Hidden Dangers in Gold

ilene's picture

Hidden Dangers in Gold

Based on an article by Dr. Paul Price in the Dec. 4, 12 issue of the Market Shadows newsletter: A Failure to Communicate: Numbers, Rates & Lies 

Why isn't Paul currently buying gold bars, gold Electronically Traded Notes (ETFs), and mining companies? Wouldn't owning gold offset the (understated) inflation that we see daily and that may soon spiral out of control? While Paul argues that Washington’s Biggest Lie is its denial of real inflation, he also believes that pouring money into physical gold, gold-tracking assets, and shares of mining companies, is very risky, even if it makes logical sense. (Gold - The Biggest Risks Are The Ones You Don't See)

It makes sense because the supply of gold is limited and gold cannot be magically created by the Central Banks. Gold has also been used as a store of wealth for centuries. And of course, gold is presumed to be a good inflation hedge. But is it really?

Going back to 1980, gold peaked at about $850 per ounce. It bottomed in 2000 at about $250 per ounce. Annual inflation in 1980 and 1981 was in the double-digits. Later in the 1980s and through the 1990s, inflation fluctuated from under 2 to over 5 percent, drifting lower over those two decades.

Paul's chart below shows the nominal price of gold beginning in the 1970s. The second chart shows the nominal price of gold from 1979 to July 2012. (Click on charts to enlarge.)

Nominal Gold Prices 1979 - 2012

Chart from allaboutinflation.com

Paul notes that from 1980 to 2000, the CPI inflated by a cumulative 137% (compounded). Gold dropped to $250 during this period. But what about yearly inflation rates vs. the price of gold - is there a correlation?

The following chart shows gold prices vs. annual inflation rates. Apart from a clear correlation between inflation and the price of gold in in the 1970s, the correlation has weakened in recent years.

Gold Prices vs. Inflation Rate

Chart from Bloomberg

Describing the chart above, SymmetricInfo wrote,

It's clear that the lines seem correlated back in the 70’s and 80?s, but lose their relationship in the past decade. This makes it difficult to believe that the recent increase in price of gold has been solely due to a change in realized inflation and weakens the case for gold as a good inflation hedge... There isn’t much empirical evidence to make one believe that the decade long gold rally has exclusively to do with either realized inflation, inflation expectations or the federal reserves balance sheet. (Is gold really an inflation hedge?)

In Gold vs. Inflation, Barry Ritholtz noted that the link between gold prices and inflation is limited. The correlation between gold and inflation year over year is 0.42. On a month over month basis, it's only 0.11. According to Merrill, "Gold is not a great hedge against inflation. Investors would be better off owning TIPS if they are looking for protection against a potential rise in inflation." (Merrill Lynch via Barry Ritholtz)


Paul doubts that gold prices will soar to new heights anytime soon. He questioned the wisdom of amassing physical gold, buying gold in a custodian's care, and loading up one's portfolio with assets reflecting gold prices:

Recent history shows at least some custodians of your warehoused Gold to have been unreliable. For example, commodity brokerage firms MF Global and Peregrine Financial both failed to protect customer interests in the physical gold ‘safeguarded’ by them.


If you correctly bet on Gold going up you still may never even see your original stake returned, let alone any paper profits. Speculators were willing to risk price fluctuations. They didn’t know they were also subject to outright theft of their property.


Many traders today play Gold movements with ETNs (Electronically Traded Notes) without knowing these have bigger risks than simply the metal's price action. These ETNs are unsecured obligations of their issuing financial sponsors....


Physical delivery of Krugerrands, American Eagle gold coins and or bullion bars, and holding them in your own safe seems to avoid the custodial problems. Now, word from ZeroHedge.com confirms that Chinese companies have been actively promoting the sale of assorted counterfeit gold plated items ‘for legal purposes only’. (Gold - The Biggest Risks Are The Ones You Don't See)

Fakes and Frauds

Besides the risks that inflation won't skyrock and that custodians of your gold-based assets will go belly up, Zero Hedge noted that tungsten is being used to fill fake gold items. A firm called ChinaTungsten Online is marketing its broad 'tungsten-alloy services.' These services include "the gold plating of various tungsten formulations among them 'gold' bricks, bars and, yes, coins." The company is openly advertizing its tungsten gold-plating and precious metals replication services.

Zero Hedge also relayed a story about counterfeit gold being found in Manhattan's Jewelry District. "Myfoxny reported that a 10-ounce gold bar costing nearly $18,000 turned out to be a counterfeit. The discovery was made by the dealer Ibrahim Fadl, who bought the PAMP bar in question from a merchant who has sold him real gold before. 'But he heard counterfeit gold bars were going around, so he drilled into several of his gold bars worth $100,000 and saw gray tungsten -- not gold. The bar was filled with tungsten, which weighs nearly the same as gold but costs just over a dollar an ounce.'"

