confused by their appalling lack of ability to see what is happening. Perhaps the it goes with the job, like the Presidency of the U.S. to read your lines and go back to sleep.
When you are paid to see what your handlers tell you to see that is all you see.
These useless dolts are "news readers" not journalists.
Reporters and journalists nowadays do what they are told.
just like anybody else with a job. especially government workers. everyone knows what happens to not-team-players or whistle blowers.
yeah i constantly see common sense and innovation get frowned upon until further notice.. which means don't do dick unless the ideas come from up top.. even if those ideas have no fucking clue of the real world or purpose..
Too true guys. Every job I had was like that. Boss said do this. No back talk. Get back to work. Make work.
That's has long been history, I am free. I like my work as a part-timer OWNER of a business.
This kinda goes with what CD's series is about. It's up to those who see this as a bullshit system to start kickin people's teeth in. Fuck the norm. Stand up and fight. The majority surely knows this makes no goddamn sense, but they're not quite ready to break the mold. I say smash that fucker into a million pieces and never look back.
just like anybody else with a job. especially government workers. everyone knows what happens to not-team-players or whistle blowers.
All these comments are 100% true - - having been there myself at the big Financial Media house. You do what your told - or else. The Editors trash anything they don't want to see in print, as they kiss White House ass 24/7. You step out of line and your in big s*&t. For many, like myself - I lasted 6 months, and quit - - vomiting on the way out by what I experienced.
Liberal news media, mainstream news media, biased media are all someone's opinion. Corporate Owned News Media is fact. That's what everyone should use.
They are stenographers only - not reporters or journalists. The secretary in any business taking and routing phone calls has more logical deduction ability and critical reasoning skills than these people.
And when your job depends on access, its all about not pissing off the people that ultimately pay your way with advertising.
Yes, stenographers for the administration. Wonder whose laps they are sitting on? - Ned
You rang?
The GDP growth we experienced is fresh new groups of people joining the buckle down fray. The consumer pullback this time is going to be unreal.
The elections are setting up the chemistry for what comes next.
http://www.youtube.com/watch?v=xqrUSePN3BM&feature=related
What about Ben's quip on his stupidity as to why gold was going up?
His worst playing dumb act yet.
Ben was ruminatin' about gold...'it isn't acting like the other commodities'...
Then today a take down after WS Banks increased their gold targets the last two days.
What a hoot. Sometimes it is hard to tell who is leading this two step!
Take it down Ben, I will buy the dips.
Damn! Ryan should not have brought it his attention!
Suppose a fairy godmother were to offer every mainstream news commentator a choice of 2 super powers:
Choose A and your hair will always look fabulous
Choose B and you will always know what is really going on.
How many would choose B?
Suppose you gave the same choice to Ed Murrow, Walter Kronkite or Walter Lippman which do you think they would have chosen?
Times have changed.
The hair!
Taffeta!
you guys are being too rough on them. but make it "you" always look fabulous and you get to squirt waterguns (circle squirt) with rahm (etc.) then it's not even a choice.
Kronkite is correct.
By the looks of it, I think most of them have already chosen A...
diogenes, your statement carries a lot of truth. not junk. integrity has been replaced by job security.
Ben's stupidity has to be a sham. It just has to be. Doesn't it?
If I were BB, I'd play it the exact same way. At this point, what other choice is there?
You'd lie like a dog?
Finding religion and telling the truth is never a bad thing in the long run.
BB == BEN BERNANKE == BAGHDAD BOB
Simple...
Come on, ZH team, this is isn't hard.......
I've read the newspaper clippings and the books from the late 1920s/1930s.....During the First Great Depression (FGP), it was all about "restoring faith in markets" and "confidence from the top"......Ben is just playing his role. What ELSE is he going to do? "I see consumer spending in the negative numbers as of May and June, so it would be best if all households stopped spending their money and retrenched?"
BB is saying what BB has to say. When Helicopter Ben tells CNBC that he's changing the FRN design to make it easier for the HP 6940 printer on your own desk to replicate it, and that he's resigning next week to retire to his llama farm in Sri Lanka...well, THEN the game is over.
It's impossible for Bernake to be as stupid as a lot of the ZH community thinks he is. He's just buying time for HIS family and friends.
geoff, the bush clan recently bought a 100,000 acre ranch in paraguay next to the moonie clan. together they cover both natural gas and fresh water reserves, with the added protection of 500 special forces guarding a 'secret' us airbase a couple of miles away. they are protecting their families. what is coming down the pike that the rest of us don't see yet.
Source.........Please?
Don't hold your breath. No credible source exists for something like that, because it's not credible.
That's what I thought.
