Sprott: Why SocGen Is Wrong About Gold's Imminent 'Demise'

Tyler Durden's picture




 

Submitted by David Franklin and David Baker via Sprott Group,

A Retort to SocGen’s Latest Gold Report

Société Générale (“SocGen”) recently published a special report entitled “The end of the gold era” that garnered far more attention than we think it deserved.  The majority of the report focused on SocGen’s “crash scenario” for gold wherein they suggest that gold could fall well below their 2013 target of US$1,375/oz. It also included a classic criticism that we’ve heard so many times before: that the gold price is in “bubble territory”. We have problems with both suggestions.

To begin, the report’s authors appear to view gold as a commodity, rather than as a currency. This is a common misconception that continues to plague most gold market analysis. Gold doesn’t really work as a commodity because it doesn’t get consumed like one. The vast majority of gold mined throughout history remains in existence today, and the total global gold stockpile grows in small increments every year through additional mine supply. This is also precisely why gold works so well as a currency. Total gold supply can only grow marginally, while fiat money supply can grow exponentially through printing programs. This is why gold’s monetary value is so important – it’s the only “currency” in play that is immune to government devaluation. 

Chart A illustrates the relationship between the growth of central bank balance sheets in the US, EU, UK and Japan and the price of gold. This relationship has an extremely high correlation with an R2 of about 95%. As central banks increase the size of their balance sheets through ‘open market operations’ to buy bonds, mortgage-backed securities (“MBS”) and the like, they inject more fiat dollars into their respective banking systems. As gold has a relatively stable supply, if there are more dollars available, the price of gold should rise in dollar terms. It’s really a very simple and intuitive relationship – as it should be.

Global -Central -Bank -Assets -vs -Gold

Source: Bloomberg and Sprott Asset Management LP

This relationship between central bank printing and gold has existed since the beginning of the gold bull market in 2000. In fact, this relationship shows that for every US$1 trillion increase in the collective central banks’ balance sheets, the price of gold has generally appreciated by an average of US$210/oz.

Somewhat surprisingly, it turns out that the collective central bank balance sheets have actually shrunk over the past three months – by approximately US$415 billion. The biggest drop was seen in the ECB’s balance sheet, which shrunk by the equivalent of US$370 billion, while other central banks also experienced small declines. Based on our simple model above, a decrease of US$415 billion should produce a gold price decline of roughly US$87/oz. And as it turns out, gold fell by US$76/oz over the first quarter of 2013. Does this sound like a bubble to you? It certainly doesn’t appear to be. Gold is performing almost exactly as it should – by acting as a currency barometer for the amount of money being injected into or withdrawn from the economy... which leads us to Japan.

Japan’s recent QE announcement is a thing of wonder. It represents an absolutely massive injection of yen relative to the size of the Japanese economy. The Bank of Japan’s US$75 billion equivalent per month of yen printing, coupled with the US Federal Reserve’s $85 billion per month (through its current QE program) will addUS$1.97 trillionto the collective central bank balance sheets over the next 12 months. Given Japan’s considerable contribution, we seriously question how SocGen believes gold can drop to US$1,375/oz by the end of the year. For that to happen, we would need to see a collective balance sheet decline of roughly 15%. Does SocGen seriously believe the US Fed (or any other central bank for that matter) is going to reverse its QE accumulation and then start aggressively selling balance sheet assets over the next year?

The only gold ‘crash scenario’ that makes sense to us at Sprott is if governments begin to balance their budgets and return to sound money practices. There is no question that gold could lose its utility if western governments made a concerted effort to fix their fiscal imbalances, but who honestly believes that’s going to happen any time soon? We certainly don’t – especially in the US. While US deficit spending may diminish in scale, it will remain well above $1 trillion per year after factoring in unfunded obligations. We don’t know of any creditable forecaster who believes otherwise.

We also don’t see a chance of the US Federal Reserve ending its QE programs, despite the continual jaw-boning by various Fed officials of a planned QE exit strategy. There is simply too much risk to the US bond market for the Fed to cut the US$85 billion in monthly Treasury and MBS purchases that the current program employs. After all – remember that those purchases are what keep interest rates close to zero today. If the Fed were to remove that flow of capital, the free market would once again dictate US bond yields and stock prices. There’s not a chance the Fed will take the risk of finding out what US bonds or stocks are worth to the market without a perpetual government-induced backstop. Why take the risk?  Especially since the cumulative QE programs to date have not caused a drastic increase in inflation expectations.