Will we soon be drilling into the cores of our shiny golden trinkets, bars and coins to test for purity? This is expensive, time-consuming, and decreases value and transferability.

The fraud in the metals market is here in the US, and not limited to physical pieces. In a Fool’s gold? CFTC says 12 firms sell phantom metals, Rob Varnon reports:

The U.S. Commodity Futures Trading Commission announced Wednesday, it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against 12 firms and their executives for fraudulently marketing illegal, off exchange retail commodity contracts...


According to the CFTC complaint, the defendants claim to sell physical metals, including gold, silver, platinum, palladium, and copper, to retail customers in retail commodity transactions. Under the defendants’ retail commodity transactions investment contract, customers allegedly make a down payment on certain quantities of physical metals, usually 25 percent of the total purchase price. Defendants allegedly claim to arrange loans for the balance of the purchase price, and advise customers that their physical metals will be stored in a secure depository.


But the CFTC alleged that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions, according to the complaint. Defendants allegedly do not own or sell metals to customers; customers are charged storage and insurance fees on metals that do not exist; and are charged interest on loans, which are never made by the defendants... (Fool’s gold? CFTC says 12 firms sell phantom metals)

Mining companies may seem like viable alternative to other gold-based investments involving trusting custodians or stockpiling one's own gold supply. However, particularly for mining companies with foreign operations, forward estimates and past performance may not be good predictors of future profits. 

I used to favor shares of international resource and mining companies as a safer, liquid, back-door play on rising inflation. Worldwide political forces and heavy government debt have been catalysts for repudiation of long-term contracts and unilateral nationalization of foreign assets. This puts downward pressure on the earnings power of resource companies with significant assets in less developed countries.


Argentina-based oil company YPF (YPF) lost about half it value overnight some months ago after local authorities basically seized its assets without fair compensation. Indonesia has threatened to abrogate signed contracts with FCX because it now wants bigger royalties than previously agreed to. Australia is raising taxes dramatically on BHP, which cut back on its development there in protest.


The good old days of paying contractually promised royalties to less developed nations while mining their natural resources appears to be coming to an end. This explains what look like bargain prices on industry leaders like BHP Billiton, Rio Tinto (RIO), Freeport Mc-MoRan (FCX), Newmont Mining (NEM), American Barrick (ABX) and others.


All forward estimates may be shot to hell in the political climate that looms just over the horizon... (Gold - The Biggest Risks Are The Ones You Don't See)

A Gold Bubble?

It is not easy to find financial gurus and writers who are currently bearish on gold. There is Warren Buffett, who prefers buying something that generates income. Joe Weisenthal posed the bubble question in writing about Felix Salmon's attempt to go shopping with a gold bar. "It sounds silly, but if gold is a currency, then it should be usable as a medium of exchange... Felix goes up to a guy loading wholesale beer, and the guy knows instantly (!) what a gram of gold is worth: right around $50! When the guy loading wholesale beer knows the price of a gram of gold instantly, you've just got your famous example of the taxi driver giving you stock tips. DANGER!" (This Is The Best Proof We've Ever Seen That Gold Is In A Bubble)

Safe Haven Built on China? 

Jordan Weissmann at The Atlantic argues that China's problems are gold's problems.

Investors who love gold tend to think of it as a sort of bomb shelter. It's supposed to be a secure place to park your money when the rest of the financial world is blowing up...


In the past decade, much of the new demand that set gold off on a wild tear from around $300-an-ounce at the turn of the century to almost $1,900-an-ounce last year has come from two places: India and China. Combined, they account for 45 percent of the world's demand for gold jewelry and bars...


For today, let's focus on China, which passed India as the world's top gold market earlier this year. The country deregulated its gold market in 2001, and since then, it has gone from consuming about a third as much gold as the developed west to overtaking it by 2011. Let me repeat that: the Chinese buy more gold than the entire west combined...


Just as China's rich have found new places to invest, the country's economy has been slowing down frighteningly, which dropped demand for jewelry this last quarter by 9 percent from a year earlier.

Source: Why Is the Price of Gold Falling?


Updated and based on Paul's article in the latest Market Shadows newsletter: A Failure to Communicate: Numbers, Rates & Lies.


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DavosSherman's picture

"Many now believe---passionately---in PMs,..."

Many now believe---passionately--- that all currencies have been satanically decimated and have enough fucking sense to avoid the martyrs cross.

chindit13's picture

As the Good Book says, it is easier for a Danish cartoonist to circle the Ka'aba than for a gold apostate to post an article on Zerohedge.

ilene, you've been fatwa'd!

