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What Is Pushing Down the Gold Price?
It has been an increasingly brutal ride for gold and silver, beginning around late March and accelerating through April. The gold price was over $1600 and on Monday April 15, it fell below $1350, a loss of $250. Silver did even worse, falling from $29 to $22. We called for the gold:silver ratio to rise, and since the start of February, it has risen from around 52.5 to over 59 as I write this (with a few periods over 60).
Everyone wants to know why. Why did this happen? Could the prices fall further? If so, how much? In this two-part article, I address these questions and put them into perspective. In the first part, I discuss the conventional theory and in the second part the Monetary Metals theory.
In this article, I refer to the “gold bug” frequently. By “gold bug” I mean the dollar-focused speculators and traders, not the people who buy gold and silver to accumulate for the long term. The latter understand, implicitly or explicitly, that gold is money and that it is good to hold money as the world moves closer towards global bankruptcy and default.
Let’s start with a question. If you knew that a casino was cheating, if you saw that there was a magnet under the roulette table, would you gamble there? Would you risk your money, hoping that on the next spin, the magnet would somehow malfunction?
It would be irrational. You would be better off going to the next casino where they obey state law and run an honest game. It is the same with the markets. If you believe that the gold and silver prices are controlled then why would you risk your capital attempting to trade them? Technical and fundamental analysis would be at best useless and at worst misleading, because there are cheaters in the game. No analysis could predict when the cheater will push the button that raises the magnet under green “00”, and take your money.
We are not aware of any gold or silver analyst that called for the crash of last Friday through Monday. There are some analysts who are generally bearish, and we ourselves have predicting the rising gold:silver price ratio, and we emphasized that we were not bullish on the silver price in dollars all the way down from $35. But no one said that the gold price would drop more than 10% in two trading days.
In this paper, I shine some light onto the conventional manipulation theory and also the very idea of holding gold waiting for a higher gold price. I present my own theory of what may be happening in the markets right now, and a different view of the use and value of gold. If you want to understand the gold market dynamics, then you must understand the gold basis and the broader credit environment.
If you are firmly committed to the belief that the gold price is suppressed, then you may want to stop reading right here or else prepare to be offended. Consider yourself warned.
What follows is a sometimes-humorous and often-irreverent and hard-hitting discussion. I write this not out of a desire to insult anyone, but to help people see their way out of a no-win zero-sum game. I hope to offer a different perspective and expand your thinking about gold and silver. My other goal is to address those people who are holding gold and who are nervous about the near-term price volatility. I hope that in this article, you come away with a stronger understanding that you are in the right place, that selling low is never a good strategy, and the dollar is not a store of value.
The Conventional “Gold Bug” Theory
It is commonly accepted today that as the quantity of money rises, then prices must rise especially including the prices of gold and silver (throughout this article, I will use the word gold to refer to both metals unless I call one metal out explicitly). Prices in the real world do not move that way, so a convenient explanation has become very popular.
In this theory, there are nefarious forces, composed of various central banks plus assorted bullion banks (often called “vampires” and/or “squids”). In some versions, this dark cabal does not care about taking losses to suppress the price of gold. Other accounts accuse them of making illicit gains by causing poor old gold investors to buy high and sell low.
They are supposed to surreptitiously dump physical metal (which is finite in its supply) onto the market, in order to push down the price. Alternatively, they might be dumping unlimited quantities of futures to accomplish their evil end.
The reason they would want to suppress the gold price is vaguely given as trying to prop up “faith” in the paper dollar, or otherwise somehow “protect” their paper money.
In any case, when the price is rising, the gold bug treats it as right and natural. When the price falls, it is due to manipulation. Why would anyone be satisfied with this simplistic view? It won’t help in trading, though it does offer comfort after each wounding.
I have written many times to debunk these conspiracy theories, so I do not want to dwell too much on them here, except to make two observations. First, the central banks don’t have any silver. If they were dumping real metal to suppress the price, it would have to be gold only. This leads to a nagging question. Historically, the gold:silver ratio was around 16 (i.e. 1 ounce of gold could buy 16 ounces of silver). If gold is artificially cheapened—but not silver—wouldn’t one expect to see the ratio fall below 16:1? Today the ratio is near 60:1.