While we expect the Fed to continue to threaten to lower its monthly QE purchases, we believe the chances of even a mild decrease to its current US$85 billion per month rate are negligible. Four years into it this grand QE experiment, money printing has become the backbone of the US bond market, and the unsung driver of the US equity market. In our view, gold cannot become irrelevant for the precise reason that QE is here to stay… and the collective central bank balance sheets will continue to increase over time. We would question any pundit who believes otherwise – unless they can clearly articulate how the Fed can exit QE without causing irreparable harm to the very financial markets the QE programs were designed to assuage.

We believe gold is nowhere close to ‘bubble territory’ today. It is acting exactly as a currency should. Under its current stewardship, we expect the Federal Reserve’s balance sheet to continue to expand along with Japan’s. SocGen’s “crash” scenario would require a complete reversal of this trend, which we do not believe is even remotely possible at this point.

Gold is the base currency with which to compare the value of all government-sponsored money. Investors can incorporate it into their portfolios as ‘central bank insurance’, or ignore it entirely. Either way, we believe gold will continue to track the total aggregate of the central bank balance sheets of the US, UK, Eurozone and Japan. If SocGen believes the aggregate central bank balance sheet will continue to shrink as it did in Q1, then gold should continue its decline. We strongly suspect that shrinkage is over, however. Given Japan’s recent QE decision, we would expect the aggregate to grow a lot bigger, and fast. If there was ever a time for gold to be a relevant currency alternative – it’s now.

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Fri, 04/05/2013 - 22:30 | 3415275 kliguy38
kliguy38's picture

Don't worry Soc Gen is only doing what they're told......put the brakes on gold is the only thing holding this illusion alive

Fri, 04/05/2013 - 22:48 | 3415316 easypoints
easypoints's picture

What country just had 100% of their gold repatriated back to Germany? France. And one of the largest banks in that country is?

Fri, 04/05/2013 - 22:57 | 3415325 Pinto Currency
Pinto Currency's picture

 

This report assumes two things:

1) The year 2000 price of gold at ~$275 was correct vs the C.B. balance sheet.  This was after 8 years of the concerted and intensified BIS coordinated, Summers/Rubin, bullion banks, & LBMA gold devaluation program.

2) It ignores the additional role for gold as a savings medium (in addition to a role as a medium of exchange).  The bond market (a savings medium) is +/- $100 trillion and is being destabilized by accumulated debt and further money printing.

Chew for your chaw.

Fri, 04/05/2013 - 23:38 | 3415414 Professorlocknload
Professorlocknload's picture

"The year 2000 price of gold at ~$275 was correct"

Damn, those were good days! Material selling way under production cost.

To think the Bank of England could be so nice!

 

Fri, 04/05/2013 - 23:47 | 3415429 Spitzer
Spitzer's picture

It was a manipulated price by Gordon Browns gold fire sale

Sat, 04/06/2013 - 00:15 | 3415477 eatthebanksters
eatthebanksters's picture

Ask yourself one question...why are they saying goldbugs are stupid?  Te answer is very clear...people buying gold now want possession...stop the gold buying stop the demands for possession.  Now why do you think they don't want owners to take pysical delivery?  Hmmm...go figure...next question: do you trust the TBTF banks (especially a French one in deep shit)?

 

Sat, 04/06/2013 - 00:49 | 3415519 markmotive
markmotive's picture

Deflation, inflation...gold will always hold its purchasing power.

That is why Texas wants its gold back.

Jim Rickards on Texas and the Fed's Battle with Deflation

http://www.planbeconomics.com/2013/04/texas-wants-their-gold-back-jim.html

Sat, 04/06/2013 - 01:37 | 3415542 strannick
strannick's picture

Sprott is a serious bad ass. Che Guevera has nothing on him. There is no need for him to argue with bankers, they know he is right.

He is more dangerous, because Sprott and his gold doesnt steal their money, he makes their money worthless.

Sat, 04/06/2013 - 04:30 | 3415654 TwoShortPlanks
TwoShortPlanks's picture


Personally, I’d love to see Gold under $1,000 again. This would be a great buying time for anyone and everyone, but I doubt supply would last more than one month.

I look at the fundamentals, and Oh-Gee, they haven’t changed, so why the negative outlook on Gold?