Suppose I was a HNW individual who diversified into PMs to the tune of 5-10% of NW beginning in the mid-1990s.  Suppose my known associates did the same, and their purchases increased in nominal size as the rewards of being a statistical outlier increased exponentially, and most will say unfairly, when the millennium changed.  What might our buying have done to an asset that was all but completely out of favor?  Could it have been the major contributor to driving it up five to seven fold, at which point that out of favor asset took on all the cache and garnered all the affection of a 3-bedroom ranch in Stockton, CA in 2005?  Perhaps.

Now suppose I, as a hypothetical HNW type, saw the religious passion with which so many here view this pretty but otherwise useless metal.  Suppose we saw cathedrals and temples cropping up in every city and every town in America---even on the internet---singing the praises of the yellow metal and offering eternal salvation to all those who give up (to the preachers, who preach: "Dig deep, brothers and sisters!  Cast out that fallen lucre and take unto you the golden sacrament!") their sinly fiat in return for little pieces of the promised Rands.  Suppose we saw at the same time a vast majority of the non-believers who either lacked the means of acquiring salvation or else were about as likely to embrace this retro faith as Pat Robertson would embrace the teachings of Hassan al Banna or Sayyid Qutb.  Might we feel clostrophobic, like we're stuck on the wrong side of a very crowded boat that's listing?  Might we not begin to wonder if a million pilgrims on the Plain of Arafat, all rushing to toss stones at the Devil same time, could turn into something gone horribly wrong?  What might happen if us hypothetical HNW types began to pare back our position and leave the front pews to the newly converted?  Might not the upward movement of PMs hit a bit of a ceiling, and perhaps stay capped for a year or more?  What if us h-HNW types suddenly increased the speed of our liquidation?  Jesus may have risen from the dead in 2000....er....Year Zero AD or thereabouts, gaining widespread popularity for that trick, but how popular would He have been if He had stuck around only to die ten or fifteen years later, having gained so many converts (who had built many temples, written a bucketload of books, established a viral load of blogs and websites, and who posted endless and repetitive comments), only to leave them holding the bag?  All the reasons why He might have gained His popularity would be there still (man remains a sinner and a printer), but might it be possible that another faith could emerge or even a nostalgic embrace of other previous deities?  Could sinners even deny or overlook their own sins, the way a Made Man can still take Sunday Communion? 

In the end, it's all bogus, but in the meantime it's all about what the faithful choose to believe.  Many now believe---passionately---in PMs, but a large majority do not and may never convert.  They are under no obligation to do so, no matter the traditions of dead people.  They must all vote as the faithful now vote in order for the new King to ascend to the throne, and they must toss aside the god they have worshipped their entire lives.  If they don't, the King is like the King of Bhutan:  a really big deal at home but a guy who has to wait in line for a table, just like everybody else, at Del Posto.  Lots of folks (hypothetical, of course) who are flush with sacraments and the articles of faith---even if only to the tune of 5-10%---and who were largely responsible for raising this faith from the dead---are beginning to wonder if now might not be the time to "share" our good fortune.

Absent the charts and graphs, perhaps that is the "heresy" ilene attempted to explain.  Stuff happens.  Is an easily reproduce-able piece of paper so much more silly than a pretty but otherwise mostly useless metal?  It's a matter of degree...silly to sillier.  Both are mere faith, and expecting everyone to embrace the shiny one is itself a act of faith, like that man who walks into a cage of poisonous snakes.  Once in a while the snake bites him on the arse, like that sure-thing bit the Hunt Brothers and the Saudis back in April of '80.

By the way, ilene, Salman Rushdie is still alive, so relax.

paintman's picture

Money, for most people, is not a store of value.  PMs, for most people, are not stores of value.  They are mediums of exchange, because its hard to trade a cow for a potato, or a house for a pig.  Civilization needs something widely recognized as valuable with which to conduct these exchanges.  Many times in the past, governments have manufactured money with little intrinsic value which their citizens accepted as valuable.  In those times, the money failed to retain its value and eventually failed.   Those societies, in an effort to find a widely accepted medium of exchange, reverted to PMs.  There are undeniable signs that it is happening again.  It will be wise to hold some PMs for that eventuality, or to design various sizes of cows, potatoes, houses and pigs to facilitate equal trades.

DavosSherman's picture

Hopefully Price won't want to "drill" the minature cows to make sure they aren't counterfeit?

ilene's picture

This is in response to a few comments. The correlation that Merrill found for gold and inflation (probably gov't measures) was .42 yoy and .11 month over month. This is a correlation, but it isn't a big correlation. http://www.ritholtz.com/blog/2012/09/gold-vs-inflation/

Here's a picture: http://upload.wikimedia.org/wikipedia/commons/d/d4/Correlation_examples2...

