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A Report From The Front Lines Of The Gold Bubble
A very illuminating report out of BNY's Nicholas Colas and Beth Reed describing the front lines of the so-called gold bubble. A must read for everyone who would rather listen to third-hand anecdotes and speculation instead of actually doing their homework. As Beth summarizes: "Bubbles are clearly punctuated – and driven to their final demise – by bad behavior on the part of market participants. My short, but colorful, excursion to the heart of the physical precious metals market revealed no such excess. Is that enough proof to eliminate the possibility of a gold bubble? Of course not. But I think it is enough to characterize recent calls for the demise of the gold/silver rally as very much premature."
@#$% My Boss Makes Me Do – A Trip to the Center of the Gold “Bubble”, from BNY ConvergEx
Summary: We recently did some firsthand investigation into the likelihood of a gold/silver bubble by heading straight to a source of the would-be bubble – the precious metals mecca that is New York City’s 47th Street Diamond District. Surprisingly, absent from our findings was any sort of bubble-like human behavior. Yes, the booming asset prices are there, but just as critical to any bubble is the bad behavior that launches it into the stratosphere. Think subprime jumbo mortgages sold to part time hairdressers or 10x oversubscribed IPOs for profitless dot com companies. We tried every way possible to get salespeople to lure us into unwise, non-economic precious metals investments, but with no luck. Yes, we know this is “anecdote” rather than “data.” But the utter absence of heavy-duty hustling and cajoling in what precious metal bears call a bubble leads to a common-sense conclusion: this is no bubble. Not yet, anyway.
(Note from Nick: Nearby our office in New York is 47th Street – the toughest, most aggressive retail/wholesale marketplace for jewelry, gemstones, and precious metals in the world. A logical place to find proof of a retail-driven gold bubble, but too daunting for me. I hate pushy salespeople. So I sent Beth. This is her report from the front lines of the precious metals market.)
A typical day at the office entails about 10 hours at my desk staring at computer screens backed by a blank white wall. I have my own window view of sorts – about a 1” x 2” opening that gives a 48th floor perspective of lower Manhattan, and if I lean over a bit I can even see New Jersey. Nonetheless, it does occasionally feel like I sit in one of those sensory deprivation tanks, just one that is equipped with a keyboard and screens.
Wednesday, however, was quite a different story. I spent my afternoon trapped in a non-air-conditioned Midtown pawn shop with a Swiss tourist who wasn’t permitted to leave after politely declining the owner’s offering price for a used Rolex. Yes, not only do they buzz you in the door (for security purposes), they must buzz you out as well. Apparently the shop girls are instructed not to let customers leave if they haven’t purchased anything. That way the owner has more time to cajole, haggle and even harass.
Eventually the girl allowed the tourist to leave, at which point she was berated by the owner while I stood awkwardly in silence.
Ahh, the things I do in the name of research… And why isn’t Nick here? This was his idea originally…
However, there was a purpose behind this field trip to the only pawn shop in Midtown. With all the commotion surrounding gold and silver these days and speculation we may be in the midst of a precious metals bubble, it made sense to do a little firsthand investigation.
Every bubble has a “home” – Wall Street for the dot com bubble, literally “homes” in Arizona and Florida for the housing bubble, and so on. Naturally, one home for any potential gold/silver bubble must be jewelry and coin dealers, long known as a bastion of high-pressure sales and don’t-let-a-prospect-leave-empty-handed intensity. Hence the point in visiting New York City’s (in)famous 47th Street Diamond District: to scope out the source of the bubble in retail demand for precious metals.
Yes, we know that central banks and ETF buyers are also sources of gold demand. But when one of the global hubs for the jewelry trade is about 500 yards from your desk, there’s just no excuse for not taking the pulse of one key part of the market – small buyers purchasing physical gold and silver – with some site visits.
What I was looking for, in two words, was bad behavior. Yes, everyone thinks they can spot a bubble just by looking at a price chart. But there is a lot more to a bubble than price action. There are all the greedy, unscrupulous, sordid actions that humans engage in when greed takes over. Stupid negative amortization mortgages sold to senior citizens. Initial public offerings of online retailers whose only real asset was a well-known sock-puppet spokesperson. A jumbo loan issued to a part-time hairdresser with no working knowledge of English or basic math.
So it came as quite a surprise that my trip to 47th Street was, in this sense, uneventful.
Before I tell you the details of my visits, however, a little background on this slice of jewelry heaven/hell: An estimate popular with the press places the value of a single day’s trade on the block at a cool $400 million, and other reports say as much as 90% of diamonds in the U.S. first stop on this 150 meter stretch of real estate. And as home to more than 2,600 independent businesses (most of them simply one-man-operations who have set up booths within the various jewelry exchanges), it is in theory a jewelry hustler’s dream.
As someone who can’t even stand being approached by a Bloomingdale’s salesgirl, believe me when I say there was a complete absence of sketchy con-man types, high-pressure salesmen, and any other shady characters trying to rip me off. I’ve spent 3 years of my career working in close enough proximity to this block that I’ve aimlessly ventured down it on my way to 5th Avenue more than a few times. As often as I’ve been unwillingly harassed by unabashedly intense salesmen, I was shocked at the low pressure atmosphere that awaited me when I willingly approached them.
The idea once inside was to get a feel for what average, non-financial people in the precious metals trade think about the direction these assets are headed. I simply told them I had $500 that I wanted to invest in a precious metals portfolio of sorts and that I would like their opinion on what I should purchase, whether it be gold or silver, coins or jewelry. And then I let them talk.