If both metals are suppressed, then it has to be done using futures. There is an equally nagging problem with this idea. If they sell futures (but not real metal, which is typically claimed to be scarce and getting scarcer), then they tear open a large spread between the price of a future and the price of real metal. For example, if both are trading around $1600, and they sell hundreds of tons worth of gold futures—enough to drive the price down $250—then there would be a $250 spread between real metal which would remain up at $1600, and futures which would be driven down to $1350.
The term for when the futures contract is cheaper than spot metal is called “backwardation”. While there is intermittent gold backwardation, the magnitude is in the cents or perhaps a dollar or so, not hundreds of dollars. Indeed, on Monday morning, April 15, the slight backwardation that had existed in the June gold contract disappeared. The Gold Basis Report (free registration required) provides weekly coverage of the gold and silver basis and other related data.
My personal opinion is that the Fed cares far less about the gold price than we do. Gold is not in the basket of goods whose prices comprise the Consumer Price Index. Dollars are not redeemable in gold, the Fed and the banks are not struggling under an obligation to deliver gold, and there is no run on the gold of the banks.
Monetary Metals Theory
Monetary Metals was founded on a single idea: gold is money, and the dollar is credit-of declining quality. One cannot profit by buying gold and waiting for the price to rise. Sure, one has more dollars, but each of them is worth less. How much less? The decline of the value of each dollar is in exact proportion to the gain in the number of them. If the amount of gold that you own has not changed, then it stands to reason that you have not gained real wealth (and in the US, you lose wealth due to the tax on capital gains).
Let me illustrate this point with an example. Imagine you have 1,000 silver coins. The silver price is about $24, so your hoard is worth about $24,000 today. What if the silver price rose 0.1% to $24.024, and you spent one coin? Your 999 remaining coins are worth … $24,000. What if the silver price rose again to $24.048, and you spent another coin? Your remaining 998 coins are still worth $24,000. You continue this process every day (while it lasts).
Is this really like living on the interest on a bond? Or, are you consuming your capital? You are certainly reducing the amount of silver you hold, even if the dollar value of it remains constant. This is the picture of capital destruction that everyone should have firmly in mind whenever a central banker or talking head uses the term “wealth effect”. Rising prices can make one feel wealthier, but it is not real wealth.
We must operate in the real world. Few people hold our unconventional view. Most Westerners think of a rising gold price as a gain, and a falling price is a loss. (attitudes are quite different in India and parts of Asia). Western gold bugs have to sell gold. They sell when the price rises, to realize their gains. They sell when the price falls, to stop their losses.
Though many call themselves investors, gold bugs are speculators. They are described aptly by John Maynard Keynes (who did not get much else right) in 1935:
“Or, to change the metaphor slightly, professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.”1
They play a zero-sum game, hoping to front-run the others, to buy first, and then let everyone else’s buying drive up the price so they can sell. Or, often, they are the greater fools who buy from other speculators who are selling to take profits. Then, when the price drops, they sell to avoid further losses.
Although they tell the story of the falling dollar, this is just lip service. Gold bugs measure their gains in dollars, and they sell gold for dollars as their modus operandi. When they are buying en masse, the price of gold can rise sharply. When they are selling en masse, we can see precipitous sell-offs, as over the last week.
What could have caused these people to sell en masse right now?
In Part II, we address the root causes (free registration required).
- 1. The General Theory of Employment, Interest, and Money by John Maynard Keynes, p. 140 (Google Books edition)
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I agree. It had be a central bank or central banks. Not only due to the quantity dumped, but also if someone wanted to get the maximum dollars for their gold, they would never dump it all at once. The only reason to do a massive one time dump is to lower the price.
It's a no brainer
During thinly traded markets, too. If someone needed to sell gold for liquidity reasons, why on earth would they do it during Globex and after the LBMA is closed? This article is lacking in serious common sense.
Of course, the night Osama Bin Laden was found and killed and silver was dumped for 12% in minutes was normal too, right Weiner? Get a grip dude.
So better to spread it out and 100% guarantee a low price like Gordon Brown did?
I doubt Entities that have TONS of gold would sell all of their gold at once, thereby severly devaluing any gold left in their possession.
and then buy it or take possession as cheaply as possible.