Taking inflation as measured in the 80s underestimated it, according to John Williams' methodology. 

John's chart: 


John explained: "In the charts to the right we show two SGS-Alternate CPI estimates: One based on the pre-1990 official methodology for computing the CPI-U, and the other based on the methodology which was employed prior to 1980." In other words, they changed how inflation was calculated so that the numbers were lower - this is a trend...

Inflation measured by the gov't chart:


Using John's inflation numbers for the 80s would make inflation higher. But gold still dropped in price. 

I don't know Merrill's methodology for finding the correlations it found, but it would be interesting to see exactly what was being compared and over what time frames.


dxj's picture

The correlation of gold to the manipulated CPI is weak, but the correlation to negative interest rates is not. It's not inflation that drives demand for gold, but financial repression which destroys faith and trust in the fiat currency.

DavosSherman's picture

You just don't know when to through in the towel do you?  66 votes down, a whopping 1.6 all time ZeroHedge worst article ever posted, and you just keep fucking digging.

GubermentWorker nailed the right way to inflation v. Gold.


blindman's picture

the hidden danger is not in gold, not in the universe
and its structure and function, its manifest laws
outcrops and magnificent accreted or evolved creations
(barring one) / in general / but specifically in man and
his operational addiction to dim -wittedness , emerging
from oscillations of cleverness and acquisitiveness.
that should be clear by now. the universe has given man
all that he needs and more, gold is just one very
unique and shinny example. see below.
" Aquarius
Vote up!
.Vote down!
Gold was earlier the foundation of Christian Sun (current Sun) religions (not Islam or Judaism) and as such maintained as of the Sun, the representative of the High God, the Father which makes the Sun, the Son or commonly called today, Jesus Christ. Gold was from the body of the Sun; the flesh of the Son; Sun and Holy\ier than the highest which became Royale; ever been to Paris?

... where the Sun of the King awaiting to become King is the Dauphine (Dolphin) = (of Pisces fame - and Glory) He who would be King - not the enligh Afghanistan version, the Christian version. Gold is the Flesh.

Gold is the end of the metal kingdom's Causal travails; it is royalty and therefore redundant; all European Royal and their protocols are of this tradition (of Egypt) Gold is the metal accomplished.

Gold is everything that man the unaccomplished wishes to achieve; it is the end of the road; the objective and is innate in all men.

"Money" is integrity and has little to do with the trade that ensues after integrity has been established (due diligence)

Speaking of insanity: Why do we declare a tree illegal? Why do we declare hemp illegal? Are we not insane?

Okay. People establish "value". If the few Big Banks and their eagerly corruptible cull 2/3 of the human diaspora so that they may live with fear of losing their fiat and, more importantly, assets, where does "value" go.

Answer: If they genocide us all, which they have commenced, they end with nothing; their wet dreams are insanity, which has little value and I for one would prefer to be dead, that even talk to one of them. DEath would be so sweet.

Back to Gold: You may talk about Gold Standards and the pro's and con's - But the fact of the Matter, is that the entire World is a Gold Standard. Gold is the ONLY Universal Standard that we have.

There is NO time - only potential.

Oh, when they cull us, ~ 6.5B we, what fiat currency will they utilize? No values; no life!

hairball48's picture

I got to this topic late. Very disappointing Ilene.

I'm just a poor, uneducated redneck. However it's obvious to me that gold IS money, real money....and has been for 1000's of years. Nothing Bernanke and The Fed do will ever change that. Deflation/inflation, it doesn't matter. Gold will always be good money for trade.

As for the current  price of gold...it's being manipulated since that's mostly reflecting the paper gold market. Wait till the shit hits the fan. The price of physical gold, if you can get it, will set these non believers straight :)

DavosSherman's picture

I'd take 100 of you over 1 Harvard Larry Summers, 1 NYU Greenspan, 1 NYU vagina wall decorating PhD Rubini.

Your not uneducated.

Steve Jobs, Orville Wright, Wilbur Wright, Thomas Edison all had no education.  Without them we'd be in the dark, grounded and not using computers.  I have nothing against those who have an education, but fuck anyone for thinking they're better than someone without one.

Here are some educated morons for you.


LadyEconomist's picture



I welcome articles with different point of view and I applaud Tyler for presenting diverse opinions on his web site. 

I have a few comments, but they are rather about the surroundings than about the article itself. I stated earlier that I don't have herd mentality and I wouldn't buy gold right now because everybody is buying it.

Most of you disagree with me and most of you disagree with the author of this article. Moreover, you are upset with her. I do not question your knowledge, I believe you are very smart professionals and you know what you are talking about. Some of your comments are really interesting and I learn a lot from you but, I'm still staying with my original position, I wouldn't buy gold when everyone is doing it and your comments and general position about the topic convince me that we witness your herd mentality.