The six vendors I spoke with fell into one of two camps – those who love gold and those who champion silver. Though they didn’t agree on which specific precious metal should highlight my $500 portfolio (one even suggested platinum), they all quite emphatically discouraged me from purchasing jewelry as an investment. I unintentionally approached two vendors who only dealt in jewelry (no coins, etc.), and even they reluctantly told me they couldn’t recommend jewelry as an investment. The reasoning behind this revolves around the labor and design costs associated with “wearable” precious metals.
Though everyone was in agreement that coins are the way to go, surprisingly gold coins were not the overwhelming favorites. Half of the dealers suggested that with my $500 I purchase one ¼ ounce gold coin (cost = approximately $350) and use the remaining $150 to buy seven 1-ounce silver coins at about $21 each. One vendor with supposedly 20+ year of experience reasoned that gold will always gain in value. While it may not go up as rapidly as we’ve become accustomed to lately, his belief was that it will never experience another significant, lasting drop in value.
On the other side of the spectrum, three of the six retailers recommended without hesitation that I invest all of my $500 in silver coins. That would equate to about 23 silver coins at roughly $21 each. Reasoning varied from the simple (although not necessarily inaccurate) to the complex. For example, one retailer hypothesized that since silver is the poor man’s gold, and there are more poor people than rich people, obviously silver is a better investment. He asked what I did for a living, so I replied for the sake of simplicity that I worked for a bank. His response? “And they don’t tell you that there? You have to come to me?”
A more complex argument for silver over gold involved the ratio of the price of gold to the price of silver. Currently it stands at 60:1 while in previous peak times it has been closer to 20:1. Currently, silver is proportionately undervalued in comparison to gold, by this logic, and hence it theoretically has more room to grow. The price of gold is also rapidly approaching the price of platinum, and some of my contacts questioned how high it can actually go from here. I’ve attached a chart showing the gold/silver price relationship over time so you can reach your own conclusions on this point.
The main takeaway here is that there was no bubble-like bad behavior. I expected something out of the high-pressure school of sales. Men dangling gold chains with “Beth” in fake diamonds and telling me it was a better investment than a prosaic gold coin. Or perhaps a creative soul pushing some crappy ¼ carat uncut diamond as a “superior” choice to precious metals. But none of this happened, despite my repeated attempts and encouragements to all who would listen. As a final note, keep in mind that recent or current issue gold coins have some of the thinnest margins in the business. Maybe you buy some as a dealer and the price of the metal rises, but generally the bid/ask spread is no better than 10-15%.
To me, this experience was somewhat like walking into a mortgage broker in Florida in 2006, asking for a $750,000 loan with no income verification, and being laughed out of the office. Which is what should have happened, but obviously rarely did. I am not trying to portray every jewelry and precious metals dealer as the paragon of virtue; that’s obviously not true. If you keep up on this space, you know the criticisms of organizations like Goldline International.
But perhaps what my visits highlighted most clearly is that the precious metals business, at least at high volume locations like 47th Street, does not feel the urgency to “make hay while the sun shines.” Maybe my non-hustling salespeople have confidence that underlying demand is robust (so why push?) Perhaps the family/small business nature of their enterprise gives them a longer term perspective on the precious metals cycle.
Bubbles are clearly punctuated – and driven to their final demise – by bad behavior on the part of market participants. My short, but colorful, excursion to the heart of the physical precious metals market revealed no such excess. Is that enough proof to eliminate the possibility of a gold bubble? Of course not. But I think it is enough to characterize recent calls for the demise of the gold/silver rally as very much premature.
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Silver Bitchez!
BUT YOU CAN'T EAT GOLD OR SILVER!!!!!!!11ONE
brb, making FRN salad with blue cheese....yum.
You CAN eat gold: www.ediblegold.com
Repeat
Gold is a lot more used than people want to believe.
http://geology.com/minerals/gold/uses-of-gold.shtml
Silver also,
http://www.webelements.com/silver/uses.html
The one on gold was extremely well written and informative.
It's also instant schooling for anyone who thinks gold is just money.
Gold is too expensive to use by chance. Instead it is used deliberately and only when less expensive substitutes can not be identified. As a result, once a use is found for gold it is rarely abandoned for another metal. This means that the number of uses for gold have been increasing over time.
Most of the ways that gold is used today have been developed only during the last two or three decades. This trend will likely continue. As our society requires more sophisticated and reliable materials our uses for gold will increase. This combination of growing demand, few substitutes and limited supply will cause the value and importance of gold to increase steadily over time. It is truly a metal of the future.
well said, how many times do we hear "you can't eat gold" obviously from peeps that think fiat paper make tastey treats. They do have a point though.. if forced, I'd rather swallow bits of green paper then chunks of heavy bright metal.
I'd rather eat the gold. As a stable metal, it won't be attacked by the stomach acids and disolve the way the FRN would. When the Gold comes out the other end, I can then wash it off and "reuse" it. Can't say the same for the FRNs.
Bottoms up. :>)
Now THERE'S a good hiding place for your gold.
Coming soon: gold "capsules". Less chance of getting stuck in the LI.
in a real emergency, there's always the 2 peso Mexican coins... almost 1/20 of an ounce, and impervious to a body cavity search.
With those new security measures at airports they can count the number of corn kernels you had for dinner. I think the days of the condom drug mules may be over. Besides, they pics make great TSA porn for entertainment on slow days at check-in.
oh I love look and the feel of my gold jewlry. it feels soft but so strong even when shaped delicately. we are very lucky to have the means to obtain and enjoy gold, respect and cherish it for what it is and nothing more. it has nothing to do with money or currency thank god. dollars are just plain dirty and quite frankly ugly as Benny behind.