The markets are not manipulated? Who in their right mind would dump hundreds of tons of (paper) gold on the market to intentionally depress the price, if not to manipulate it? The rational approach would have been to feed it in slowly, so as to get the max possible for each contract, not smash the price lower.
Not manipulated? Sure.
Sure.......I'm buyin' what this putz is sellin' cuz every mornin' I like to get up and take another bite out of a bullshit sandwich...........
Tyler.....why do allow propaganda spreading assholes, such as this author, to post utter drivel on Zerohedge ?
Grow up. It's another opinion, as potentially valid as yours.
Opinions are like assholes, too. Some are smelly and disgusting, like this article.
Some are like gold, silver, and 24 year old pussy - sweet and juicy if clean.
Potential validity is in the environmental eye, and sociological perspective of the observer....
In a systemic crash, gold will be "stolen", just like un-insured depositors deposits, or unsecured creditors credit...
When "all hell breaks loose", gold will be re-valued by some other debt based fiat, or we go back to "the middle ages"...financially speaking...trading daughters for donkeys...
What is the value of gold relative to bread? Cigarettes? Diapers? Cable? Water? Oil?....Insurance, Internet....And where?
An underwhelmingly witty answer might be: "whatever the market will bear"...Well then...Without a fiat currency as an exchange method, the supply chain of the modern world is very constricted...When my local gas utility (owned by the city I live in) starts accepting gold to keep my furnace on in the winter...I will come aboard the Idol Ideology of Gold.
Gold will never be a universally used and available currency for the 99%...Maybe gold plate...Have you ever seen those gold plated buffulo coins in TV....
Gold Ha! The future is in wood....
Historically, Real Bills provided liquidity to the supply chain, allowing it to clear. I see no reason why they can't or wouldn't again. Warehouse/deposit notes can also be used. Nor is there any reason for electronic banking to discontinue under a gold or bi-metalllic standard.
More on Real Bills here:
http://www.professorfekete.com/articles/AEFRevTheoryAndHistoryOfMoney.pdf
http://www.professorfekete.com/articles/AEFRevHistRealBillsAndEmployment.pdf
in all fairness, keith had a disclaimer placed in his thesis
so stop bitching. you did not have to read it, he did not ask you to read it or consider it. an essay is not propaganda just because it doesnt confirm or align with your one dimensional bias. it's just your own opinion so quit imposing your shallow standards on tylers; thus, depriving this blog of diverse opinions. keith made a good point that you should think about: "if gold going up, it's going up on its own merit. if gold price down, it's always manipulated" - according to gold bugs who want to profit in fiat, instead of accumulated ounces they can purchase when the price is down.
edit: even though i personally think etf's dont have the metal they claim to have and therefore the gold paper price is open to manipulation that way, i rated this article as 5 just for the author offering a different point of view. right or wrong.
For the same reason that he doesn't censor propaganda (or nonsense) spreading assholes in the comment section:
The comments are as important as the contributions on which the comments are made. It's called 'debate'.
Learn from the takedowns (and the debates) ... unless you already know everything....
see above...
\pays zee bills!\
About the article: Boooo!!
"If the amount of gold that you own has not changed, then it stands to reason that you have not gained real wealth (and in the US, you lose wealth due to the tax on capital gains)."
So, of course, as a Canadian, I wanted to "dig deeper" on whether or not the US was special in its "tax on capital gains" weath sucking policies...
What I found were a list of jurisditions where capital gains are, lets say, "unencumbered"...
Some of the following might be nice places to live (if you're not native, and are well connected), but after Cyprus, are they really good places for money to live?
Jordan
Kenya
New Zealand
Swaziland
Oman
Dubai
Sierra Leone
Singapore (Territorial basis)
Vanuatu
Turks and Caicos Islands
Bahamas
Panama (Territorial basis)
BVI
Andorra
Anguilla
Barbados
Belize
Bermuda
The Cayman Islands
The Cook Islands
Costa Rica
Gibraltar
Guernsey/Jersey
Hong Kong
Isle of Man
Monaco
But to the crux of the matter....Gold? Money?
Not in my world...
One thing the author intimates is true...If the argument is that gold is an inflation hedge, then logically, gold's value is static, and tied to whatever fiat is available locally...
