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2012 Outlook For Gold – Positive Fundamentals Remain And Crucial Diversification

Tyler Durden's picture




 

From GoldCore:

2012 Outlook For Gold – Positive Fundamentals Remain And Crucial Diversification

Introduction – Gold in 2011
Money Creating Central Banks May Push Gold to New Nominal Record in 2012 
Central Banks Will Continue To Be Net Buyers of Gold
China Foreign Exchange Diversification Should Support Demand
PIIGS Lesson: Iceland Shows How Gold Protects From FX Crises
Currency Wars and Competitive Currency Devaluations
Falling Confidence in Paper Assets, Bank Deposits May Prompt Physical Deliveries
Gold Remains A Historically and Academically Proven Safe Haven
Conclusion – Gold in 2012

Introduction
With just a few trading days left in 2011, we can take stock of gold’s performance vis-à-vis other assets.

Gold is 13.7% higher in USD, 12% higher in GBP and 14.4% higher in EUR.  Gains were seen in all fiat currencies and even stronger performing fiat currencies such as the CNY (yuan) and JPY (+9% and +8.75% respectively).


G10 and Gold in USD in 2011 (YTD)

Stock markets globally had a torrid year with the S&P500 down 1.3%, the FTSE down 8% and the CAC and DAX down 19% and 15% respectively. Asian stock markets also fell with the Nikkei down 17%, the Hang Seng 20% and the Shanghai SE down 22%.

The MSCI World Index fell 9%.

Thus, gold again acted as a safe haven and protected and preserved wealth over the long term.

While gold reached record nominal highs at $1,915/oz in August, it is important to continually emphasize that gold remains well below the real high, adjusted for inflation, in 1980 of $2,500/oz.

Gold today at $1,625/oz is 18% below the record nominal high of $1915/oz in August 2011. More importantly, gold remains 46% below its real high of $2,500/oz. 

Since 2003, we have said that gold would likely reach the real high from 1980 for a variety of important fundamental reasons – such as global debt levels, global demographics and geopolitical, macroeconomic, monetary and systemic risk. 

Money Creating Central Banks May Push Gold to New Nominal Record in 2012


Money Creating (Electronic and Printing) Central Banks Push Gold to Nominal Records (2008-2011)

Global money supply continued to rise in 2011 and helped push gold prices to all-time highs on the fear of currency debasement. If accommodative monetary policies continue as the dominant tool for central banks, precious metals will almost certainly continue to benefit.

Were this trend to turn, responsible monetary policy actions could hinder returns. We see no prospect of this in the short term – and little prospect in the medium term.

Central Banks Will Continue To Be Net Buyers of Gold


Gold Diversifying Central Banks Should Support Demand 

Central banks have bought about 30 million ounces of  gold since March 2009, about 12% of global demand on  trailing 10-quarter basis. As central banks focus on stimulating growth, negative  real interest rates in developing nations should continue to push diversification of foreign exchange reserves, which may encourage bullion purchases.

Central bank gold reserves are likely to return to the levels seen in the 1970’s and 1980’s due to a significant reappraisal of monetary risk and a recognition of gold’s increasing importance as a monetary asset.

China Foreign Exchange Diversification Should Support Demand


China Adds Gold in Diversifying Foreign Holdings

China, one of the largest buyers of U.S. Treasuries, has publicly said that it intends to continue to diversify its foreign-exchange holdings. The total volume of China's Treasury holdings appears to be showing the first yoy declines in 10 years while gold reserves continue to increase by about 30% a year.

Creditor nation central banks gold holdings remain very small when compared to western debtor nation gold holdings which are generally well over 50%. 

It is important to note that the People’s Bank of China’s gold reserves (officially at 1,054 tonnes) remain very small when compared to those of the U.S. (8,133 tonnes) and indebted European nations - such as Italy with 2,452 tonnes.

China's growing gold reserves are miniscule when compared with China’s massive foreign exchange reserves of over $3.1 trillion. The People’s Bank of China is almost certainly continuing to quietly accumulate gold bullion reserves. Common sense alone strongly suggests that they are.

As was the case previously, the Chinese government will not announce their gold bullion purchases to the market in order to ensure they accumulate their gold reserves at more competitive prices. They also do not wish to create instability or falls in or runs on the dollar and or euro – thereby devaluing their sizeable reserves.

PIIGS Lesson: Iceland Shows How Gold Protects From FX Crises


Iceland  Shows How Forex Crises Move Gold

The steep declines of Iceland's krona in 2008 and Argentina's peso in 2002 show how gold can outperform in a depreciating currency. As the likelihood of default increases, the bulk of the gains in gold priced in the currency are realized within the first few months. 

The people of the so called “PIIGS” - Portugal, Italy, Ireland, Greece and Spain – are all at risk of currency devaluations. Some estimate the risk as high, others low but investors and savers in these countries should protect themselves by having an allocation to gold that will protect them from “bank holidays” and currency devaluations.

Currency Wars and Competitive Currency Devaluations
However, it is not just the “PIIGS” who are at risk. The risk in periphery European nations will likely be of a sharp overnight or weekend devaluation (or a series of such devaluations) and reversion to their national currencies. However all nations, PIIGS and non PIIGS alike, are at risk of currency devaluations and currency wars.