Not sure if you have realised it or not, but, when you add-up everything that’s happening right now, what we are seeing is nothing more than ‘Destruction Of Demand’; the Global Economy is simply moving toward a more sustainable production/consumption level. Like tectonic plate movement, it happens with small sudden jolts, but make no mistake, there’s huge pressures behind the move….mathematical inevitability.

Central Banks can dump as much cash on this as they like, it won't matter; global consumption is dropping off and it will find its' own level in due course....which is more than I can say for all that liquidity sloshing around.

Sat, 04/06/2013 - 05:45 | 3415691 Supernova Born
Supernova Born's picture

SocGen has declared the Periodic Table of the Elements a fraud.

They will be nominated for a Nobel prize in economics (yet will strangely go unrecognized by the charlatans on the nominating committee for chemistry).

Sat, 04/06/2013 - 08:30 | 3415792 GetZeeGold
GetZeeGold's picture

 

 

Personally, I’d love to see Gold under $1,000 again....

 

Hell....I'd just like to see a budget again. Is there a single country on this earth that actually has a fiscal plan?

Sat, 04/06/2013 - 09:14 | 3415851 LawsofPhysics
LawsofPhysics's picture

No.  Get your tribe in order. 

Sat, 04/06/2013 - 09:30 | 3415863 GetZeeGold
GetZeeGold's picture

 

 

We only have central bankers left...and they're not from our tribe.

 

So what the hell do we do now?

Sat, 04/06/2013 - 19:46 | 3416201 Pinto Currency
Pinto Currency's picture

 

I am not sure about Franklin and Baker's graph above showing a $7 Trillion increase in c.b. balance sheets since year 2000.

This graph shows an increase in c.b. balance sheets of ~ $10 trillion from mid 2006 to 2011 and that is for 8 central banks combined.

http://www.ritholtz.com/blog/wp-content/uploads/2012/01/balu10.gif

From this article:

http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/

 

On the "gold price is dropping because demand is too high" front,

http://silverdoctors.com/gold-run-there-is-not-one-single-ounce-of-gold-available-for-sale-in-bangkok/

Sat, 04/06/2013 - 09:15 | 3415852 fomcy
fomcy's picture

Turkey Silver imports climb 31% to 6.19 tons in March

http://1goldinvestment.com/turkey-silver-imports-climb-31-to-6-19-tons-i...

Turkey‘s gold imports climbed to an eight-month high in March as prices averaged the lowest since May, the exchange said.

Turkey imported 6.19 tons of silver in March while gold imports hit an eight month high at 18.26 metric tons..

According to Istanbul Gold Exchange, Silver imports rose 31% from a month earlier. The nation imported 142.2 tons last year.

Sat, 04/06/2013 - 08:03 | 3415789 bsdetector
bsdetector's picture

TSP, I found your posts "In Cyprus, Shock Turns to Anger" insightful. I posted late a few thoughts on the value of gold on a planet with many nations inflating their currencies as well as a quote from Woodrow Wilson. Any chance you could share a few more thoughts on those comments?

Sun, 04/07/2013 - 07:21 | 3418107 TwoShortPlanks
TwoShortPlanks's picture

@bsdetector, yes, I saw your post.

Okay, the following is just my own personal belief of what lies ahead of us all. My opinion is harsh and often not welcome, but formed from much investigation into many areas.

It’s a little rushed, but you’ll get the drift.

The following comments MUST be kept in the context of my previous posts (in 'Cyprus, Shock Turns to Anger') where, a single sector of society (Ultra Wealthy) own not only most/all currencies on earth through Bank-to-Central-Bank ownership, but, in excess of 70% of above ground gold (CB gold, private vaults etc).

An analogy to give meaning…

Imagine one person owning all airlines on earth, and to hedge those airlines that same investor owned all oil stocks on earth. Imagine the price-setting power that individual would have, on travel, trade, farming, manufacturing, politics, banks...it's endless!

So long as that individual decides that business must go on then, he/she is free to manipulate any market desired so that the desired Politico-Power-Outcome emerges in his/her favour. Does this person lose any wealth so long as global expansion is growing....nope! He or she is untouchable!

Now, replace airlines with gold, and oil with currencies....imagine the omnipotent and omniscient power and influence that person would have in world affairs; that person would quite literally run the place…..Woodrow Wilson you ask?

"The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."
- Rothschild brothers, 1863 –

I hope you can see this quotation shine in the light of modern events (Cyprus is a classic).