Now let's get back to gold. You might buy gold for different reasons than hedge against inflation, some state that they purchase it to be rebellious, to make a statement, to diversify, to make quick money, etc. The fact is that most people buy gold to hedge against inflation. 

Personally, I think it was good to jump on that bandwagon about two years ago or maybe even a year ago. Maybe it would be still good to do it within the next couple of months, I don't know.   Now it might be too late or it might be not too late. Nobody knows. Everybody has different risk limits and you should assess yours and act accordingly. 

First, I cannot imagine a world when gold hits $5,000. It would literally mean that our system is collapsing, our institutions don't run properly, we have rampart hyperinflation, we have panic on the market, we might even have civil unrest, and total government crisis. In this situation what you are going to do with your gold? Do you think you will be able to sell or exchange your gold to something else? Will you patiently outwait the situation and keep your gold in a safe place? Will you try to sell some of your coins and try to replace them with fiat money just to buy food? Will you even be able to show your Krugerrands without the risk of having them confiscated or being robbed? Finally one fiat money is going to be replaced by another fiat money across the board and hyperinflation is going to be tamed. 

Second, we cannot predict if the scenario in previous paragraph even happens. It is one possible scenario only. Maybe nothing like this is going to happen. We might experience a mild inflation only for relatively short period of time and the whole current ‘gold rush’ is going to be worth not too much. Maybe we get our way out of deficit throughout combination of tax hikes and gas and oil exports or some other means. Economical events are difficult to predict.

That’s my three cents into the conversation. Sorry for spelling and syntax, ESL (English Second Language). 



Mr. Hudson's picture

Marc Faber, who is a billioniare and a Swiss investor, has a large amount of gold in his portfolio. He has repeatedly warned Americans not to keep their physical gold in the United States, because our government made it illegal in 1933 to hoard gold. We will have gold detecting drones flying over our houses when the SHTF. Did you know that the private citizens of India posses 18,000 tons of gold, which is more than all the gold of all the governments and central banks combined? If Indians decide to "dump" their gold and buy cows instead, do you know what that would do to the price of gold?

DavosSherman's picture

If India stops worshipping and starts eating cows they'll buy more cows.  They'd dump everything and anything before they dump gold.  Get to know some of them, you're fucking clueless.

Keeping it out of the US isn't a bad idea.

LadyEconomist's picture

Then maybe it makes sens to invest in the rear vingage of wine, or classic cars, or antiques.

Vooter's picture

"I stated earlier that I don't have herd mentality and I wouldn't buy gold right now because everybody is buying it."

Who's "everybody"? How many people do you personally know who are buying bullion? I can count the number that I know on ZERO fingers. The OVERWHELMING majority of people in the United States don't own any gold or silver. Next...

LadyEconomist's picture

If some type of gold ad runs in TV and in the radio every 15 minutes for the last 5 years and still not enough people are convinced to buy it then it must be something wrong with it. 

DavosSherman's picture

"If some type of gold ad runs in TV and in the radio every 15 minutes for the last 5 years and still not enough people are convinced to buy it then it must be something wrong with it."~LadyEconomist

"I don't have herd mentality and I wouldn't buy gold right now because everybody is buying it."~LadyEconomist

You talk our of your ass.

Which is it bitch?  They're all buying or they won't buy it?


LadyEconomist's picture

You are a cretin and maybe you can read but you don't know how to analyse. I said that because I DON'T BELIEVE such a small amount of people invest in gold right now. Everybody is aware of gold. If there is so many ads running in TV and radio about purchasing gold, general public knows about it and smart investors already purchased enough gold. Consumers are saturated. Most don't have money or means to purchase gold, the rest already did it. Now it is time for suckers to buy. That's what I'm warning about, people might lose their investment or get screwed by crooks, you moron.

TheFourthStooge-ing's picture

LadyEconomist said:

Everybody is aware of gold. If there is so many ads running in TV and radio about purchasing gold, general public knows about it and smart investors already purchased enough gold.

"It's those STUPID "buy gold" commercials that I must watch 20 of per day. Some little guy comes out who looks like he never had a date with a non-inflatable woman in his life and starts that "Don't you just love the feel of gold" and then the creeps start FONDLING the gold right there on TV and it just totally creeps me out."

"This gold fetish stuff is crazy. The only reason to buy it is the HOPE that some future person will give you more "purchasing power" then, than what purchasing power you put into it now. That is nothing but SPECULATIVE buying, and what do we call it when people pay increasingy stupid amounts of money on something betting that somebody else will pay more for it in the future- - -A BUBBLE!!!"

Now it is time for suckers to buy. That's what I'm warning about, people might lose their investment or get screwed by crooks, you moron.