Currency wars and the debasement of currencies for competitive advantage poses real risks to the long term stability and prosperity of all democracies in the world and to the finances and savings of people in all countries. 

Falling Confidence in Paper Assets, Bank Deposits May Prompt Physical Deliveries


Falling Faith in Currency May Spur Gold Deliveries (Charts Courtesy of Bloomberg Industries)

Current market turmoil is likely to continue and may even deepen. The prospect of sovereign defaults is real which could see confidence in paper assets, particularly sovereign debt, further erode. Contagion means that even AAA rated debt is no longer risk free.

Institutions and high net worth and retail clients taking physical delivery of gold given a decline in confidence would put pressure on exchanges to deliver because the amount of metal represented in open interest is nearly six times (5.8) the amount of metal in inventory.

Gold Remains An Historically and Academically Proven Safe Haven
Forgive us for continually emphasizing how gold is a historically and academically proven safe haven.

We feel it is very important that investors and savers understand this and are frustrated by the continuing significant degree of ignorance regarding the gold market and gold’s role as a diversification, a store of wealth and a wealth preservation asset.

Some of the media and some experts continue to focus solely on gold’s price and not its value as a diversification for portfolios. Many economists and other experts have been suggesting that gold is a bubble for a number of years and suggested that again at the beginning of 2011 and again recently.

The facts, the data and the charts strongly suggest that this is not the case. In August, we presented 

‘Is Gold a Bubble? 14 Charts, the Facts and the Data Suggest Not’. Many of the charts were long term in nature (2000-2011 and 1970-2011) and remain important today.

Whether gold is a bubble or not is not the fundamental question. What is far more important is that there is now a large body of academic and independent research showing gold is a safe haven asset. 

Numerous academic studies have proved gold’s importance in investment and pension portfolios – for both enhancing returns but more importantly reducing risk.

The importance of owning gold in a properly diversified portfolio has been shown in studies and academic papers by Mercer Consulting, Bruno and Chincarini, Scherer, Baur and McDermott, Lucey, Ciner and Gurdgiev and by the asset allocation specialist, Ibbotson.

An academic paper, ‘Hedges and Safe Havens – An Examination of Stocks, Bonds, Oil, Gold and the Dollar' by Dr Constantin Gurdgiev and Dr Brian Lucey and was presented in November at a conference hosted by the Bank for International Settlements, the ECB and the World Bank.

This excellent research paper clearly shows gold's importance to a diversified portfolio due to gold's "unique properties as simultaneously a hedge instrument and a safe haven."

Oxford Economics research on gold in July 2011, showed how gold is a good hedge against inflation as well as deflation.

Only last week, more excellent independent research was released confirming gold's unique role as a diversifier and foundation asset in the portfolios of investors, especially at a time of heightened currency,  investment and systemic risk.

The independent research once again confirms the importance of gold as a portfolio diversifier to investors and as a store of wealth.

Conclusion – Gold in 2012
Many market participants and non gold and silver experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” major change in the fundamental supply and demand situation in the gold and silver bullion markets – particularly due to investment and central bank demand from China, the rest of an increasingly wealthy Asia and creditor nation central banks.

Support for the price of gold should come from the rising global money supply coupled with increasing investor and central bank purchases which have been driven by falling real interest rates and concerns about the euro, the dollar and other fiat currencies as stores of value.

Tighter monetary policies, as seen in the late 1970’s, would likely help alleviate fears of further currency debasement but it is extremely unlikely that this will be seen in 2012.

Indeed, ultra loose monetary policies, debt monetization, competitive currency devaluations and global currency wars look set to continue – if not intensify.  

Gold will likely reward investors internationally in 2012 as it did in 2011 and will again be an essential diversification for anyone wishing to protect and grow wealth in what will be a very volatile 2012 and in the coming volatile years.

 

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Wed, 12/21/2011 - 10:54 | 2000874 bernorange
bernorange's picture

all that glitters bitchez

www.pmbug.com

Wed, 12/21/2011 - 11:00 | 2000903 idea_hamster
idea_hamster's picture

I think that $1,625 is 35% below $2,500 (not 46%), but point taken.

Wed, 12/21/2011 - 11:53 | 2001157 s2man
s2man's picture

Correct. 2,500 is 46% MORE than 1,625.  1,625 is 35% LESS than 2,500.

Numerator, denominator. What's the difference between friends?

Wed, 12/21/2011 - 11:01 | 2000907 mrgneiss
mrgneiss's picture

Are they setting up silver for another smash?  Position limits temporarily revoked:

http://silverdoctors.blogspot.com/2011/12/cmecomex-grant-jpm-temporary-waiver-for.html

Wed, 12/21/2011 - 11:13 | 2000964 tmosley
tmosley's picture

This is why you cost average.  Wouldn't want to miss a naked infini-short by JPM.  That's more real money in my pocket for my TP.

Wed, 12/21/2011 - 11:19 | 2000999 mrgneiss
mrgneiss's picture

+ 47 (significant number)

Wed, 12/21/2011 - 11:53 | 2001158 tekhneek
tekhneek's picture

Looks like it's Black Friday 'til May.

"I'll play your game you rogue"

Wed, 12/21/2011 - 11:14 | 2000969 russki standart
russki standart's picture

I would not be surprised since the CME is the morgue's lapdog.