Now, Mayer Rothschild wasn’t dumb, in fact, I’d hate to say it, but to me he was quite literally a genius, and in the true sense of the word. Einstein was genius because only he could see a path through all the data and concepts on the nature of gravity and light, likewise, Rothschild saw a path through the history of money. He knew the power of fiat lay in the transfer of wealth from purchasing power.

Rothschild also knew the power of the layering of command, and the brilliant use of agents. Anti-Semitism forced Rothschild to operate behind the scenes, and this is what I believed happened to not only the people who comprise the wealthiest families on the planet, but also to their wealth; they and their wealth are next to invisible…and this takes us back to my post in 'Cyprus, Shock Turns to Anger'.

Back to my point…

On Currency Inflation: Expanding CB balance sheets may only have limited affects within global economy undergoing Destruction Of Demand.

Destruction Of Demand: Money Velocity in Western countries is very low and not picking up. For the most part, the East makes the stuff the West consumes…so how can the East prosper? It can’t, it won’t. Internal consumption is a myth.

Debt: The origin of this Destruction Of Demand cycle lies in the spread between Base Money (Bank Reserves and Currency in circulation, and that of Bank Assets (a Bank Asset is its’ own Debt). This figure is around $80 Trillion. Up to this point this has been the main culprit of the increasing viscosity of the currencies running throughout the global economy. Feeding QE into the system does little more than adding kerosene to Oil, it lowers the viscosity and allows the oil to fee-up sure, but the quality of the properties of the oil itself have been compromised. With QE, money is losing its’ money-ness.

Derivatives: This is the monster which is slowly but surely gaining potency ground on the problem of debt (stated above). I would have to guess, but 90% of derivatives must hinge upon the US Dollar. That’s a ticking WMD, no? Also, watch what happens when the rich get hunted for their wealth and they start defaulting on their derivative positions.

Blame: Well, let’s face it, everyone wanted to get rich quick and few stopped to question loose monetary policy as property prices soared up-n-up. That being said, there’s a reason Greenspan has special protective powers afforded unto him by the BIS in the execution of his duties. What I am alluding to here, is that I believe the BIS (“Custodial Network…Back Bone”), through Alan Greenspan as Fed Chairman, deliberately commenced the expansion of the Fed balance sheet, all the from the DotCom bubble, way up and into the Housing Boom. The net affect of all this, in his own words;
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights (Cyprus, Fiat or Gold). If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard”

So when you add up all the individual pieces of the jigsaw puzzle, and there are millions, the picture is still incomplete…and that’s deliberate!

Agenda21: A continuation of the UNs’ earth Summit, which is a continuation of Holdrens’ Ecoscience (1977). In simple terms, this is a blueprint for an Ultra Wealthy Utopian World where a sustainable global society exist a level standards of living (a few pegs above subsistence), and where a global elite, ruling class, sees-in a new era, new return, of Global Monarchical Rule. Agenda21 is all around us, in every state, in every suburb, and it is slowly but surely worming its’ way into becoming, trendy.

The future isn’t a rosy one I’m afraid. I believe that in due course, the financial system will be sacrificed for a new one. One day you’ll come to the stark realisation that all of the myth and legend about Gold and Silver turn out to be more than true.

The next system will come with strings. Expect UN demands that the modern financial system (currently operating with the supposition that there are in fact zero limits to growth) be widely accepted as ‘Unsustainable’ old stupidity and ignorance, and that a new, strict, system be adopted…Agenda21 will also be signed upon in ‘Hard Treaty’ across all nations.

Custodial Global Monarchical Rule 101.

Sun, 04/28/2013 - 20:31 | 3508614 margaris
margaris's picture

please go on, or explain in more detail please, I can't get enough of your posts lately lol...

Sat, 04/06/2013 - 11:32 | 3416150 SpiceMustFlow
SpiceMustFlow's picture

Yeah Sprott is a fucking badass, +a billion, he wakes up and takes a shit on a banker

 

Sprott PM Roundtable:

http://www.youtube.com/watch?v=mq_siM2Oh7g

Fri, 04/05/2013 - 23:43 | 3415420 DoChenRollingBearing
DoChenRollingBearing's picture

As always it is important to remember that the price of gold that we see every day is for paper gold.  While for now, the paper gold price may be very close to the physical price, this may not be so later on...

As I have mentioned various times over the last month or so, I have gotten out of the prediction business.

But I will write this: the Central Bank of DoChenRollingBearing will continue to buy gold as money (CA$H) comes in.  Whether the price is $1570, $1375, or $1135, or even $2000.