Gold pays no interest, does not natually multiply itself, and is inherently usless...Think about it, what is it used for most of the time? Plating other metals to make them look like...wait for it...gold...
If gold goes up in price, that just means that the value for whatever is being traded for gold, whether you're trading paper, chickens or bread has become less, or, less scarce relative to gold.
It really is as simple as that. Propaganda by one class, used to fleece another...There is always a greater fool...
Tell me, when the credit crash comes, where will I be able to buy a pack of smokes and a loaf of bread with real gold? How would I demonimate my gold? Who would trust that my gold is good? How would the vendor make change? Would he keep little chunks of gold, or gold dust around? Why would I trust the vendor to give me real gold?
That the system will crash, and gold will be money for the masses is delussional...Why would those that would wreck the world make it that friggin easy for gun totin' rednecks with a few ounces of intrinsically worthless yellow metal be the top of the food chain....
Think about it...
For fuck's sake, you know there are fractional ounce gold coins, right? And seriously, with paper dollars backed only by the 'faith and credit' of a government almost universally despised by its citizens are you REALLY THAT DENSE?
We got along just fine as a species for thousands of years with gold and silver as circulating currency, and after those with poor imaginations and scare understanding of history and economics are weeded out by the coming systemic convulsions we will continue to do so in the future.
Don't hate the players - hate the game...
Hmm so "money", printable in unlimited quantities at no cost, is worth something? Wow that's a cool trick!
It's you who needs to do the thinking, son! ... 'cos this is how they currently do it in Africa during a currency meltdown:
The guy with the fags and bread on the back of the HiAce has a set of digital scales and a good knowledge of how to quickly assay the one metal that is immediately recognisable at various carats (give or take).
With the gold dust/nuggets given him by the guy in front of you in the queue.
You betcha! It's why money is called "fungible". Look it up.
He'd like to come back the following day with more fags and bread for you peons queueing up for more, without being subjected to an impromptu pitchforking.
You also seem to be blissfully ignorant of the origin of the 'quarter', or 'two bits', or the older Spanish 'pieces of eight' (hint: precious metal coins can be cut into segments....).
CanRan has a point, but it lies in the unspoken assumptions all of you are making.
Gold IS fungible and liquid... in a very undeveloped, rural, relatively unregulated environment.
To put the unspoken assumptions another way, hopefully with more clarity:
IT'S NOT FUCKING 1538 ANY MORE!!!!!
500 years ago you could go to the market and "buy a chicken" with gold. Can you do so today? I dunno, try it. Go to the local swap meet or yard sale, and try to buy something with one of those miniscule 5-dollar gold coins that make a dime look like a silver dollar. It weighs 1/10 of a troy oz, and is worth roughly 130 bucks.
Well, you're back. What were you able to buy with that magical gold piece? Nothing? Maybe a broken Schwinn bicycle, or a pair of Oakley knockoff sunglasses? Huh, imagine that.
It's these sorts of unexamined assumptions that drive me fucking nuts when it comes to gold. If- when- the crash comes, society won't revert to the 16th century. The police state apparatus is in place. When the crash comes, the next gear shift will be to a totalitarian, state-run, centrally planned, surveillance, totally controlled economy/society. If your gold is to be fungible and liquid, assuming DHS doesn't break your door down and electrocute your genitals until you tell them where it is so they can steal it, it will be on the black market, and a combination of deflation and black-market surcharges will make your gold worth about $35, maybe less.
As far as Bolivia goes, I simply repeat myself. The relatively unstructured economic mechanisms that allowed someone in Bolivia to utilize gold as a wealth storage device simply won't work here, in POLICE STATE AMERICA.
If you purchased your physical gold with anything other than cash; if you purchased your physical gold in an establishment, rather than in a back alley, YOUR FUCKING GOLD IS TRACEABLE... TO YOU!!!!!
All your physical gold is, is a giant FUCKING BULLSEYE that says, "I have gold! I'm a terrorist, or a domestic extremist, or simply an idiot that needs to have his gold stolen from him."
Data fusion centers tell me that confiscation is inevitable.
The IRS spying on your emails tells me that confiscation is inevitable.
The fact that a commie masonic fuckhead like FDR stole the gold before, telles me that a commie masonic fuckhead like Obama will inevitably steal it again.