Wed, 12/21/2011 - 11:23 | 2001021 Pegasus Muse
Pegasus Muse's picture

as is the CFTC

Wed, 12/21/2011 - 12:56 | 2001407 Jonbutterfly
Jonbutterfly's picture

For those interested, TexMetals has a great promotion going on sealed boxes of 200 Grizzlies in Thermatron packaging. Spot is $7.95, which is actually really good for the grizzlies (APMEX is $10 over). Only 2400 left. If I had any cash I would buy.

https://www.texmetals.com/silver-coins/silver-canadian-grizzlies/canadia...

Wed, 12/21/2011 - 10:57 | 2000881 Bulletsnbullion
Bulletsnbullion's picture

Get Ready For 'Peak Silver'

 

got mine, got yours?

Wed, 12/21/2011 - 10:57 | 2000885 lynnybee
lynnybee's picture

i've always loved gold.   back in the 90's  i bought some wonderful pieces of gold jewelry from an estate jewelry store.   i managed to  buy (used) gold bracelets out of my grocery budget !    i wondered why that gold jewelry was so inexpensive; now i know !   ROBERT RUBIN'S STRONG DOLLAR POLICY !      funny how all roads of destruction lead straight to ROBERT RUBIN .

Wed, 12/21/2011 - 10:57 | 2000888 fuu
fuu's picture

Stack it up!

Wed, 12/21/2011 - 10:58 | 2000889 dereksatkinson
dereksatkinson's picture

You should do an article like this for gold equities.

Wed, 12/21/2011 - 10:58 | 2000892 Ben Bermonkey
Ben Bermonkey's picture

Hey folks, Solar Millenium is bust! Solar Compynies down

Wed, 12/21/2011 - 12:06 | 2001224 HoofHearted
HoofHearted's picture

I was on the airplane from London back to the States yesterday. My little seat-tray advertisement for Verizon had some small print in the corner that said that it used the antibacterial properties of silver so that I wouldn't die of some awful disease I obtained while eating the crappy lunch the airline served me. (I'm paraphrasing a little.) So even if solar isn't doing as well, and my seatmate who is developing enclosed turbines mist agree with you on that, then silver is still necessary in so many ways. And those ways keep o growing. Although I have a stash of gold, too, I prefer the silver.

Wed, 12/21/2011 - 10:58 | 2000894 Panafrican Funk...
Wed, 12/21/2011 - 10:59 | 2000896 San Diego Gold Bug
San Diego Gold Bug's picture

Must see Christmas gold video bashing MF and the CME  

Watch here

Wed, 12/21/2011 - 11:14 | 2000966 lynnybee
lynnybee's picture

thank you, SanDiego Gold Bug .... that video made my day.

Wed, 12/21/2011 - 11:02 | 2000910 fonzanoon
fonzanoon's picture

CNBshit blasting NAR's fantastic existing home sales in November. Vomit.

Wed, 12/21/2011 - 11:04 | 2000920 whatswhat1@yahoo.com
whatswhat1@yahoo.com's picture

Catastrophe will come when everybody realizes that fiat is an "IOU nothing."

Wed, 12/21/2011 - 11:06 | 2000927 qussl3
qussl3's picture

Housing absolutely dismal.

Mortgages need to be at 1% to get any traction.

QE3 here we come.

Wed, 12/21/2011 - 11:06 | 2000928 Caviar Emptor
Caviar Emptor's picture

Call of the year: 


Tue Feb 1, 2011 3:55pm GMT


(Reuters) - Investment bank HSBC said on Tuesday that recent developments in Egypt had been "constructive" enough for it to view Egyptian stocks as attractively priced and to move them to overweight.

Wed, 12/21/2011 - 11:08 | 2000938 Bullwinkle Moose
Bullwinkle Moose's picture

Buy physical, and demand delivery. Put it in a safe, and forget about it.

Wed, 12/21/2011 - 11:24 | 2001024 Azannoth
Azannoth's picture

As long as you don't froget the lock combination

Wed, 12/21/2011 - 11:26 | 2001030 Odin
Odin's picture

I really wish every article on gold would start EMPHASIZING the difference between Phyz and ETF's... The sooner the sheeple start realizing the difference, the sooner we can get this gravy train rolling...

Wed, 12/21/2011 - 11:12 | 2000959 JustObserving
JustObserving's picture

China has $55 billion worth of gold versus foreign exchange reserves of $3.1 trillion. That  works out to be 1.77% in gold.

They have a long way to go to have reasonable levels - say 5 to 10%.

Besides,  real estate in China and Hong Kong is worth well over $150 trillion.  China has lots of dry powder to buy lots more gold.

 

 

 

Wed, 12/21/2011 - 12:14 | 2001258 Smiddywesson
Smiddywesson's picture

Only if we let them and don't reset the system.  Everybody knows we will print, and we are kicking the can for a reason, so that reason has to be, in part, so big trading partners like China have enough gold to do business under the new system to come.  We can speculate on what that system is, but they are all buying and they all refuse to say from whom they are buying.  In other words, there's a lot of gold being passed around to ready for the big reset.  I would be astounded if China only has 1.7%.  They have lied before about how much they have. 