VB or Kathy , good comment. Yes money is dirty, moreso now as the greed is pervasive. No honor in fiat
Those FRNs that you ate were loaned into existence at interest. How are you going to poop out $1.065 in FRNs for every FRN eaten?
Your intestinal tract will be foreclosed on. I wouldn't do it if I were you.
Worse still, you DO NOT want to know what is actually on those used FRNs germ-wise. Of course when they tested FRNs in the 1980's from Congress, over 1/2 has traces of cocaine on them(!). Hmm...
it's ok, I've been loading it with beer and crap food.......the smells that have been coming out of me have not been pleasant....the bank is welcome to have it!
Add baked beans, cabbage, and wash them down with Old Milwaukee. Ole' Swill Doggie as we used to call it.
The filthy little banksters will still brave the stench and dig through your pile to get their grubby hands on them.
Ahhh...that is exactly the ratio chart I was looking for.
Thanks...Tyler et al ;-)
Tulips Bitches!!!!!!!!!!!!!!
Gold is a currency, a store of value. The bubble is in fiats, especially as represented by interest-bearing promises of insolvent governments.
Novice Question:
Isn't the real gold bubble in the LBMA selling fraudulent fractional reserve contracts AS physical gold?
Without the inventory in physical to back the contracts?
So the bubble is not in the price of gold....
Like you say the price of gold just measures Bernanke's dollar devaluation... But in the Wall Street/City of London ponzi paper gold pyramid scheme?
Could we say:
GOLD = Bernanke Buck - (minus) CB Suppression
All hail Bernie Madoff...
Good point. The bad behavior characteristic of a bubble that Beth is looking for is happening on the short side of gold, selling as much unbacked 'gold' as possible in exchange for fiats.
gold will not be 'expensive' until fiat currencies are no longer in a bubble as they still are. why doesn't this journalist shine a light on the fiat currency bubble of the past 20+ years? isn't this one popping as we speak?
That's hitting the nail on the head.
The answer is that Beth's job is to sell paper to chumps.
The "Is Gold A Bubble" posts are becoming redundant. Gold is not a commodity, and not a precious metal. It is a currency.
Seeing how 98% of the population who does not own it, thinks it is, perhaps there is some more penetration to be had...
As far as investment gold goes, I think from my experience that 99+ doesn't own it; brokers hate the stuff.
"brokers hate it". ha, ha. you know, some piece of sh*t 'financial advisor' frowningly told my dear, dear mother that her son was "in the minority" as an accumulator of gold. my dear, dear mother, who would place undying faith in absolutely any 'figure of authority' before thinking for herself naturally could not explain either how the 'financial advisor' was compensated or why gold was at record highs with her son as the only buyer. priceless!
Nice to see Chopper making an apperance too...
"Even Beethoven had his critics. See if you can name three of them."
:) "Jimmy, if you keep stabbing me, you're going to kill me."
my mudder too. Anyone elses opinion had more validity than I who had my familys survival at heart.
Very similar experience here. Very close friend here's me harping 'bout gold and silver for the last 18 months, an inheritance to her favor intervenes, which is now in the form of paid of Toyota, vacation to Hawaii, annuities and CDs.
"Well my new financial advisor said..."
"Fuck your financial advisor! He wants a cut! He doesn't get a damn cut if you are looking out for yourself."
I imagine her house will be on fire before she follows my advice. Doesn't matter how many articles I email and comment for her. People magazine has more influence when it comes down to it. So be it. Let it burn.
Some might say, "Well, you cried wolf and the world didn't end so nobody wants to take your word for it."
Your empty stomach won't be my problem and I have washed my hands.
your a troll, get lost.
And you're illiterate. Just goes to show that nobody's perfect, I guess.
Kathy
why call him a troll. when gold broke out at 320 i knew "it was on". i was the crazy guy at the bus stop raving about gold. almost NOBODY LISTENED. my family members will take the opinion of everybody else before mine. it has somthing to do with sibling rivalry or insecurity or power. if my family had listened and believed i loved them they would not have to worry about their old age because they would have been in gold at under 400 and silver at under 6.
Now when the zombies come to their door, they are toast.
dogbreath
dogbreath, not a big fan of stinky dog's breath. but i am happy for you. it is great you were right calling "it was on" whatever that means.
i called him a troll cause he called me and it really hurt my feellings and upset me. i am far from ever being a troll. i never really knew what a troll meant until i starting reading ZH, and then didn't really think it was so cool to gang up on whom ever decided someone was a troll. i don't have many mean bones in my body.
so this is a private battle carried over from some other thread
She needs to go. This is not a place for hurt feelings. Get ready to have your teeth kicked in.
why do you say such things? you use to be nice to me. why would my teeth get kicked in? i know your not serious, but wonder why you would even imply such a horrible thing happening to me? why can't there be hurt feeling on zerohedge, that is ridiculous? you think all you guys are too good for hurt feelings, or you just have to be macho and act like that never occurs to men. your a fool in denial, at best. but i don't hate you, i feel sorry for you.
No. I do not believe you are VB. I wish you would stop posting. But I imagine you will not. If I believed you were VB I would not tell you: "Fuck you. Fuck off. Die."
Fuck you for trying to have some casual fun around here. Our humor is the blackest of black. Death and Destruction reigns and you want to be the resident clueless. Fuck you.
your nuts, so am i
casual fun what is what suppose to mean? like casual sex?
please, i just had a grand time with some beautiful sushi chefs, the ultimate of man engaging in their art of preparing love, and i am good.
are you sure you speaking for this entire community, cause i don't see the darkest of dark that you express about O U R humor. your on the dark side of ZH,,
girl interrupted, by you the dark ghost of shill .