The ponzi financial system tells me confiscation nis inevitable.
The inescabable deflationary pressures that will INEVITABLY destroy the ponzi economy tell me that confiscation is inevitable.
The fact that we have OBAMA in the White House tells me confiscation is inevitable.
Sandy Hook and the Boston bombings, being the Mossad/DHS false flags that they are, tells me that confiscation is inevitable.
Take your physical gold, get in your time machine, and go sometime where your gold is actually going to be useful!
If the financial system collapses*, ain't gonna be no civil servants like these police you mention showing up to work... coz both their paycheques and their pensions got vaporized in a hyperinflationary hurricane.
*Please note this is a somewhat relative term... sometimes gov'ts have to go through multiple currency collapses before the system collapses. Assignats... to Mandats... to Napoleons.
Less than 2% of the American public has any precious metals at all, and most are untouchables like John Corzine, Warren Buffett and George Soros; police states take orders from those types, they only steal from them once the whole system collapses.
The feds are WAY more concerned about taking the people's firearms before taking their meager amounts of gold...pay fucking attention for once!!!
a few ounces of gold is not putting anyone at the top of the food chain... here is an example for your simple mind to wrap around. the system crashes. i have food, wine, etc. to sell because i prouduce this stuff or have surpluss. what do i take in exchange ?????????????? worthless dollars...no... i need something i can turn around and use too buy what i need . gold has fit that role since before recorded history... END OF LESSON
OK I've thought about it and talked to my wife who went through a crash and hyper inflation and a new currency in Bolivia. During hyperinflation everyones wages went up to millions per month but they were all standing in bread lines trying to just eat. Then overnight the government revalued a new currency at a million to one. Then they made the holding of dollars illegal. In the end those with real property and physical gold emerged with their wealth intact and something to show for their years of hard work. This scenario has repeated over and over all over the world throughout history. You can ignore it if you like. That's your choice.
Ok. I did think about it....
and I think you must have hit your head repeatedly as a youth.*
If your first priority 'after the crash' is smokes n a loaf of bread...yu already dead son. For literally thousands of years(before the institution of 'usury banking' as a state religion, folks took a dinar or dirham to the bazaar to buy a chicken, sheep, or bucket o barley...works like a charm...buyer meets seller...no middleman required.
Propaganda by one class to fleece another? I'm not gonna say yu wrong there....but what we decide to do bout the moneychangers and their henchmen\spokesmen will determine whether this ol earth becomes a hell or the paradise it was made to be.
*Jus kiddin ol son. Not dissin you, just takin the time to free yur mind!
CanRan: Gold? Money? Not in my world...
Your world is passing, son. It's going back to my world, and my father's world. When Pop was young (he's gone now and I miss him) people used gold and silver for money, right here in the United States, every day, all day long.
When I was a kid, the govt had stolen the gold, but we used silver coins all the time. Liberty quarters, silver dimes, even came across a Morgan dollar now and then.
And then 1965 came and gold and silver were snuffed out of the popular knowledge of money. You don't have to go back to the 1500's to find gold and silver money in everyday use. People have forgotten...because they were intended to.
The recent Gold move is 100% Japan related.
A 5 sigma move (JBGs stopped) on the same day a 7.5 sigma move on Gold. Here is teh explanation below.
The recent move is 100% Japan related.
Japan has 20 times debt to GDP or war like Debt.
Japan consumes 20 % of budget interest even with very low rates.
FIRST THINGS WE ALL KNOW. BRIEF RECAP.
Japan has now a trade deficit because of Fukushima and because they move some their logistics out of the country to hedge against earthquakes.
More people are now moving out of the workforce then entering so in aggregate they are di-savings, creating problem for demand for JGBs.
So the debt situation is the most serious.
There is a way to avert that, and taking down the Gold price.
Japan wants to inflate away in an orderly way (like Britain post world war II) However the currency had declined by 25% in a short period of time
At the same time the Gold price in Yen was breaching a 30 years all time high.
The backdrop of this breach was a QE announced which is 2 times larger in proportion than the US.
Normally an old all time high breached after 30 years with such a backdrop would mean Gold off the races in Yen.
That would have potentially created a panic since Gold since Gold is purchased in panic.