Wed, 12/21/2011 - 12:35 | 2001341 Oracle of Kypseli
Oracle of Kypseli's picture

China mines its own PM's and is buying mines or becomes large shareholder of mining companies and sells gold and silver to itself. Already underway in Africa and can expand to Peru, Chile and elsewhere.

No need of COMEX or any other organized crime operation. 

Banksters are to Planet Earth as Mafia is to Cities

Wed, 12/21/2011 - 12:49 | 2001383 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1  Yes.

China is playing that one right.  Slow accumulation of wealth OUT of dollars.

Be your own central bank!  Buy gold!

Wed, 12/21/2011 - 14:00 | 2001663 onebir
onebir's picture

"No need of COMEX or any other organized crime operation."

See also Pan-Asia Gold Exchange...

Wed, 12/21/2011 - 16:55 | 2002216 silverserfer
silverserfer's picture

well the chineese havent really given a shit about gold for 2000 years because they value jade much more. it is the gateway to heaven. theire jade stockpiles are formidable. and most honarable.

Wed, 12/21/2011 - 19:23 | 2002808 StychoKiller
StychoKiller's picture

Maybe, but ya cain't eet Jade!  :>D

Wed, 12/21/2011 - 11:16 | 2000977 Quinvarius
Quinvarius's picture

The dollar is defacto the biggest bubble in human history vs gold.  If you look at tulip bulb charts prices in gold or South Seas share charts priced in gold vs the USD priced in gold, you will see that you need to GTFO of Dollars.  Not only are they vastly overvalued and over owned, they have crested the peak.  The sad thing is, like all bubbles, the people in the USD bubble can't see it.  It is beyond their experience to prepare for it.  They get pretty ticked when you show them data too.  Oh well.  If you get your 5% in gold, you will probably break even in the paper collapse.

Wed, 12/21/2011 - 11:49 | 2001134 s2man
s2man's picture

When the USD and TSY bubbles burst, then we get to ride the biggest, baddest bubble ever, the gold bubble.

Wed, 12/21/2011 - 12:11 | 2001247 HoofHearted
HoofHearted's picture

OK, I'd recommend going even one step further. Most of us bitchez have pretty decent credit scores. Citi, JPMorgue, BAC, and others are offering all of us credit cards with zero interest for a year or two. Take them up on it. Buy as much PM and prepper stuff on the cards as possible, paying 2%-4% per month for your purchases and ZERO interest. When it al blows up you win big time. And if it doesn't, you still have your stack to pay off the bills. Or you can just decide to strategically default like so many have done in the housing sector.

Somebody show me how you lose doing this. Arbitrage, bitchez.

Wed, 12/21/2011 - 12:43 | 2001365 n8dawg84
n8dawg84's picture

That's a very interesting idea.  I've had similart thoughts myself.  My one concern with buying PM and other prepper stuff with a credit is that paper trail that leads to you when TSHTF.  Personally, I don't know whether it will matter that much or not.  However, I'd rather not risk a stash of PM or other prepper stuff (like food) trying to beat them for too much.

Wed, 12/21/2011 - 12:17 | 2001267 Smiddywesson
Smiddywesson's picture

Oh well.  If you get your 5% in gold, you will probably break even in the paper collapse.

On average, yes, but in reality some will lose less and some will lose all.

Interesting article in the AP today about money markets fleeing equities.  It is Exter's pyramid in action, but the funny thing is the public thinks the bonds they are fleeing to are safe. Leave it to the public to do the wrong thing at the exact wrong time.

Wed, 12/21/2011 - 11:17 | 2000985 Odin
Odin's picture

Imagine people en masse started to withdrawal their money from banks in order to buy and hold precious metals, how quickly that would tear them down... It's no wonder they are terrified of Gold... I say, make them try to outlaw Gold again, it will expose them... This isn't 1933, we are more educated and informed, and they know it... Take your information war and shove it up your fat ass Hilary; if this is a war, you’re outnumbered…

Wed, 12/21/2011 - 11:21 | 2001011 ParkAveFlasher
ParkAveFlasher's picture

This might be the wrong thread for this comment, but hi I'm PAF and Lord as my witness I own gold.  God forgive me for what I done to them nice banker folks.  I even traded in my dollars for PM. 

Wed, 12/21/2011 - 11:51 | 2001149 ParkAveFlasher
ParkAveFlasher's picture

yes flog me with a red arrow, I sinned and will sin again.  Evidently, after I will keep periodically sinning up until May 31, incrementally stacking my sins in secure, discrete locations.

Wed, 12/21/2011 - 11:23 | 2001023 vegas
vegas's picture

Let's be honest here  - no will on the part of politicos or central bankers, in the long run, to reign in fiat. Period.

 

http://vegasxau.blogspot.com

Wed, 12/21/2011 - 11:35 | 2001083 thunderchief
thunderchief's picture

Continue to buy your  physical gold, silver and platinum and store it in a safe place. 

Do not forget the white metals platinum and silver, as they are really a bargain. 

Forget about all this until at least the end of this decade.  Make your monthly purchases and do not listen to all this static. 

You will be rewarded. 

IMO

Wed, 12/21/2011 - 11:49 | 2001133 Lost Wages
Lost Wages's picture

Hmmm, plantinum. Indeed. Been thinking about it.