I speak for no one but myself. Fuck you.
hurt you. the repeated beatings of " you know shit " by family members feels real good by comparison.
Being that I was a financial advisor for a large financial firm, I can affirm that anything that wasn't managed money, insurance, or a mutual fund was consider blasphemy. Just mentioning the fact that mutual funds weren't in the best interest of my clients in a meeting and I ended up getting a sit-down with a VP.
They will never, ever, ever recommend anything that doesn't get them 5% upfront and/or juice every quarter.
I couldn't live with myself and had to leave for my own sanity.
Good for you.
A lesser compensated man who still has his integrity and soul is the richer one neverthless.
“It is no measure of health to be well adjusted to a profoundly sick society.”
- Krishnamurti
fiat currency bubble. run for your lives.
agreed. keep 'em coming
Wait till they roll out Dollars 7. Ben will start having host a Dollars 7 party evengalizing ritual. Geihtner will threaten to throw peoples gold coins out a window and larry summers will kick his dog out in the woods for letting a silver bug pet him in the quad.
Hey, I've been spending more than I've been making for about three years, and between the calls from credit card companies and the grief from my landlord, life was sucking bad. But then I got Dollars7, and it's all good, bro. I'm an FI*, and Dollars7 was my idea!
* - FI - Fiscal Idiot
+ 1
I'll get junked for this multiple times as sure as tomorrow is Sunday but a lot of people saw the spike (and inevitable collapse) in gold prices in 1980 as a bubble. I was there and I don't think anywhere near 98% of the population owned physical gold for investment then let alone any more than own it now.
gold versus a basket of commodities is still below its 1981 high.
http://www.sharelynx.com/gold/CRBGOLD.php
note: the CRB Index actually contains 17% precious metals which will skew it a bit more conservatively when comparing it directly to gold.
further, when Berwanke raises rates to 20% then you will be right, hettygreen.
p.s. i did not junk you.
Not at all the same situation. From 1971 to 1980, gold was shaking off four decades of artificial price fixing. Any engineer will tell you that in such a situation (we call it a "step function"), the system response will tend to both under- and overshoot before settling at an equilibrium. Not sure if you're aware that gold's price actually fell just after the price was set free.
Now, gold is responding to an unprecedented flood of fiats of different names. Not comparable situations in the least.
not saying they are entirely comparable or not, just making one comparison.
i agree with everything else you are saying. broadly speaking, the price of gold is going up exponentially because our money printing is growing exponentially. How is that for 'new normal'?
gold did overshoot, then consolidated around $800 (Bridgewater stepped in with some others) where it found major support. The Central Bank of India started buying around $1,000, so you may wish to place your stop loss order slightly below there.
every trader knows that this consolidation and subsequent breakout is a continuation of the trend. where is the near-term top? who knows? but when it finds this top and turns then gold will overshoot to the near-term low somewhere above $800, at which point it will find some kind of 'equilibrium' that you've been so kind to educate me about. From there it either breaks lower (because the fundamentals have changed?), or it continues upward again in the direction of the trend (because we are on QE9).
i am impressed that you are an engineer. Again, thank you for the education.
Tyler: I'm sure that both of us realize that "the gold is a bubble" crowd has been well indoctrinated or that many may be shills for TPTB. Westerners (specifically Americans) will be the last to the gold "party"; much to their peril.
Stating something does not make it so. Gold serves many purposes, and it should be a currency, but I don't know the last time any consumers used gold to buy products and/or services. Maybe when ZH starts taking donations in ounces and not $, you may have a point.
At the end of the day, Gold's price is a function of supply/demand. Supply is low, demand is still nascent. Regardless of what you 'qualify' Gold is, there's plenty of upside to be had.
Anyone calling for a top in gold, a bubble in gold or lack-of-inflation downward move in gold is totally and completely clueless about the on-going, fundamental demise of all the major fiat currencies.
IF the US, the EU and Japan all decide to trim the budget deficits by half and IF, in doing so, their GDPs all surge to a maintainable 5%+/annum, then gold will top and head substantially lower. In the meantime, buy gold and silver and hold them in your own two hands.
The end of the Great Keynesian Experiment is upon us. Prepare accordingly.
ps Dec10 gold will trade at 1335 by Wednesday and 1350 before Halloween.
Don't you think the EE will move towards a newer fiat or perhaps a modified SDR, rather than lose control of the printing press?
I think we may be moving toward, or actually in, a bubble in bubble-calling in general.
I actually welcome all the "Gold is in a Bubble!" hysteria from the mainstream center-thinkers --- it just means that gold is almost by definition NOT in one. And I suspect that it never will be; it's price will most likely rise and then plateau at some level once it is reintroduced in whatever manner back into the monetary system (perhaps with some final but modest overshoot, to be sure).
What makes gold so valuable compared to other precious things like diamonds or palladium is that it meets all the physical and technical requirements to be the perfect currency. If gold weren't the perfect currency, it wouldn't be used as the ultimate store of value. So you're right on the point that gold is not legally and widely used as a currency, but it is its ability to be the perfect one that gives it 90% of its value.
Otherwise, gold would just be a yellow rare metal with some applications in industry.
No argument with your definition of currency, we're on the same page.
But you can also make an argument about the ideal nutritional qualities of a salad, and still fail to refute why most of the population consumes cheeseburgers at McDonalds. Much like salads in America, Gold is not in a bubble because there's not an overwhelming demand for it, even if the demand is growing.
childs pose...... just wondering is it mandatory for everything to go thru the bubble period? i mean, i don't know anything, but the way i read is a bubble process necessary to everything? bubbles might be the ultimate of greed and egos. oh i better quit passing the bubble pipe around.
Child's pose has a lot of value. Very artful of you. Interesting questions.