"I am not angry at GoldBugs. I just hate to see people get zonked if this Gold stuff is a bubble, and I am pointing out how people who own Gold can not be relied upon to give unbiased info."

"Sooo, its a Ponzi scheme, and it irritates me, and makes me feel sorry for all the people who get scammed. Plus, all you victims are going to have hope that you can screw some future victim out of their money to get yours back, which is going to take a psychological toil on you. So that is why. Gold is just a horrible circle jerk."

It looks like Squeeky Fromm done went and made hisself a sock puppet.

LadyEconomist's picture

Ownership of gold makes you paranoid. I can see that accidentally I stepped on some irrational cult of gold worshippers.

LadyEconomist's picture

You old fart, you said only 5% of investors buy gold. Why is that genius? It is difficult to store it, move it, trade it. When true collapse and hyperinflation occures you cannot do anything with that gold. Would you smuggle it overseas or something? What are you going to do with it? Take it to the grocery store and buy food for it? If you don't buy and don't store gold directly, you don't have any guarantee you even own it. All these gold dealers suddenly are going to disapear. Who is going to find them? Where your papers are going to be? You don't know what collapse means. You can only theoreticize about it and play a bonzo on the blog.

akak's picture

LadyEconomist, there are so many non-sequiturds (nods to TheFourthStooge-ing) in your rambling, nonsensical diatribe above, one can hardly know where to begin in trying to refute it all.  Suffice it to say that you are obviously not only brainwashed and a complete idiot, but demonstrably dishonest and ignorant of any aspect of financial and monetary history as well.  But let's take a stab at it, shall we?

you said only 5% of investors buy gold.

No, actually only around 1% of all investors hold any form of gold in their portfolios --- which doesn't stop you from trying to label those few who do so as having a "herd mentality".  Please inform me in which particular species 1% or less or all members constitutes a "herd".

It is difficult to store it, move it, trade it.

Oh, the burden of holding and storing gold!  The horrors!

Even a pathetic weakling like you could easily hold $1,000,000 in gold in your hands, and you could store multiple millions of dollars of gold in a shoebox.  Yes, you're right --- that is SO difficult compared to holding silos full of grain or railroad cars full of coal.

When true collapse and hyperinflation occures you cannot do anything with that gold.

One could trade it directly for real goods, sell it for (inflating) fiat currency, no matter that's currency's present value or rate of depreciation, or hold it to store wealth and one's savings into the future, when the crisis and hyperinflation are long over.  Please inform me which, if any, of these options are "nothing".

Would you smuggle it overseas or something?

That is always an option too --- see Vietnamese "boat people" of the 1970s for examples.

What are you going to do with it?

The options are limited only by one's imagination and knowledge --- which is perhaps why you cannot think of any.

Take it to the grocery store and buy food for it?

It seemed to work for 99% of recorded history.

If you don't buy and don't store gold directly, you don't have any guarantee you even own it.

Bravo!  Even a blind pig finds an acorn once in a while.

All these gold dealers suddenly are going to disapear.

Via the Rapture, perhaps?  Alien abductions?  Who or what is going to make them disappear?

Who is going to find them?

So mass blindness and/or disorientation is going to coincide with monetary collapse?  A fascinating hypothesis, but I can find no historical parallel.

Where your papers are going to be?


You don't know what collapse means.

And we are still waiting for you to show even an iota of an inkling of a semblance of a glimmer that you know what collapse means either.

LadyEconomist's picture


You assume you are going to have NORMAL trading system, your regular institutions to execute your trades and everything like it is right now. I'm telling you third time and I won't repeate it again, that during hyperinflation there is nothing normal. Everything collapses around you. Just think for a moment, prices go up every week, really fast. You cannot keep up with it. Most of your time you will spend in lines either trying to buy any product now before its price would go up or in line into the bank, or gas station or something of this nature. Try to pull out your krugerrands at the grocery store where the ungry mob of people is waiting in line or maybe ask your employer to do payroll in gold bars because the next salary you get is going to diminish in value. There is absolute fucking chaos! Do you understand that? Can you imagine that situation? You would be lucky if you burry your gold in your back yard and you still have a back yard!





akak's picture

LadyEconomist, I fully understand your point (I have seen hyperinflation firsthand myself, in South American and Africa), but your arguments against gold are still nothing but specious red herrings.  Even presuming that one has a hard time during a crisis selling their gold in exchange for (rapidly depreciating) fiat currency in order to buy food, that takes NOTHING away from the all-important fact that gold is a guaranteed --- yes, I will say it, GUARANTEED --- store of value to transport one's savings THROUGH the crisis to the more normal times afterward.  There is not one example in world history in which you could try to claim otherwise.