Wed, 12/21/2011 - 11:55 | 2001176 tekhneek
tekhneek's picture

Me too. I'm going to get some of those 1 oz coins. I hear they have a really nice sound when you flick'em.

Wed, 12/21/2011 - 12:12 | 2001252 Errol
Errol's picture

A couple of points regarding platinum:

Tell me again how many tons of platinum the central banks are holding?

Platinum is an industrial metal, period.  Most of the production is used for catalysts in petroleum refining and in exhaust catalysts in cars.  Smart money knows these uses will decline as the effects of cheap peak oil proceed, hence lower relative price.

Does platinum (looks just like stainless steel) have that nice glow against your girlfriend's skin?

Wed, 12/21/2011 - 12:50 | 2001353 DoChenRollingBearing
DoChenRollingBearing's picture

Platinum is for optimists!  (I believe I learned that line from Mr Lennon Hendrix)  That is what makes it different from the other PMs.  If the world economy takes off, so will platinum.  Disclosure: Pt is my second largest PM holding.

Errol, I guess you have not seen much platinum.  Looks different than stainless steel to me.

Wed, 12/21/2011 - 17:53 | 2002460 Acidtest Dummy
Acidtest Dummy's picture

DoChen,
Pt looks like Ag or Pd enough that another test would be desirable. When a foolproof field-test for Pt is discovered then your optimism will be very well rewarded.

Wed, 12/21/2011 - 13:02 | 2001429 Smiddywesson
Smiddywesson's picture

Platinum is a fine way to transfer one's wealth through this crisis.  However, I am with Errol on this one because he seems to be saying is that platinum won't capitalize on the banksters revaluation of gold/devaluation of fiat.  It will capitalize on the bankster massive printing campaign after the revaluation/devaluation scheme, but then so will stocks as they did in 1934.  Demand destruction is a valid concern, but manufacturing took off after Roosevelt used the same scheme to restart the US economy.  I guess the issue rests on how long your time horizon is for platinum. 

Still, gold will get the first and best sugar injection from the Fed, and then a few more as things progress and they make adjustments to gold prices and exchange rates.  Silver will too, and the future for silver is bright, but I can't call it.  It will ramp on the reset, but it might keep on ramping for a decade, outperforming gold over the long run because of supply and how much more the price has been compressed.  There's also a significant chance that it will be remonitized in some nations, especially China, India, and Mexico.  That should keep the bull going.  I keep enough silver to feed myself during the transition, but recently started to stack that too.  Just because the banksters are not stacking doesn't erase the fact that they are suppressing the price.  That tells us what to do. 

Wed, 12/21/2011 - 17:12 | 2002275 akak
akak's picture

Speaking of platinum, and sorry to bring up lousy paper assets, but one aspect of platinum investing/holding that I have NEVER seen addressed, anywhere, is the potential for a Ponzi scheme in the platinum ETF PPLT.  Many analysts have discussed the suspicious natures of the GLD and SLV ETFs, almost ad nauseum, but I have never read any similar suspicions raised in regard to PPLT.  Is it a given, or does anyone here have any circumstantial evidence at all which suggests that the PPLT ETF is just as Ponzi-fied as GLD and SLV?

Wed, 12/21/2011 - 11:48 | 2001131 jomama
jomama's picture

what the shit, is it 2012 already?  i need to get out more often.

Wed, 12/21/2011 - 19:29 | 2002828 StychoKiller
StychoKiller's picture

Only 365 days till Dec-21-2012 -- synchronize yer Mayan calenderz... :>D

Wed, 12/21/2011 - 11:56 | 2001174 Freegold
Freegold's picture

Gold is a reference of wealth, managed for many decades. It may take some time but when the managing collapses and it will, few can imagine it´s value. Most likely it will continue rising and one day *snap*. Don´t be the one who have to say oh snap!

Gold, go get you some!

Wed, 12/21/2011 - 12:44 | 2001366 DoChenRollingBearing
DoChenRollingBearing's picture

+ $55,000 for your moniker alone.

Wed, 12/21/2011 - 12:05 | 2001202 Smiddywesson
Smiddywesson's picture

Money Creating Central Banks May Push Gold to New Nominal Record in 2012

  Yes, gold will rise 20% next year like it did during the last 10 years.  But if you are saying we will get the big payout this year, it's not going to happen unless they unleash massive printing, and that will end the can kicking, which of course will end their program of gold purchases.  So TPTB will do anything, even steal brokerage accounts, to avoid the prining we all know they have to do.

 
Central Banks Will Continue To Be Net Buyers of Gold

 

That was true last year and this year, and it didn't lead to anything more than the same old 20% rise we have been getting for a decade in this manipulated market.  When the system crashes, you'll see vertical pricing, not before.

China Foreign Exchange Diversification Should Support Demand

By the article's own admission, China is grossly under capitalized in gold and is playing catch up, and yet, gold prices are not breaking vertical.  The only logical conclusion one can draw is they are part of the conspiracy to suppress gold prices and are reluctant to drive up prices.  More importantly, China is the chief beneficiary of kicking the can because it allows them to play catch up.  Sure, they can use the PAGE to blow up the Comex, but they won't do so (yet).