I hope you seriously want to learn this.
Nothing can bubble without banks getting involved. You can bubble house prices because the bank in essence set's the price. The person just wants it and if they can get a loan and afford the loan then it's price expands. Gold can't bubble without the credit card industry. And the credit card industry in effect bubbled nearly everything from electronics to film industry to music industry to books. Until a significant portion of people are buying gold on credit cards it won't and can't bubble. Because the people who buy it can afford it, so there's no chance of "pulling the call money". Pulling the call money is how they crashed the market in 1929. The banks had given huge loans to people to buy and speculate in stocks and they called in all the accounts the day the market crashed.
You can bubble cars, boats, just anything that you can get a loan for to buy. Because it's "other people's money" that is expanding the supply of money within the economy allowing it to grow. If it's a periphery bank then the other people are around you and it's thier money you borrowed and spent. If it's a central bank then they can create money from thin air just by having you sign a document saying you agree to pay it back. Periphery banks can do this with mortgages but I don't think they can do it with anything else, if they couldn't then the downturn and crash in housing and commercial real estate wouldn't be putting them underwater. Central banks can do it with ANYTHING including credit cards. Just signing the visa receipt on your chase visa makes you a bank assisted counterfeiter.
plus you can B L O W bubbles.
no seriously i re read your explanation and i understand. thanks. give credit to you for simple explanation about the credit and bank involvement. i no longer have a chase vista. it was tough, cause i have upgraded many many flights to first class, boy that was fun. but no more. just have to pay full price for business or first class from now on. but i liked frequent flyer miles, you have no idea how many i had. always paid off balance, and only had to pay a $60. annual fee.
NO MORE
done
It may be sad that our society is structured in such a way, but fast food is a relatively economical approach to consuming sufficient calories to survive. It's certainly very telling. 1300 calories for $4 has a great deal to do with the all-too-common poor nutritional choices made in the US. In most population centers, $4 won't buy 1300 calories of any kind of healthy produce.
Most folks are poor. They buy cheap food, 'cause after all, ya gotta eat. They have 30-minute lunches, so they have to do it quickly.
Dig a bit deeper into those kinds of equations, and it makes a good bit of sense. It's cheaper to mass-produce "food" that doesn't rot quickly and requires no costly labor to prepare and serve. And since the majority of the customers are willing to settle for eating just about anything if it tastes OK, it's hard to go broke in that business.
Vegetables rot, require expensive handling, and require considerable semi-skilled labor to fashion into a meal.
Now of course, one doesn't tend to see near-starving people at a fast-food business. The fact that high-sugar/high-fat/high-salt foods have a tendency to produce obese customers while also reinforcing poor eating habits is just part of the elegance of the system.
Gold is the only, unilaterally accepted currency...period
I recently had some custom cabinets made for my retreat cabin and I asked the cabinet maker if he would take an ounce of gold along with some FRNs for payment and he declined the gold. Gold was at $1180 at the time so his lose my gain.
This is why you KNOW we are not in a bubble....if he had a CLUE, he would have jumped all over that deal.
Bottom line, J6P, is in the DARK.
And I would like to applaud the MSM for yammering about bubbles.Because that's were J6P get's their FIX.
Hey, dudes, it's on TV, so it must be right!.
In the long run, it all boils down to how many patatoes you can buy for one ounce of gold vs. one ounce of silver. Fiat currency pricing of metals kind of defeats the purpose. imho
...or how many ounces of gold or silver someone can buy with potatoes. who holds the most scarce item on any given day? I may give a bag of potatoes for a piece of silver if i have a truckload of potatoes, but i would not give my last glass of water in a desert for all the gold in the world.
this bartering with brand-name fiat has reached ridiculous proportions, and the awakening/enlightenment towards this fact is still in early chapters, in my opinion. can The Fed calm the natives who hold the brand-name fiat by aggressively raising rates to create its scarcity?
...not this time.
+1, good post
...or how many ounces of gold or silver someone can buy with potatoes. who holds the most scarce item on any given day?
IF it get this bad, it won't make a hill of beans.
...and who holds the biggest guns, or who can hire them.
anyway, just making a clear point about the relativity of value, DosZap.
my potato growers at the farmers market would take gold i know. so i am going to order smaller increment coin. i think that would be viewed as diversification of my wHOLE gold portfolio. i have some silver it is kinda heavy though. not so beautiful as gold. but you need both to be balanced.
If I go to the local farmer's market and pick up a bushel of potatoes for a 1964 Kennedy half dollar -- the farmer has bought silver with potatoes. What's your argument again? A holder of PM coinage expects to make trades, but that may vary from day to day, or year to year. All the arguments for/against the ability to use PM for what one needs are valid, but ain't it all a crap shoot anyway?
I've been long physical gold since 2007 but I just sold most of it today. Except for a very small bit left in case of bribery requirements in a truly worst-case scenario, I am now flat gold and long the poor old FRN.
Why you ask, when I am believe as strongly as anyone on this board that we are thoroughly hosed.
A couple of reasons...
One, I think Bernanke will blink in the end. With three Fed governors arguably reticent to print print print, I think the tide will turn on this experiment. Moreover, the existence of the dollar as a functioning currency is an existential requirement for the Fed, and in the end when thinks start to blow up, I think that entity will protect itself, which means protecting the dollar.
Two, I think deflation is still winning. Similar to the potato exchange rate above, there is often the mention that an ounce of gold will buy you a good suit. Now, I'm not sure specifically what qualifies as a good suit, but I saw Cornelianis and other generally high quality names on sale today for $600. Arguably, you can buy a decent suit for less than $500, thanks to your friendly neighboorhood Shenzen sweatshop. So if the suit/gold ratio should eternally be 1, gold may have a lot of downside.