Gold shapes inflation expectation and the secondary effect could be a disorderly JGBs.
Remember that the JGBs were showing great volatility BEFORE with 2 stops in JGBs market.
So who did the take down?
My answer is Global central banks who have debt problems and need to maintain negative interest rates on their Gov bonds.
Why? If the JGBs go disorderly, it would immediately trigger uneasiness with other sovereign bond markets.
Hence the Gold price in Yen, which could be the fuse for this event had to be squashed.
Who squashed it?
People who can do it. And they should do it in order to avoid a big problem for Japan and the rest of the world.
People from ECB (Draghi), to BoE, the US Fed.
How did they do it?
First a short recommendation by Goldman on Wednesday last week
Next Draghi says Cyprus has to sell its Gold.
However, how reliable is Goldman in warning its clients about an impending bubble?
Absolutely not reliable.
Remember Abigael Cohen in 1999 (Goldman was the biggest IPO promoter of internet bubble)
Fabrice Tourre was structuring crap to be sold to clients (while Goldman was short subprime with AIG)
Goldman made a call for 200 USD oil back in 2008.
So this is why Gold had to be squashed, the JGBs were stopped because of daily limits while the Gold price in Yen was moving strongly above its 30 years all time high while Japan was announcing massive QE.
We had a 7 sigma move in Gold, even in 1970s you never saw a 7 sigma move, while at the same time the government with the highest risk of disorderly adjustment being halted for excessive move down? How often are the JGBs halted?? And on the same day that Gold has a 7 sigma move down.
http://www.cityam.com/blog/volatility-jgbs-sees-them-halted-again
Soros had figured it out that central banks would not let a panic start on the Gold in Yen terms, and he sold his Gold back in September and started to buy puts on the Yen.
All good...except this...
Japan has an increasingly wide trade deficit cause they decided to muck with the China market over some obscure islands and are losing air in the zepplin big time. Not suggesting that the Japs made that decision for themselves...just that it was made for them...
by the usual suspects.
Agreed, thanks for the heads up.
http://www.youtube.com/watch?feature=player_embedded&v=yWUB4MCLsHg#!
Maybe it was Texas.
Come on please.
Statistically a 7.5 move on Gold down while JGBs are halted and limit down? I mean this is obviously a way to avoid a disorderly inflate away (too fast).
What would have happened if Gold was racing 30% in 3 months in Yen?
The JGBs would have fallen appart. Kyle Bass had to be taken down or his prediction would have been self-fullfilling.
Soros knows that and that is why he sold his Gold in the Fall and bought puts on teh Yen.
1. Physical gold price will follow future price until everybody start taking delivery. You will see how fast the spread increase if holders of GLD demanded their gold.
2. The bank run on gold have already started when Germany wanted to repatriate their gold. We don't have enough physical gold for delivery. I still haven't heard a good explanation why this process should take 7 years rather than 7 days.
3. I wonder if the Cypriot would wether keep their savings in the form of bonds or PMs.
This dope states you cannot become rich owning gold.
This statement would be 100 per cent factual if the gold price was not artificially suppressed.
With all the Bernanke bucks printed in the last 5 plus years, you think gold's true value is $1375 ?
When uncle Ben loses control of interest rates, and he will as it a mathematical certainty, gold will make many ordinary people into millionaires. Physical gold that is.
If you are going to conclude PtII of your thesis then its probably a good idea to have a functioning website for people to jump to.
Gold price tracks the money supply, doesn't matter if it is cause and effect...the fact is money supply up, gold is right on its tail.
10 years ago how many trillions USD in existence, today how many trillions? Like a cork in the water, no matter how you push it down, the moment you stop up it pops to the money supply.....until the world starts to believe that their are cracks in the currency and then gold jumps M2.
Yes there is a big correleation between dilution of currency and the value of monetary metals.
AND if somebody should convert some of their bullion to fiat, it would be as much as they need for a specific purpose, to buy into some other hard asset or neccessity.