Currency Wars and Competitive Currency Devaluations

 

 

The currency war theme assumes it is a war and not a collective effort by central banks to devalue their fiat.  When the Brits devalued, all the 17 biggest members of the former empire devalued with them.  This time we have a global economy, and the central bankers are by and large cooperating in not driving up the price on one another, and not coming clean about where they are purchasing their gold.  Their backs are against the wall.  They are going to step in as a group, tie their currencies to gold, drive up the price of gold, and print like crazy.  This will happen all at once as per Bernanke's 11/21/2002 helicopter speech.  His fifth and remaining tool is laid out there for the whole world to see.  That's why nobody has jumped the gun and printed more than they need to just kick the can.  They will move together. 

Falling Confidence in Paper Assets, Bank Deposits May Prompt Physical Deliveries

They are driving those who demand physical deliveries out of the market and will continue to punish these traders if they don't get the message.  Given a problem with delivery, they can just crush these traders and take their accounts as they did with MF Global.  When your only motivation is to kick the can so you can buy gold, you don't mind if your actions further doom an already doomed system. 

 
Gold Remains A Historically and Academically Proven Safe Haven

Absolutely friggin A it is.

Conclusion – Gold in 2012

Scenario 1:  Gold prices continue to climb by the government cheese program approved rate of 20% per annum, because by some miracle, the system doesn't collapse and they can avoid rampant printing.  Keep stacking because you don't know when they will step in and reset the system.

Scenario 2: There is a generalized sell off or a system collapse.  In this event, gold prices will sell off as everything goes out with the tide.  In fact, TPTB, knowing the collapse or print day has arrived, will unleash everything they have, margin hikes, rumors, market manipulation, dirty tricks, to pick up as much physical as possible.  Fortunately, the smart move is the same as the other scenario, keep stacking because you can't time when the system will collapse or TPTB hit the reset button, and it will be too late to find physical for sale.

Either way, keep stacking.

 

Wed, 12/21/2011 - 12:07 | 2001221 mc_LDN
mc_LDN's picture

Like man. The more I understand the crooked architects of this system the more I think they will just find ways to take all of our Physical gold too. These guys aren't gonna lose without taking us all down with them first. Sure they will string it out for as long as possible so we all think were ahead of the curve getting into Bullion but they will find a way to confiscate surreptitiously (MF Global is just the first above board example in mainstream view). They'll rinse the ETF Gold scam, Physical will decouple, Everyone thunders through to the bullion - we think we're smart cos we got there early then we'll suddenly find theyve also taken over the Bullion trading companies alla Rothschild and BullionVault along with governments nationalising the mining companies. These guys are always 4 steps ahead. They work the strings behind the politicians and make up the rules as they go along. The old dictum of craft a problem, provide the solution applies to the financial markets also. Its all so very sad and degrading. We're all slaves.

Wed, 12/21/2011 - 13:13 | 2001467 Smiddywesson
Smiddywesson's picture

No confiscation unless it is in paper form or with an institution which will hand it to them.  The game is to lull you to sleep while they take your civil liberties and your money.  Open confrontation with all the gold bugs in the country would undermine this process of slow erosion.  The last place they want to create a row is when they are beginning to use their new powers against your civil liberties.

Rich people have gold, very few of the plebs do.  Rich people don't want their gold confiscated.

Taxation is as effective as confiscation.  Rich people can avoid taxation, therefore, they don't have to confiscate.

There are no golden coins in circulation to recover from the public, unlike the 30s, and regional bank vaults don't have to be raided this time around either.

If some gold bug peasants escape with wealth in the form of gold, we sneaky bankers will get it back anyway within on generation.  We own everything and make the rules.  Ex:  Banksters don't seem to mind some very plebian hedgies making boatloads of money.  They know they are going to get it eventually.

Wed, 12/21/2011 - 19:34 | 2002842 StychoKiller
StychoKiller's picture

When lions get hungry, they go after Zebras, NOT termites.

Plenty of other happenstance to worry about.

Wed, 12/21/2011 - 12:07 | 2001236 Lester
Lester's picture

Time to cut to the chase.

All that glitters is not gold, The Bard wrote; and this is true except when it comes to money.
Anything of Sterling silver, even 40% halves, along with Gold is truly Golden.

 

If you cannot see the collapse happening around you by now, your fate will be to be buried under what is coming down.
Paper is merely "A promise to pay", but in an era when no promise is enforceable unless you are part of the gang taking U.S. down, all the promises mean nothing and can be weaseled away in the courts, in arbitration, and ultimately in collapse.

Might want to read or re-read Silas Marner.  True wealth is not measured by our store of money, but by love and commitment.
Nobody lives forever, but your children and heirs might prosper and grow strong if you make decisions today that recognize the fraud we must live and accept to remain "investors" and "prosperous citizens".  Our Nation has been stolen from U.S.  Our Founding Fathers struggled to preserve equity and sound money so our wealth could not be stolen by paper and manipulation.

The maruaders are riding-in to plunder you and your loved ones.
Time to circle the wagons and defend what is yours and what you will need to live self-sufficiently with potential to prosper.

The time to be concerned about "return of my investment, rather than return on it" has long come and gone.
You best possess what you expect to own and keep by now and have worked out how to do so.
Any who choose to still trust the system or remain in the game are either the chumps destined to be fleeced and slaughtered or degenerate gamblers who seek thrills and excitement.  In the slaughter house that was once the American Investment Arena, there will lots of excitement, but you will only see yours for a few seconds.