All you gold naysayers love to focus on the crisis period, and try claiming that gold has no utility then, and ignore the more important facet of gold as a safe savings vehicle to move one's wealth THROUGH the crisis.  If one needed to immediately sell gold in order to get through a monetary crisis or collapse, then that person did not plan very well to begin with.

LadyEconomist's picture

I never said I don't like gold ! I understand money backed by gold. I listen to Ron Paul.

I said I WOULDN'T BUY GOLD RIGHT NOW. It is already in the bubble. Everybody is buying gold right now. My neighbour who walks his dog is telling me he buys gold, my coworkers are buying gold. If people around you are telling you they buy something, run away from it. I said they are other better investments you can hedge against inflation and not that many people are doing it right now. Your firend crazy Davo moron just burried my messages with his obscenities. You do whatever you want. I said I wouldn't touch gold right now. That's it. I'm done.

DavosSherman's picture

You are a moron who can't even read.  I said advisors were just now starting to advocate (that means suggest) that their clients get into gold at least 5 percent of the NW in gold.

That can't be done.

It is mathmatically fucking impossible with the CB's holding gold.

Gold above ground is the size of a fucking building.

Go away you fucking torll.

GubbermintWorker's picture

The only type of gold ads I have seen that run constantly on TV are people who are buying it, not selling. And, they giving shearing the sheep of their gold by giving them a fraction of the fiat its worth.

DavosSherman's picture

"And, they giving shearing the sheep of their gold by giving them a fraction of the fiat its worth."


Or their selling numismatic at insane mark ups

LadyEconomist's picture

Then tell me about this secret black market of true gold purchases. Do I need a special pass to that club?

DavosSherman's picture

"Then tell me about this secret black market of true gold purchases. Do I need a special pass to that club?"

China buys the mine, not gold from the mine.

The secret is at the spot market, the LBMA, which is massive.  The secret is in paper contracts traded v. what phsyically exists.

GubbermintWorker's picture

Hardly, there is no secret club but neither is there any hyped up big sales campaign going on as you suggest.

jimmyjames's picture

 I wouldn't buy gold when everyone is doing it and your comments and general position about the topic convince me that we witness your herd mentality.


What side of the gold trade does it look like the herd is on?


DavosSherman's picture

Putting Economist in your name is like calling yourself LadyMoron.

"I have a few comments, but they are rather about the surroundings than about the article itself. I stated earlier that I don't have herd mentality and I wouldn't buy gold right now because everybody is buying it. [enphasis mine]"

1 percent of the world's investments are in gold.

If you cubed gold it would be the size of a small 7-story office building.  All the gold in the world above ground, one tiny cube.

You don't get it.  You don't come within 100 miles of getting it.  Right now HNW and its advisors are just starting to advocate holding 5 percent in gold.  That right there would push gold well, well north of $5K.

You also fail to comprehend the rest of it, the currency part of it.  This work is totally subpar to everything ZH publishes, it is CNBS crap, it is not a different point of view, it is crap, the ratings and the comments prove that.

Get a fucking clue---don't be like ilene.

LadyEconomist's picture

You also fail to comprehend the rest of it, the currency part of it.

Are you refering to coming back to the Gold Standard? What events do you think have to happen and how long would it take before gov decides to do it?

DavosSherman's picture

The gold standard has nothing to do with it.  Read the first comment on the thread.  I could give a flying fuck about the gold standard.  It'll likely happen when paper is shunned.  It may happen as some commenters suggest---China and or the BRICs with China shove one up our ass.

You have no fucking clue, I can tell by your demonstrated lack of understanding by what you write as to our government's situation.  You can't be an economist if you don't know how countries go BK.  You have homework to do.  You haven't read the comments on this page, yet you say you have.

You're right up there with that fucking bimbo repeater who calls herself a reporter that SafelyGraze was so kind in posting.

LadyEconomist's picture

First of all, I suspect you are a gold dealer. You have personal interest in pushing that agenda. It is this same type of people who pushed subprime loans on the public during the hey-day of the real estate boom. I don't blame you, people need to make money to live but I'm not the ideal consumer for marketing manipulation.

Second, I'm not commodities expert and I never claimed to be one but I also read a lot and even my presense on this particular portal proves it. I know that German government recently asked for audits of their gold holdings and Ron Paul requested to audit Ford Knox and there are voices that Feds should return gold to their original states and all of that. I know QEnfinity and EU all central banks printing money simultaniously and China and Russia try to undermine American Dollar and bla, bla, bla. 

I also know what is going on during the hyperinflation and when countries go BK.  because I'm from one of these countries which experienced that. I don't know how partiuclarly Americans would react in this situation, I hope you stay calm. Basically it goes much faster than now, when we have regular inflation. 