Gold will lose its value as soon as currency fundamentals are supported by the economy, or look like the can be.
just another unintended bubble
gold will hit terminal velocity when 5 percent finally realize they are out of options to protect their hard earned labor.
as these narcissists try ever so hard to control the price of physical gold, they will loose control as we are seeing via shortages.
it has begun. look macro/world as thes fucks start to seize private property and violate the greatest human achievment ever-personel property rights! this social contract will be violated moar and moar as they get ever so much moar desparate.
the great crumble to gold infinity as people realize it has arrived-personel property seizure.
glock and gold
gun control=hitting what is trying to take what you earned!
glock and gold in hand or boot on face; your choice...
My dear author......you sir are a moron.
It is ironic that no less than Goldman Sachs said sell gold just days prior to this...is it a collapse?...an "instant correction"? ...and yet that is not mentioned here. Obviously I'm a long only guy so to me what the author is not explaining nor is he even trying is a rational reason for what I do agree appears to be inexplicable. Since this guy "ain't ever gonna go there" let me take a stab at it as I've already stated and am on the record as calling Seeking Alpha's Scott Granis' gold call "to fall" as "epic" when he made it last December and that call obviously got Saturn V lift off over this weekend. First and foremost GOLD IS AN ASSET. You will not get any argument from me there...nor from me any argument vis a vis those who buy the physical. I have surmised that the price collapse in gold is symptomatic...an Event Horizon if you will...of falling prices elsewhere. In other words "as prices fall we are forced to look at other assets as well"...not because they compete with hold but because they offer similar properties of "to have and hold" and by definition "no matter how fungible money might be it's most important quality is it's scarcity." Hmmmm. In other words "the big money" (clearly not something this author has any clue about) has to make ALLOCATION decisions when deciding "what do I do with this most limited of a resource" and then "he has to allocate." In this sense gold is FAR down the list since "how is it making more of the limited resource?" (Meaning money...and yes money is a resource too sheeple. I might add SO IS CREDIT.) so unlike what this author ASSUMES (but is flat out wrong about--sense of desperation? Incompetence? Willful ignorance?) "that money is everywhere and with interest rates this low credit is as loose as a 2 dollar" (you get the idea) in fact what we KNOW is that the Fed is NOT money printing "to give" but "debt buying" and IS BEING COMPLAINED TO BY THE PRESIDENT AS NOT CAUSING ENOUGH LENDING. Hence dear Watson...MONEY IS TIGHT AND GOLD IS FALLING. (And this is obviously confirmed by interest rates which are lower now than EVER in the Great Depression.) so the question therefor must be NOT "why are prices falling" but "what other assets are there that are gold like that are being bought thus reducing the supply of limited dolares." DEBT comes to mind since by buying it you are in fact exacerbating "money restriction" MASSIVELY. Indeed "if you are long gold you would in fact WANT the Fed to be goosing stocks"....yet nay, verily..."they are not doing that at all."
repeating what ive said many time before=these gold wonks can all go fuck themselves...
even the experts. who annointed them anyways? just moar cnbc gold wonk bullshit to try to sell abook or two to the uninformed wanna be ride the wave idiots. surfs up, bye bye gold till i can flip it and make a buck. lol
2 suckers were just born. gold for you for the WRONG reasons. always is always was...
flip a home flip a burger flip out, the new normal, thanks ben
Has there been some kind of new prize announced for 'most shameless amd misinformed stack of jarringly incoherent and deluded words strung together ever' ... or something? If so, I think Keith's a shoo-in...reading this makes MarctoMarket look like a profound thinker and economic heavyweight!
This unabated series of non-sequitors, sophomoric misunderstandings and erroneous conclusions based upon illusory premises makes it hard to know where to begin...indeed, it might be better not to try and unpack this toxic mess at all...except that it's impossible to resist bursting the bubble of a guy who advertises his delusive fantasies as "humorous and often-irreverent and hard-hitting discussion"...sooo,
"First, the central banks don’t have any silver." This is supposed to be evidence that the price of silver cannot be manipulated by the central and bullion banks...hold the phone while I call and see if the SLV somehow vaporised without my hearing about, and therefore paper silver no longers dictates the physical price! Oops...apparently not.
" there is no run on the gold of the banks."..."then there would be a $250 spread between real metal which would remain up at $1600, and futures which would be driven down to $1350"..." the Fed cares far less about the gold price than we do" Boom! A trifecta of winsome assertions that are certainly 'humorous'...and perhaps 'irreverent' to common sense...but hard to qualify as hittin - cause the batter has swung and missed-by a country mile!