Sat, 04/06/2013 - 01:09 | 3415534 Flying Tiger Comics
Flying Tiger Comics's picture

Well if you really want to buy gold, we're selling physical fresh mined for 44 a gram.

Sat, 04/06/2013 - 01:43 | 3415558 Professorlocknload
Professorlocknload's picture

I predict Au will be around longer than the existing governments of the world.

I will not predict the price of it won't see $700-$1100 again before the Fed finally goes into psychotic break.

Sure, inflate it all away is all they know. But they could fall behind if they don't constantly increase the dose. Especially if Japan, California or BAC or whatever blind sides 'em.

Look at what little $85B a month now buys? Then $100B, Then $150B.

 

Just to stay in the same place.

 

 

Sat, 04/06/2013 - 08:49 | 3415829 GetZeeGold
GetZeeGold's picture

 

 

I dunno.....if they go QE_Au that crap's gonna be worthless in no time.

Sat, 04/06/2013 - 10:04 | 3415899 Stoploss
Stoploss's picture

Why is AU assigned a value in USD?

Why not GBP? JPY?  CAD, CHF? AUD?

Good thing it's pegged to the USD huh??

 

Sat, 04/06/2013 - 14:42 | 3416613 Winston Churchill
Winston Churchill's picture

The LME is proposing a yuan /gold fix.

Sat, 04/06/2013 - 09:16 | 3415854 LawsofPhysics
LawsofPhysics's picture

Stop worrying about "price".  Au is a store of value, period.  The atomic properties of the metal make it so.  The price is irrelevant as all fiat is dying.  Soon enough, there will simply be those that it have gold, and those who don't.  You tell me who will have more purchasing power.  Personally, I never have trouble exchanging the metal for the value of another's labor.  All of recorded history seems to agree.

Sat, 04/06/2013 - 10:18 | 3415912 Stuck on Zero
Stuck on Zero's picture

One thing that can cause gold to fall in price is an economic condition that drives people to give up their gold for food or survival.  If it's a choice of starving or selling your gold people sell their gold.  If a country is invaded and they need to buy arms the gold goes on the market.  We are seeing that now with pawnshops.  Another thing that can drive the price of gold down is velocity.  If cash currencies fail then gold and silver will reappear everywhere as the new currency and the sheer velocity of movement will make it look more available than it is. 

 

Sat, 04/06/2013 - 00:36 | 3415498 eigenvalue
eigenvalue's picture

The author of SocGen's report is called Sebastien Galy. I wonder why a guy specialises in fiat money suddenly becomes an expert on real money.  I scanned the report and I bet that the author knows little about the physical market. 

Sat, 04/06/2013 - 07:23 | 3415764 Room 101
Room 101's picture

OK Eigen - this will probably disappoint you on some level....but you now have an attentive audience.  You're now my fave heretic against the heresy. So what are your current thoughts on the movement of Au and Ag vice FRNs?   

Sat, 04/06/2013 - 09:51 | 3415885 eigenvalue
eigenvalue's picture

I don't know. I called a bottom on Wednesday but I can be wrong and the charts still look ugly. What puzzles me is the open interest of silver. In the past, when silver price declined, the open interest would decrease. But this time the open interest increases. Some people point at the Comex silver inventory and conclude that the demand is slowing down so more silver will be delivered at the Comex. However, registered silver (only registered silver can be used for delivery) is still lower than the 2010 level. 

Even if it were true that a lot of silver could be delivered in the future, that wouldn't necessarily be bearish for silver. I don't know if you trade soybeans. If you do, perhaps you have heard about the huge delivery in China back in 2002. (In China, the wild east, there are almost no position limits and you can take/make as much delivery as you want)

Back in May 2002, a single Chinese investor took delivery of 760,000 metric tonnes of soybean on the Chinese futures market. That was about an equivalent of 5600 CBOT contracts. That was a lot soybeans. China's annual production was around 15 million tonnes. Since only Chinese soybeans could be used for delivery, that was about 1/20 of the annual production. Back then, the total open interest of CBOT soybean was about 200,000 contracts. 

However, the buyer who took delivery was prescient and the sellers who made delivery were silly. Within 1 year after the huge delivery, the soybean price soared by 100%. 

Huge deliveries are not rare in China because of the lack of position limits. There are many cases in which sellers made huge delivery at the bottom and turned out to be stupid. (By the way, you should be glad we are more civilised than the wild east)

Trading is about forecasting the future supply and demand not the current. 