Three, I remained confused by all this hyperinflationist talk. If we are talking money supply and it is booming as everyone states, than M3 should be taking off, and it's not. It's nose-diving. Arguably, with M2 growing, an M3 explosion is just a matter of an increase in velocity and/or a loss of faith in the currency, and while it may happen, to take that view, i think you have to believe the Fed is purposefully going to destroy the U.S. economy in the pursuit of some other aim (choose you tinfoil target - global government, depopulation, etc.). I have no illusions to the criminality of the elite, but I just don't buy that view, and if something like that transpires, unless you have a private army, your gold is probably forfeit anyway.
Four, and this is bullshit technicals, but all the markets have been in low-vol rallies of late, which to end violently the other way, and as I think the Euro is headed for dollar parity, I would expect that move to clobber gold.
And finally and importantly, I just bought a house with a laughable 3.5% down (thank you FHA for helping my poor, poverty-stricken self afford a house. what a joke.). So if hyperinflation occurs, I get a free house courtesy of the Federal Governments endless subsidy and distortion factory. Personally, I think I will lose 25% on the house over the next few years, but that will not happen in tandem with a gold rallly.
Anyway, it has been a good run, and I will never be short gold, but for now, I leave the upside to others.
I truly applaud a poster who uses reason and logic to present a bearish case for gold, without resorting to insults, I hope JB and his wanna be minions/alter egos take notice. Nonetheless I beg to differ a few points, one being that growth in M2 is a necessary but not sufficient condition for growth in M3.
I completely agree with you, MrGneiss, and find SpeakerFTD's arguments worthy of consideration, even if I may disagree with some of them. THIS is what constitutes honestly differing opinion, not the shrill and relentless trolling of the real gold-haters such as (the former --- can I still wish?) JohnnyBravo. And just for the record, Speaker, I did NOT junk you, nor would I ever junk anyone who presents a logical and well-reasoned argument as you did above.
look up Gartman letter...
long term, still plenty of upside. But I think the danger of a rather quick correction is definitely looming. That was a quick move up from 1250...of course I said this at 1250 as well.....lots of hot fast moving money has probably moved in like in late 2009.
You have my respect for making decisions based on your own world view. One can do lots of mind tricks with "facts" at hand, and two people not agree on a plan of action. Taking action is the hardest thing to actually do. For a person to break down and buy that first silver eagle is a difficult hurdle. Your selling the first ounce was a lot less traumatic since you have conquered the lure of the siren song. Hanging onto a few ounces was your hedge. Good investing logic. Hats off to you.
My last buy in was awful. Didn't get crap done until I pulled the trigger. I hate having any money in the bank, yet I kept waiting for the pull back that never came. Still have some powder dry in case it does.
Don't feel too bad. I just bought a roll (20) of 2010 silver eagles at $521! That was a killer.
But then I recall having been anguished at buying gold above $400. It was gut-wrenching.
All the same it was $521 I didn't need for anything else since I'm fully armed with ammo, seeds, food, and such. Where else would I put the money?
Rocky and friends,
I am now in TAHITI avec ma femme, but I did take the opportunity to use some of my REAL LIMITED 'Net time to visit ZH, besides it's raining...
Nice to see gold move up while I am gone!
Best of luck mes amis de l'or!
En espérant vous voir bientôt!
SpeakerFTD... Finally! someone on zerohedge gets it. No wonder you were junked twice. Way to go! ;)
I'm just one of Ritholtz's moronic housewives... part of my personal retirement program is simply matching our astronomical Verizon Wireless bill with physical PMs each month. I'm not sure if it falls under the heading "bad bubble behavior" yet, but I've got us up to 4 blackberries.
I agree with trader Joe and the rest. Gold price is not bigger, fiat currency is smaller. Gird your loins accordingly.
I want them to keep calling "bubble!" because it's so entertaining to watch as it goes ever higher.
What's funny to me is that while they're screaming "bubble!" to the sensible folks protecting their wealth with gold, behind them grows the most outlandishly oversized, overblown bubble of 'em all: the stock and bond market! Bloated to the max with increasingly worthless FRNs chasing ever more elusive "yield" and "growth" (with growing urgency), pumped up by every rescue program, remedial help operation, and 24/7 increasingly desperate poking and proding by anything but actual economic growth.
You tell me which is the real bubble.
Taking a position as Devil's advocate, perhaps gold IS indeed in a bubble. But in the face of orders-of-magnitude-larger bubbles in governmental debt and deficit spending, in which bubble would you rather reside?
YOU CAN'T EAT GOLD!!!
... and you can't print it either.
You can't eat dollars either. You exchange dollars and gold for "stuff". When dollars get diluted, "stuff" becomes more expensive in dollars. But not in terms of gold which you can exchange for more and more dollars.
Imagine winning at the tables in Vegas and finding out they doubled the number of chips and halved their trade in value in dollars. If you had demanded gold you wouldn't have gotten fooled.
Most of the debt around the globe is denominated in dollars. *This* will *always* drive, a steady thurst for dollars. The global economic system that now exist needs a global currency and it has one in the dollar, at this point others would like to change this but they can not. No matter what this will have to be negotiated, at the very least, with the US.
I still did not get an answer to this next question ....
What if over the past few years Uncle Ben has asked for gold as the other countries ask for dollars via our swap lines/dollar backed bonds...... to service their own banking system ?? Ben knows whats going on with the value of dollar, hes not stupid, so why not restock our gold vaults?
I need to hear a concrete reason uncle ben has no/could not do this ... Tyler? Anyone ...Turd Ferguson, anyone?