The anecdotal reports supplied by "Big" Jim Willie of physical already changing hands in major tonnage north of $2000 in Asia must hereby be discarded...in favour of the kernels of Keithist wisdom herein dispensed...we 'goldbugs' will also dutifully change our view of what gold gives us -an asset of increased performance as measured against the cost of 'tangible things' - to an opportunity to buy paper bucks with which to tread water...because Dr Keith has diagnosed our condition and prescribed it so!
My, how much this reminds of what Anton Le Vey(Church of Satan)said about his brand of Satanism...'It's really just Randian principles with magic and rituals added!...Dr. Keith's Objectivist World o Majic n Randian Rituals Revealed!
Thank you for an intelligent and reasoned response to this tripe of a piece. I didn't have your patience. This piece is pure garbage beneath the standards of ZH. But I suppose we have to entertain alternative POVs no matter how inane and sophomoric.
Ask Paul Volcker if the FED doesn't care a wit about gold. When Benny puts the FED's gold (what's left of it) out to the curb to be picked up by the 'sanitation engineers' then I'll believe the astoundingly obtuse statement "The FED does not care about the price of gold."
There is a kernel of truth in saying that buying gold is something of a Ponzi, assuming that a greater 'fool' will pay more for the gold later. If you employ such reductio ad absurdum you'll find that principle applies to virtually every financial asset on the planet. No one buys an "investment" expecting it to go down in price. Our entire fiat money system is a Ponzi, focused almost exclusively on price. In a gold-based money world, there is virtually no long term inflation and the focus is on true VALUE. That is the big difference between the slow-motion fraud called Keynesianism and the Austrian School.
In 2005, when GLD first launched and a gold backed ETF existed for the first time, I insisted that my broker buy it. Over the ensuing months the price doubled. My broker resisted my purchases at every turn and it irritated me to no end. Mind you I have been buying physical since 2004 and this was corporate monies trapped in the paper system. So GLD was my only avenue to gold until CEF, PHYZ. Of course, paper gold is not physical gold; but I digress. On one occasion while GLD was performing quite well, my broker asked me "why do you buy gold?" I said: "Because I cannot lose with gold." He said: "How is that?" I said: "If gold goes down, then the dollar is strong and I don't have to worry. I have good cash flow in dollars so life is good. If gold goes up then I am protected against dollar devaluation. And, if the dollar collapses because of irresponsible fiscal management or just plain economic collapse, I hold gold as a timeless store of value." He kind of said a-huh and hung up.
Upvoted.
Put succinctly, the article is as superfluous as a spare prick at a knockshop wedding,
I'm surprised that patronizing and supercilious shill Muck to Market hasn't already exuded a similar pile of contentious crap.
That's assuming that the two are not one in the same!
Given that it's now clear that the top banner typistas on ZH are advertorial advocates of their own central bank(s)*, there's every possibility that 'MarktoKeith\MonetaryMoron' has simply used his 'leverage' of spare fiat to demand a twofer....
and gets two guest slots for the price of one!
Reggie(Middle-man)take note...it always pays to push a lil harder when 'negotiatin'!!!
*disclaimer...I fully support the notion that ZH has to pay it's bills and givin these clowns a stage is a neat n easy way of doin it! ...that doesn't mean we can't make a lil fun of it all!
"My personal opinion is that the Fed cares far less about the gold price than we do. Gold is not in the basket of goods whose prices comprise the Consumer Price Index. Dollars are not redeemable in gold, the Fed and the banks are not struggling under an obligation to deliver gold, and there is no run on the gold of the banks"
Your personal opinion = sheer propaganda a.k.a officially approved bullshit. The Manufacture of Consent, Wall St edition.
For those who want the truth, here it is:
http://www.alhambrapartners.com/2013/04/15/we-have-seen-gold-prices-act-...
Cue Jack Nicholson
Nice follow-up to the above link here:
http://www.alhambrapartners.com/2013/04/16/gold-follow-up-cyprus-wasnt-f...
There are other reasons and strategies for stacking that are not expressed above. For example, many gold bugs stack as a way to preserve wealth, which can be passed on to their kids without a paper trail.
By definition, that isn't a Gold Bug, it's a stacker.