Sat, 04/06/2013 - 10:37 | 3415948 Prisoners_dilemna
Prisoners_dilemna's picture

Im in Florida for the past week from NY. I saw the dip wednesday and decided to check out gainesville coins in Lutz Fl as I saw recommendations about them here on ZH.
I felt like a kid going to disney. Didnt even stop to piss as I wanted to get there and btfd before it disappeared. They have a beautiful shop but... They couldnt sell me the silver eagles I wanted. Kid behind the counter said he had to process them in before he could sell. He told me to come back in an hour. Fuck that.
I went a mile down the road to legacy coins on manby something rd. Super friendly, had a great chat with Mark and owner Art. I bought all the eagles I could, plus two old silver certificates (one dollar bills from 57 I think), he had them in the register and was gonna give them out as change. He let me exchange two singles for them. We told some obummer jokes, bitched about the country, talked florida gun laws, aggression of wild hogs, travelling the country on motorcycle, and with the $19 toiletpaper notes I had left I got a junk half dollar, quarter, and roosevelt dime.

Point of my story, thanks for calling a bottom, and imo give your business to legacy coins on manby, gainesvilles to uppity.

(in their defense I was in sweatpants and carrying a military sgyle packpack, but first thing I did went I walked into gainesville was hand a wad of cash to the kid to count, and told him I was there to spend it all... Come back in an hour.... sheesh)

Sat, 04/06/2013 - 10:42 | 3415956 Prisoners_dilemna
Prisoners_dilemna's picture

@eigen
PS if you post a bitcoin address Ill send you a tip for the call you made.

Sat, 04/06/2013 - 12:35 | 3416133 Pinto Currency
Pinto Currency's picture

Unprecidented global silver trading volume:

Click on this link:

http://netdania.com/Products/live-streaming-currency-exchange-rates/real-time-forex-charts/FinanceChartPopUp.aspx?symbol=XAGUSD|netdania_rt&name=Silver,%20spot

Select the square 'D' for daily and zoom out until you can see the time interval Jan 2011 to today.

Now select the green and red volume bars button to the right of the 'D'; this gives global daily silver trading volume on all major exchanges.

The silver trading volume we are seeing has not been seen before. That is bound to be accompanied by an open interest increase. 

There was a comment yesterday that market manipulators can enter markets to manipulate price but that they are going to generate associated very large positions whie they fight.

What is also of note is that the price of silver is now climbing despite the enormous churning and pounding silver has taken.

Sat, 04/06/2013 - 11:29 | 3416141 James
James's picture

PD, I live where you were visiting. I believe the street you were on is called Dale Mabry.

And Gainesville Coins just what the hell is wrong w/you???

Why have a open pimped out showroom but you are unable to sell on demand. Your competition has no problem selling me as much as I can pay for and they too have a pimped out showroom. What gives? Does losing some of us just not matter?

Sat, 04/06/2013 - 20:19 | 3417438 eigenvalue
eigenvalue's picture

Correction: I double-checked the data. It should have been "Within 1 year after the huge delivery, the soybean price soared by 35%. " The 100% gain was made in less than 2 years. I have poor memory these days. That's my fault.

Sat, 04/06/2013 - 07:22 | 3415765 achmachat
achmachat's picture

you are really difficult to label! Sometimes it seems that you're just trying to bash people who like to save their wealth in precious metals, and then, all of a sudden, you give us little pearls of wisdom.

Sat, 04/06/2013 - 09:58 | 3415889 eigenvalue
eigenvalue's picture

So you want more "Die, die, die, silverbugs"?

Sat, 04/06/2013 - 11:21 | 3416104 GetZeeGold
GetZeeGold's picture

 

 

Beats paying for it.

Sat, 04/06/2013 - 15:36 | 3416724 Room 101
Room 101's picture

Naaaah. We got the "die, die, die silverbugs" part.  As you might have noticed, you have a few people who are following what you have to say. You're bright and prescient.Word spreads as to who is worth listening to and who isn't.  You're in the "is worth listening to" group.  Even if you're a pain in the ass from time to time.  

Thank you for your insights.   

 

Tue, 04/16/2013 - 02:05 | 3455167 auric1234
auric1234's picture

See how the "pearls of wisdom" worked out. Makes one wonder if the bastard knew something was about to happen, or is completely clueless about anything.