So you think the complete opposite of what most of the evidence suggests? Instead the U.S. can pay for its military empire, intelligence/counter-intelligence, propaganda, buy oil, buy other currencies, pay for health care and social security, pay for the govt and buy gold simultaneously? Just by printing more dollars?
That really did not answer the questions?What evidence says the rest of the worlds debt is not denominated in dollars and what evidence that Uncle Ben can not be taking payment in gold..?
And yes, the US is paying/borrowing for all that Q.E. 2.0 will be more of the same.
Per Tylers latest post, the EU will be banging on our door again for more dollars soon as the banking crisis developes..
Another thing, as other countries buy this oil, they need even more dollars to do this ...
Spalding,
One, because the USD is the RESERVE CURRENCY(like you said the world will thirst for dollars), that is fixing to change, soon.
Two, because it's not part of the PLAN,I still cannot figure out why it's so difficult for some here to see this is a PLANNED event.(I know to the majority it makes no sense), but since when did the Fed,or the Gov't make sense?.
Three, HE could do what you suggest, but no one would know it, as it would cause a mass panic.(The JIG would be up), and J6P would awaken from his Blatz induced coma.
And, he doesn't NEED to do it, as all the PM mines in the US, can be Nationalized at the drop of a hat.
Not *one* answer to the questions, next ... Tyler, Turd anyone ?
Dollar reserve status change, how, when,date ......? whats in it for us, what will the cost be ?
What plan? Link please hard facts ...
Ben asking for gold would cause a panic? CB's all have gold, they need dollars .... As you say we are sitting on most of this already , so sign it over.
*Update* - Until the questions are answered, the great fall/collapse of the dollar will not happen before every other currency crumbles first, game,set,match.
Uncle Ben cannot overtly settle transactions in Gold ... that would clearly indicate a "no confidence" vote in your own currency - the reserve currency. Would that not be the same as shorting your own currency? The jig would be up ... besides no CBs are selling, they are ALL buying. If Benny (Treas) is accumulating Gold, it has to be done very quietly ...
The paper ponzi exists because no global currency is backed by gold. Paper swaps are faciliated with printed money. You swap your printed money with my printed money. Status quo, and the ponzi continues ...
Most recently, the CBs are devaluing their currency by selling their own currency and buying dollars (or so they say). If Japan openly stated it was selling Yen, and buying gold, what would that do to the global paper ponzi, and the price of gold?
Could that not be easily be interpretted as a "no confidence" vote in the doellar. At what point does a big CB player openly abandon the reserve currency, and say they are buying gold, and what are the consequences?
The recent surge in gold purchases and price is a "no confidence" vote for paper ... ALL paper. It is accelerating, and there will be a tipping point, IMO.
As for oil transactions, Iran is settling most (if not all) of its oil transactions in non-doelar denominations ... why do you think we have such a "hard-on" for them? This is the real reason we overturned Sadam, because he threw out the dollar for oil transactions in 2001, and the US could not allow his break from the ranks to set a precedent in the middle East. The US has demonstrated clearly that it is willing to sacrifice many lives to protect its petro-dollar oil transaction hegemony. Our reserve currency status is dependent upon this.
Uncle Ben cannot overtly settle transactions in Gold ... that would clearly indicate a "no confidence" vote in your own currency - the reserve currency. Would that not be the same as shorting your own currency? The jig would be up ... besides no CBs are selling, they are ALL buying. If Benny (Treas) is accumulating Gold, it has to be done very quietly ...
Link ...? Or something to back this up, anything?Please re-read what I posted. The other c.b.'s MUST borrow dollars to let their banks/people/business service debt .... end of story.It has nothing to do with confidence ....!!
Everyone and their mother knows that gold is intertwinded with derivatives. Who knows whats really going on between the c.b.'s...
If you have to have what's going on in front of your eyes, and need a written composition on it, then I give.
The Soverigns left, with real fiscal wealth are/have been calling for a new Reserve currency.How long before they get one.
Also, OUR dollar, is worthless,they have shot their wad.
Everyone knows it...........
The Fed is not a CB, it is the RESERVE.
But just for us.Also, I said Ben could be doing exactly what your surmise...........who knows?.
Highly unlikely though, makes too much sense.
Going from FRN's to PM's WOULD scare the hell out of all the J6P's in the world,holding FRN's, and that's about 2/3rds of all in print.
Imagine them dumping it for PM's.IF they thought Ben was doing just that?.
I can see the day it happens..........as for QE 2, I agree, no way after Nov elections they get to slam 2T.
But they are already talking 500B more......
Where's it going, who to, for what purpose, for all that's been spent I HAVE not seen ONE positive thing, since the first one came to fruition.
Shovel ready jobs?,doing what?,shoveling more lies and crap?.
They need our dollars, or they go by,by who cares what they know or what they think they know.... They need to service debt in trade,oil,old loans, new loans ect..., in dollars.
I'll admit to being a bit confused as to what you want.
You want US to prove or disprove YOUR theory?
Told you I was confused.
At a minimum we do know that china and russia are making deals circumventing the dollar. China is approaching this slowly but with certainty. I have no links but am certain google will work for you to
Listen up bitchezzs the US will always do the right thing, after it has exhausted every other possibility
You appear to be a bit behind the times.
http://www.ediblegold.com/
...and your caps lock seems to be sticking.
But you can buy the farm with it.
You CAN eat gold: www.ediblegold.com. Pffff...
Silly me. Monday, I will sell off all my gold & silver because paper currency is the only way to survive fiat debasement cycles.