Source? Uncle Google of course... this has been well known for "like duh, forever" when his daughter (I think Jenna) went scouting around and purchased the land. As per the next response that this is B.S. suck my scrote sack nutt job and do some research.... I.d.10.t.
Deniability does not do it for me. The stories came out, something was up, and then Bush Inc. C.I.A. D.E.A. drug dealing whores for Satan just kept quiet. Very similar to Goldman, hoping things die down so they can be back to business as usual if everyone there can just shut the fuck up and 'make' money through fixed income and all forms of dark algo manipulation.
Might be old news, but not widely known (i.e.: talked about)
http://www.google.com/search?q=bush+in+paraguay&ie=utf-8&oe=utf-8&aq=t&r...
Oh come on. Bush assets when President are in a blind trust. If you don't what that means, it means HE CAN'T BUY LAND IN SOUTH AMERICA. So it never happened.
source? i read the article and forwarded it off to a number of blogs. article said it was the talk of south america but no mention elswhere. the deal was done by laura bush and el presidente. there is no war crimes extradition treaties in that country. The moon family are in the same valley sitting on large nat gas reserves with the bush property on a large aquifer. i'll try to track it down again. stuff like that only stays around for a day at the most. go figure.
I read something like that about 2 (?) years ago, and then it just died, the story about Bushes buying a ranch.
That part of Paraguay has "the cheapest biomass for the money" I read somewhere. Few roads, fertile soil, but irregular rainfall. That part of Paraguay also sits on top of a big part of the largest freshwater reservoir in the world.
If I were really, really rich, and in trouble, that part of the eastern Chaco would be a place I would look at to hide...
True stuff. I have a friend who lives there and he is English married to a local. His wife's family has worked at the "ranch" and seen both Jenna and Barbara there.
Geoff, I agree he cannot be that stupid.
Your avatar is priceless.
Isn't it weird that it's either all or none with the gold trolls? It's either 3 jackoffs in each thread or peaceful tranquility, weird. I guess the local Burger King hired MB/JB as the new janitor and he doesn't have time to let his multiple personalities out of the closet.
I guess the local Burger King hired MB/JB as the new janitor and he doesn't have time to let his multiple personalities out of the closet.
Thats assuming that he could actually handle the job. Only thing I know he's capable of is talking a bunch of crap, not cleaning it up.
Bravo, jory and JayBay I can put up with. Besides we have dumpster who knows how to blow away guys like them.
That really nasty SOB Eric C was beyond disgusting trashing one of ZH's brightest lights.
If you see anything really vile from Eric C, junk 'em right away. He is the ONE case where I would go ahead and violate Rocky's (Rocky Racoon) Rule, post then junk. Eric C posts anything really disgusting again, I will go to The Tylers That Be (TTTB) and try to have him removed from the community.
That's just a personal rule, DCRB, but I think only fair. Some folks don't deserve the courtesy of a comment first, and you've named one.
His name is Hank, I mean John, I mean Robert Paulson.
His name is Robert Paulson.
Went to BB last night to get some cheap Chinese trinkets. The place was empty (not a poor area either). No more than 3 people in the whole store. Really spooky. On the + side easy to get help...
Ah, gold. Has it's time come? Will the price hockey stick, like so many graphs from the Fed? Will there be a "Freegold" event like FOFOA talk about? (Free as in freedom, not as in given away for nothing). Will there be currency collapse? Hyperinflation? Hyperdeflation? Stagflation? or a Nascent recovery? Black swans? ...Beuller? Beuller?
no black swan, this is a white swan (not even soaked in oil) - Ned
Bastard child from the conjugation of The Blob and a Swamp Monster is what I think we're facing here.
Taleb's next book will be published when he figures out how to say what I just said, in a form suitable for a book title...
I'm figuring he's already got the manuscript finished...
From, Mr.Sinclairs website...............a quote from Sprott.
http://edegrootinsights.blogspot.com/2010/06/gold-running-in-short-supply.html
A lot of Gold demands come from speculation. We have huge demands for internet stocks in 2000, houses in 2005. When everything settles, we don't really need them too much, do we? Uncle Ben will keep supplies meet demands in no time.
Gold is not necessarily a speculation. People are trying to retain their purchasing power, that is not speculation.
And the biggest growth industry in North America: Casinos
Yep, the people sure hate speculation.
I have learned that I speculate badly.
I am now more into wealth preservation.
If the people like speculating, most will be hurt. I am very happy that the 5 or so options speculations (and the 25 or so casino visits) were all fairly negative, and that cured me.