You just start hearing that Mint is going to abandon first, 1 cent and then 10 cent, etc. Then they start introduce higher and higher currency because the current one loses its value overnight. When panic sets in and people start to hoard anything they can purchase, store experience shortages of supply, you would stay in lines for every day commodities. Stock market might collapse. People would demand higher wages, strikes would occure every day and interrupt production activities. Regular institutions close down, won't even function. Government would make emergency regulations. You won't be even allowed to trade your gold any longer. That whole stage is relatively short. Finally, new government decides to change the currency all together, so everybody loses their savings at the same time and at the same rate. They replace fiat dollar with fiat dollar before they even think about gold standards. Government anounces that the country is insolvent and foreign investment and all other obligation holders can go and pound the sand. What they are going to do? No one would dare to challenge USA. End of story. Everything goes back to normal. If you can make a buck with your gold before and during that period, good for you but not everyone would be positioned to do it and not everyone would have means and courage to trade in that such an extreme and hostile environment. 

DavosSherman's picture

"First of all, I suspect you are a gold dealer. You have personal interest in pushing that agenda."

Fuck you.  I'm NOT a gold dealer.  I'm not in financial services at all.

I've devoted years to writing and blogging and never took a fucking dime for it your fucking c#nt.  How dare you.  The only agenda I have is spreading the truth, smacking morons upside the head with stupidity by dedicating article to them and emailing them.

People need to be stopped.

Almost every asshole mentioned on this site I've emailed them an article dedicated to them and told them they had shit for brains.  You're talking almost the entire FRB.

For a dumbass who has lived through a currency collapse (which I doubt is true) you don't get gold yet, then you are a total brain dead retard.  That is all there is to it.

And oh, by the way, the US is ditching the penny and the nickel.  It's the reserve currency, so even if it isn't your countries it is.


LadyEconomist's picture

Take some valium and flush it with a liquid gold. You can doubt whatever you want. 

DavosSherman's picture

Go fuck yourslef.  I seriously doubt anyone else would touch you.  Don't tell me to take valium, my kids are getting fucked as a result of these dipshits and shitheads who write crap articles and c#nts like you who tout shit articles are largely the problem.

You advocate getting fucked with a currency crisis.

You're a fucking moron, the dregs of society, a total pos.  A fucking headwing on humanity, a drag to mankind.


akak's picture

Boy, I simply cannot WAIT to see you take on AnAnonymous!

That will indeed be the mattering thing, the crustiest bit, very much something.  Until then, will just have to bear with it.

DavosSherman's picture

Sorry Akak:  I'm not following you.  Anonymous the hacker group?  I'm actually pretty in awe of some of their fine work.

akak's picture

Davos, sorry, I was referring to ZeroHedge's pet troll AnAnonymous, whose strident and over-the-top, quasi-autistic anti-American diatribes have become legendary here, and are the butt of some never-ending mockings by myself and others.  The last part of my post above was phrased in "AnAnonymouspeak".

DavosSherman's picture

Agh, I read that too fast.  Hysterical, thank you.

Jumbie's picture

Absolute nonsense posting a government issued CPI chart.

In the last 5 years I've seen bread, gas, lumber, car parts, you name it, rise 50%. Charts lie, prices I see at the register don't.


"It's clear that the lines seem correlated back in the 70’s and 80?s, but lose their relationship in the past decade."

Yeah, they weren't as good at manipulation then; the electronic tools didn't exist. The question again regarding the author is: ignorant or shill?

DavosSherman's picture

In Summary: ilene, I hope you realize that 53 votes with a 1.7 rank tells you and Price something.  

I think it is a kinder gentler message then that of which I told you the other night, you know, before you took out the first load of trash.  I can't recall the exact words that I used before you pulled the post, but I think it was something to the effect that 'you are a clueless fucking economic moron'.

ZH has run a lot of my work, it has passed on a fair share of it as well.  I crank out some dogs, not everything I write gets 154,000 reads. http://www.financialsense.com/popular  But even my worst article wasn't as fugly as this.

It absolutly amazes me that a POS like this made it up on ZH or that the Tyler(s) have given you post-blanche access right up there with Bruce, George, William and the rest (Sailer narcisist boy not included).  My worst dog wasn't 1/1,000,000,000,000 as fugly as this.

The new "Things That Make You Go Hmmm".

Nice job "Champ".

Mr. Hudson's picture

On the one hand, gold advocates say that gold is going to the moon and that the government won't make it illegal to hoard it like it was in 1933, but on the other hand, they say our government is headed for facism and tyranny and we are going to lose what little rights we have left. So, which is it?

Vooter's picture

They certainly might try to confiscate gold, but how are they going to enforce it? Will government agents be going from yard to yard with shovels? LOL... Furthermore, only an idiot turned in his or her gold in '33, and that was a time when the public had WAY more faith in the U.S. government than they do now...