Somebody should revise "Where Have All The Flowers Gone" to be the MF Global (et al) investors anthem...

Wow!  Michael Milken and Frank Lorenzo never conceived of the times we are now living in.  
Maybe the Kubrick Estate would allow a revision of FMJ?  Set the at rest scene in combination with the dinner scene from American Psycho:  "These are Great Times we're living in bros... We are Pin-striped giants walking the earth and destroying wealth."

Roadside sign seen in the Great Depression:  This Land Is Your Land, Don't Let The Big Man Steal It From You!

Just might be too late to do anything but hold what you got and wait things out where the waters are calm and the action slow.
If you still can get there...

Wed, 12/21/2011 - 12:47 | 2001377 DoChenRollingBearing
DoChenRollingBearing's picture

You raise the excellent point that gold should be thought of as value through time as well.  Give it to your children and/or grandchildren.

Number one is to take care of your family!  That means love first, then security (gold).

Wed, 12/21/2011 - 12:43 | 2001358 Bansters-in-my-...
Bansters-in-my- feces's picture

I see our ENEMY has slit golds throat again this morning.
See you'e in HELL ...PPT and we will talk over old times....
I can hardly wait.

Wed, 12/21/2011 - 14:07 | 2001689 onebir
onebir's picture

This could really do with enlargeable charts...

Wed, 12/21/2011 - 14:14 | 2001708 Bartanist
Bartanist's picture

Don't get me wrong, gold seems as decent a "Plan B" as anything these days and it is as likely to increase in price and retain value as anything except food, water, air, energy and shelter in the event of some sort of catastrophe.... and with the understanding that there is a cartel in charge that manages the price of gold. There is no free market.

However, I keep hearing rumors that there has been a LOT more gold dug out and refined over the years than is commonly reported. It is just like diamonds and the REAL reason the syndicate banned diamonds from Sierra Leone and bought out GE' synthetic diamond production business. The supposed reason that the vast majority of gold can be hidden from the official stocks is that it is VERY old gold mined from a time when gold was plentiful on the surface and long before any records were kept... ancient treasures.

I also wonder what happens in the doomsday scenario if we have to start using gold for currency or worse yet, trading it for a new currency. What will the people who have the goods we need or who create the new system value more; their food, water, energy, currency etc. or my gold (I guess it depends on how they perceive my need)? How much gold would I pay for a steak and a bag of rice if my family was starving.

In my view, gold is a medium-term play feeding off of insecurity and some hope there will be a fair "gold standard" currency. It may not be the best long-term play if there is a catastrophe for me because I am dependent on someone else to create a market for gold. 

And, since the gold price is set, not a free market, it "could" be just a massive set-up to take wealth from the gullible.

Wed, 12/21/2011 - 19:37 | 2002849 StychoKiller
StychoKiller's picture

So much paranoia, so little time.  If worrying would help, I'd worry.

Wed, 12/21/2011 - 16:43 | 2002185 BeHere...Now
BeHere...Now's picture

WHY?  I have done a moderate amount of research and I don't come to the same conclusion.

Let's just talk about silver at the moment.  The USGS has data all the way back to 1931.   Economics 101-supply & demand.  As we needed more, we've mined more.  We've NEVER had a silver shortage.  Other than investors buying up silver ETF-consumption has gone DOWN.   As the economy continues to limp along the amount of silver we need has followed along.  Sure, there are 1000 more uses for silver but all those require SMALL amounts of silver-solar, clothing, filling, conductors...Look at the data, not the fear.  We have been using between 5000-6500 metric tons/year.   The world has a KNOWN reserve of over 500,000 tons.   So even if we never extracted a single ounce from the ground again, we have about 100 years of silver available.  I have seen a lot of OPINIONS about why silver should be 40, 100, 500, 1000/oz, but when I look at the FACTS I see no reason for it.

 

I'm interested in the replies, but not to the links to sites making crazy claims--as great as silver is industry will quickly use other things if it ever goes as high as people are saying.  They are the same sites saying silver is more rare than gold.  If that is the case, why does the USGS report so much more silver than gold being mined EVERY SINGLE year? 

1986 example 13,290 metric tons of silver mined vs 1,606 for gold (gold chart is displayed in kg, so I divided by 1000 to match measures).  Last I checked, 13,290 > 1,606.

http://minerals.usgs.gov/minerals/pubs/commodity/gold/stat/tbl1.txt

http://minerals.usgs.gov/minerals/pubs/commodity/silver/stat/tbl1.txt

 

Regarding industry demand, these sites forget industry has to make a PROFIT.  Who is going to buy clothing that cost 3x as much, or a solar panel that is 10-15% more efficient for 3x the cost because of the silver content?

 

Take jewelry-when silver was under $10/oz, demand was up.   At $40/oz, demand dropped.  How much silver jewelry will you buy at $400?   Gold is even worse since most of gold is used in jewelry.  "Jewelry consumption continued to drop as the price of gold continued to increase" (mcs-2011-gold.pdf)

 

It's not going to be used as an alternate currency.  I've never heard of a government considering going to a silver-backed economy.   Poor-man's metal, sure, but if TSHTF, silver isn't going to do you any good.  Again, look at fact-did Argentina or Bosnia or Germany use silver when they hit the economic cliff?