:>P
Take a look at Armstrong's latest on gold.
http://www.martinarmstrong.org/economic_projections.htm
Gold going to $1000. Even the 'Great Armstrong' knows. Buyers at these levels are nothing but chum dripping in blood.
Is that you Johnny Bravo? JonNadler? Master Bates? The song is the same.
Not even a 10 bagger yet...
Thunder Dome did not even read the article.
Here is what Armstrong really said:
"Clearly, those who think that gold is just way overpriced have their head in the sand."
http://www.martinarmstrong.org/files/Gold%20an%2011%20Year%20High%20for%202010%2009-17-2010.pdf
Hey Thunder, I think Obama has a job for you in his Department of Truth--you'd be a shoe-in!
Armstrong's most recent piece states that gold should bottom around June 2011 at $950-1000.
'Time to buy is when there is great deal of contention for an asset' (Hugh Hendry). What asset is that right now? REAL ESTATE!!!
Bring on the junks fish.
Okay, Thunder. This is Armstrong's latest piece:
http://www.martinarmstrong.org/files/Gold%20an%2011%20Year%20High%20for%202010%2009-17-2010.pdf
On what page does it say "gold should bottom around June 2011 at $950-1000."?
On page 7 he says in 2010, "A close above $1227 will signal new highs into 2011 are possible."
Park the gold disinfo at the market ticker, Thunder. Denninger would eat it up.
Page 10 right hand column: '$1000 will become support but will be faded'. Meaning low will be $950-975 range.
GOLD STILL HAS TO TANK BEFORE NEXT BIG UPMOVE!!!
Ah, I see that there is a general misunderstanding of technical analysis here. Support and resistance are not targets in and of themselves. Especially Armstrong's support and resistance calculations which are on decades-long intervals.
Thunder, you seem like a bright enough guy. I implore you to do more research and not bet the farm on a misunderstanding.
Very important Armstrong date coming up next May/June.
I will be selling calls if gold trades $1330.
Great Post!
When the average Joe sees a 5,000% increase in stocks or public debt, he thinks it's normal and never question it.
When he sees a 350% increase in gold, he yells that's a bubble.
Lol. Just lol.
+350(%)!
i have my own barometer for a bubble, when my mother tells me it is time for her to buy some gold then i will call it a bubble. She is the most skeptical person i have ever met.
+1
Apparently not sceptical about the $ and the Government however....
Let us know when she capitulates!
XAU to Gold ratio was scraping the lows for many months.
Now it is sitting a the top of the recent range. Breakout or fail? Best case for the bulls would be to see gold sit around $1,300 and the gold stocks continue to advance, meaning that the stocks are confirming higher gold prices later.
Gold should have crashed after making a parabolic spike in some foreign currencies during the PIIGS crisis. Instead, it has marked a healthy consolidation, making a constructive chart pattern. So far, so good.
So it appears that it is "game on" for risk assets, until the market tells us otherwise.
Sorry. Robo.
Just means no confidence in stocks. That's part of the premise of the gold run. Confirmation from the stocks is not needed and irrelevant.
+ 1000, CE
1,300 dollar range bound channel +/- 75...would be a firm base. Good trading Robo...
I wised up when Kennedy halves were at 5 bux/ea. Now they're at 8 and I am still buying. Silver is going over "$100"--sooner than later.
He asked what I did for a living, so I replied for the sake of simplicity that I worked for a bank. His response? “And they don’t tell you that there? You have to come to me?”
-lol, that's hilarious..the guys down there on 47th are funny as hell..you can tell they like the work.
need another dip for Ag acqs. I heart ag...am big on it...anyhoo..i heart A.g.
I am a big silver fan but I must say we a very near a Gold bull market. In my eyes this still has to start.
Today I was driving my wife to the city (she thinks investing is buying that 101th pair of shoes...) and I noticed all the jewelery store had this card in their window: "WE BUY YOUR OLD GOLD"
These shops never had a sign like that, they only started doing so this and last week. These kind of jewelery store are pretty high class stores.
For me this is a sign that the real gold bull run will soon start.
Also, it's nearly impossible to buy any gold below spot price these days. Silver on the other hand is still possible. Friday, I've bought 120 oz of silver liberty coins from 1987 from a german guy on the internet for 20$/pc.
Also there, in the silver market, the real bull run still needs to happen, and it will!
Van je vorige comments kan ik uitmaken dat je net als mij uit België komt , een passie voor economie hebt én net als mij een goudbug bent :)
En van Gent he! :) Leuk om te zien dat er hier nog Belgen op zitten :)
SD,
Dude,your in Belgium.
What is happening there, is related,but not close to the same as here.The prices and incremental sizes and types of coins your buying, are nearly not available here, and the premiums are WAY over what you pay.
What is a Silver Liberty Coin?, a half dollar?.
That's what WE call them..........at $20, you may have not got a smokin deal.
http://www.coinflation.com/coins/1916-1947-Silver-Walking-Liberty-Half-Dollar-Value.html
Metal value just short of $8
$13 on Amazon
http://www.amazon.com/1946-Silver-Walking-Liberty-Dollar/dp/B0031OY7NS
The increase in scrap metal sourcing suggests the CRIMEX & LBMA are scrambling for physical to settle with. According to Jim Willie and others they may soon fail to deliver then die -- similar to what happened to the London Gold Pool.
Ya but some commodities are getting hammered down while gold rises. So someone with money to lose is clearly sending a signal that there will be no inflation or at least not enough to see till it's too late.
http://www.youtube.com/watch?v=I4ZnGprplKU
But you can't wipe with gold!
+1x10^x
You can wipe with gold but its rather painful and messy
Make a golden spoon and dig in.
"But you can't wipe with gold!"
LOL...I'm stealin this ;-)