Egad! A starving lion! Better get out my AK... :)
look to the trough to peak for those others you mentioned. Look at any trough to peak for any cycle (DOW, S&P, housing, Inet stocks, tulip bulbs, etc) and its way way more than the rise in the current bull market in gold. And are seriously going to tell me that the run from last year to now at any point resembled a blow off top? Really? In what alternate universe? Look back at those two you mentioned with housing and Inet stocks - now there were two blowoff tops that occurred.
Sure and he'll reverse oil production declines too.
Gold peaked in 2000, bud. There is less YoY supply now and this trend will not reverse. RSA is in a state of veritable production collapse.
Referring to my constant cynicism regarding governing bodies, and after having the epiphany that my doubts are indeed completely justified, my wife just said,
"...what I hate is that once you realize something, you can't overlook it anymore".
I guess that's why they call ignorance bliss, and why so many try so hard to remain oblivious.
Thanks ZH.
More and more taxpayers are waking from their "Hopium Dream".
It's hard to go back to sleep after reality slaps you in the face...
She's a keeper. But you already know that.
A physical gold shortage will start manifesting itself, because price does not reflect supply and demand. The secondary market (black market) price, is higher than the official spot price and will get higher. The free physical market, will strip away the gold paper control and bring down one of the many precious metals ETFs. Got gold?
Perhaps Extraterrestrials from Alpha Centauri are buying gold. Whether its Rosenberg, or Gordon T. Long, plausibility does not equate to fact.
Here's a far out explanation for the 10 year gold run: persistent weak supply + heaping helpings of bullshit.
If by "heaping helpings of bullshit" you are referring to our government's reckless and unsustainable fiscal policies and backdoor manipulations of every possible market, along with their propping-up and bailing out the corrupt and criminal Wall Street financial elites, then I could not agree more.
Huh?
If supply is declining, should not price rise?
I'll take the gold thank you.
Any starving lions (or .gov goons) come by to take my gold or guns away get SHOT!
It will be my choice: 9mm or 7.62x39
Got bad news...they will kill you.
And if you manage to kill them the first time, they will systematically hunt you down.
"They got the guns, but we got the numbers..."
Well, they've got most of the guns, and the best ones too, but we've still got the numbers,
"May take a week and it may take longer."
http://www.youtube.com/watch?v=lQrAULjiysk
Enjoy, yippies.
Regards
Mr. Kim
http://seekingalpha.com/article/209254-three-reasons-to-sever-all-ties-w...
Good stuff! Thanks.
Gold sure looks like a crowded trade, but only a small fraction of assets in the world are in gold, or silver. When you look at the value of world equities, and bonds, and cash, and real estate, etc., one can see how a gradual shifting of just a percent or two of these aggregate assets into gold could cause a sustained increase in the price of gold lasting many years.
Instant, I have always liked your comments.
You relinquished your Platinum Eagle avatar for the Gold Buffalo. If I weren't a bearing guy I would snatch what you left behind, because Pt is my favorite PM.
A crowded trade with few players. How is that seemingly contradictory situation possible?
DCRB can explain why it's not a "trade" to begin with...
I'm not trying to be argumentative, just saying that it's all about perspective.
for what amounts to a very small amount that actually exists and with production declining worldwide, the gold trade dwarfs oil. gold is and always will be political. that also makes it dangerous. stay thirsty my friends.
If the BIG PLAN is Q.E. to banks and equities, hoping Main Street will follow this vapor economy built on golden parachutes and ludicrous bonuses, I can't think of a worse way to lose newly printed fiats by proping up P/Es hoping once people 'get back to even', the dream of life past will hypnotize the sheeple to believe it's business as usual and we're in a new bull market. Did Paulson's and Geithner's flowchart show this two years ago?
Somehow this debacle resembles BP's fumblings because in reality, the financial side of our government doesn't have a fucking clue what to do... deer in headlights, plain and simple. Got AuAg?
Demand will come. Investment demand. And then mania. It's only been ten years..
This is fantastic! Got this far without one creepy troll fouling the discussion.
Thanks to the fine folks at ZH I'm sure.
See how civil things are with the nasty-ass trolls gone?
Indeed! Reading this troll-free thread was like a spring breeze blowing across a mountain meadow filled with wildflowers.
With JB, Jory and JayBB in the mix, it's like standing next to a cesspool on a steamy summer day.
Down right bucolic, even pastoral, isn't it. Lovely thought.
WTF? Doesn't it creep you out a little bit that they ALL take a vacation at the same time.
What do I smell? Is that my anxiety burning?
No shit here: Doomsday in NY for monday...
http://wcbstv.com/politics/nys.goverment.shutdown.2.1745114.html
GOT GOLD? BITCHES...