 

Finally, when "buy gold/silver" is heard from every walk of life is a good indicator of a top.

 

Bubble.

 

                        1980                 1990

production        1,218,613          2,127,398 (doubled!)

consumption          99,998            118,065 (FLAT)

Industry                                                     20,000 (SLOWLY rising (less than prod!)

reserve                 35,757              35,623

85% jewelry

10% investors

"since the 50s, where private ownerships was allowed, price changed in response to SUPPLY AND DEMAND"

 

"nearly all the gold that has been mined in the last five millennia is still above ground, is more or less locatable, and, in large measure, is either still in use or poetntially available for use...85% (63,000 t) could be expected to come onto the market in response to the high gold prices...identified underground resources are conservatively estimated to total about 100,000t"

 

"mining is expected to be able to grow fast enough to provide the needed new gold..."

 

http://pubs.usgs.gov/of/2002/of02-303/

 

Wed, 12/21/2011 - 17:25 | 2002345 akak
akak's picture

The world has a KNOWN reserve of over 500,000 tons.

This is utter nonsense.

What you are claiming here is that the world still holds, in available reserves, well over a third of the total amount of silver ever mined throughout history.  While that might be true, in theory (and I am skeptical even of that), in fact almost all of that amount is held as artwork, religious artifacts, collectors' coins, heirloom silverware, a vast amount of jewelry, and other non-bullion forms of silver that would only pass into the market at MUCH higher prices, and much of it not at any price.

Wed, 12/21/2011 - 19:40 | 2002854 StychoKiller
StychoKiller's picture

The B(L)S stated that unemployment "dropped" to 8.6% last month -- believe them, do you?

Wed, 12/21/2011 - 16:44 | 2002186 BeHere...Now
BeHere...Now's picture

WHY?  I have done a moderate amount of research and I don't come to the same conclusion.

Let's just talk about silver at the moment.  The USGS has data all the way back to 1931.   Economics 101-supply & demand.  As we needed more, we've mined more.  We've NEVER had a silver shortage.  Other than investors buying up silver ETF-consumption has gone DOWN.   As the economy continues to limp along the amount of silver we need has followed along.  Sure, there are 1000 more uses for silver but all those require SMALL amounts of silver-solar, clothing, filling, conductors...Look at the data, not the fear.  We have been using between 5000-6500 metric tons/year.   The world has a KNOWN reserve of over 500,000 tons.   So even if we never extracted a single ounce from the ground again, we have about 100 years of silver available.  I have seen a lot of OPINIONS about why silver should be 40, 100, 500, 1000/oz, but when I look at the FACTS I see no reason for it.

 

I'm interested in the replies, but not to the links to sites making crazy claims--as great as silver is industry will quickly use other things if it ever goes as high as people are saying.  They are the same sites saying silver is more rare than gold.  If that is the case, why does the USGS report so much more silver than gold being mined EVERY SINGLE year? 

1986 example 13,290 metric tons of silver mined vs 1,606 for gold (gold chart is displayed in kg, so I divided by 1000 to match measures).  Last I checked, 13,290 > 1,606.

http://minerals.usgs.gov/minerals/pubs/commodity/gold/stat/tbl1.txt

http://minerals.usgs.gov/minerals/pubs/commodity/silver/stat/tbl1.txt

 

Regarding industry demand, these sites forget industry has to make a PROFIT.  Who is going to buy clothing that cost 3x as much, or a solar panel that is 10-15% more efficient for 3x the cost because of the silver content?

 

Take jewelry-when silver was under $10/oz, demand was up.   At $40/oz, demand dropped.  How much silver jewelry will you buy at $400?   Gold is even worse since most of gold is used in jewelry.  "Jewelry consumption continued to drop as the price of gold continued to increase" (mcs-2011-gold.pdf)

 

It's not going to be used as an alternate currency.  I've never heard of a government considering going to a silver-backed economy.   Poor-man's metal, sure, but if TSHTF, silver isn't going to do you any good.  Again, look at fact-did Argentina or Bosnia or Germany use silver when they hit the economic cliff?

 

Finally, when "buy gold/silver" is heard from every walk of life is a good indicator of a top.

 

Bubble.

 

                        1980                 1990

production        1,218,613          2,127,398 (doubled!)

consumption          99,998            118,065 (FLAT)

Industry                                                     20,000 (SLOWLY rising (less than prod!)

reserve                 35,757              35,623

85% jewelry

10% investors

"since the 50s, where private ownerships was allowed, price changed in response to SUPPLY AND DEMAND"

 

"nearly all the gold that has been mined in the last five millennia is still above ground, is more or less locatable, and, in large measure, is either still in use or poetntially available for use...85% (63,000 t) could be expected to come onto the market in response to the high gold prices...identified underground resources are conservatively estimated to total about 100,000t"

 

"mining is expected to be able to grow fast enough to provide the needed new gold..."

 

http://pubs.usgs.gov/of/2002/of02-303/

 

Thu, 12/22/2011 - 00:45 | 2003460 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

I am definitely not selling my gold.  When the economy collapses, gold is going to be the only currency worth it's salt.

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