 

Sat, 04/06/2013 - 10:25 | 3415922 tsx500
tsx500's picture

anyone with a name like 'Sebastien Gayly' ..... well, i'll just leave it at that, ok ?

Sat, 04/06/2013 - 11:32 | 3416152 WhiteNight123129
WhiteNight123129's picture

Well this guy Sebastiaen Galy does not know the difference between money, currency and credit. And also he probably does not know that present goods are circulated in what we call GDP, that included into present goods are commodities and that financial assets are discounted future cash flows. The relative price of the two is governmed by the treasuries, when the treasuries goes in  peer shape, present goods price relative to future cash flows go to the moon.

Gold is a form of money which is a present good, where are treasurires are future cash flows. The asset backing the currency are in the banking system not anymore real bills with short maturity which are quasi present goods but long dated finanical assets which are mortgages. The Central bank is emitting USD agianst another finanical asset which are the Treasuries. The result is a finanicalization of the currency.

If all the assets backing the currency where just gold and quasi-present goods in the form of real bills, there would not be swings between commodities (present goods in general including gold) against finanical assets. The currency would be anchored along present goods and commodities (price stability). Instead we have a currency which is backed by finanical assets. The currency instead of being the alter ego of the circulation of present goods, is the alter ego of finanical assets. So the currency moves up and down in very large swings against financial assets with interest rates.

When interest rates rise, the present value of all finanical assets shrinks, including the Treasuries. Incidently the Treasuries is the asset backing the currency, so evidently the currency falls also against present goods. When interest rates rise, the present value of assets in teh commercial banking system shrinks as well.

THIS IS YOUR GOLD-DOW RATIO EXPLAINED!

 

Sat, 04/06/2013 - 14:44 | 3416575 Alexandre Stavisky
Alexandre Stavisky's picture

How can the Fed exit QE without causing irreparable harm to the very financial markets the QE programs were designed to assuage?

Exactly.  And just as BOJ announces a doubling of its monetary base within 20 months.  Even if you were to grant the supposition that money creation had supplied enough units of account to fill all the holes created by mismanagement, fraud, and default of the latest GFC, still all the large nations now have significant unemployment and lifetime dependencies of retirees, pensioners, disabled, and hungry.  Deficit reduction also cannot occur without reduction of money supply which forces greater defaults in a usury system which REQUIRES exponential growth of money.  C+I+G+X=GDP.  Austerity drops G component just as greater tax demands shrink C and I and very few nations (Japan included) have current account or export surpluses.  Without money printing, the entire world would wake to the true revelation of the economic state.  That would trigger a truly vicious cycle of economic actors stepping away from the table of trade.

Without money printing to smooth over the deep global contraction signifying depression, austerity would be forced upon all stakeholders with outsized effect.  No! Instead central bankers have coordinated their global efforts and by dib and drabs of competitive currency devaluations, financial asset manipulations, and periodic seizures seek to ameliorate the worsening situation.  This has bought time and misplaced confidence.  However when every financial instrument is able to be manipulated at will by the banking sector, no investors can get a true read upon any prospering viable economic output.  For instance, Groupon, Netflix, Amazon, Apple, etc have had terrific vapourware rallies, while the steadfasts like FedEx, CAT, Homebuilders have been crushed.  Hot money games distorting any reliable feedback of economic viabilities.  Since the Nasdaq crash, the Japan Nikkei and property crash, and the USA MBS real estate crash, how can anyone trust any market?  All is an enron accounting, global crossing marketplace.  Place your bets only if you can afford to lose. If all financial assets are founded upon some coordinated currency game, that eventual crippling step-devaluation will smack every sector just as instantly.  It shall be as a global EMP shock upon every asset.  Unrecoverable damage.

Unless you "freeze" your money.  If you find no confidence in this reason-defying Keynesian endpoint, you must hold some other instrument which has at least some degree of insulation from the deteriorations of counterfeit, debasement, and arbitrary value reassignments.  The GO-TO alternative currency which resists tampering...?

That may be precious metals.

Sat, 04/06/2013 - 06:32 | 3415724 jjsilver
jjsilver's picture

SoGen is controlled by Rothschild or Rockefeller, all this shows how desperate they are. Your psyops don't work anymore

Sat, 04/06/2013 - 10:19 | 3415908 Prisoners_dilemna
Prisoners_dilemna's picture

@easypoints
Teach me! Whats the largest bank?
Thank you!

Edit: herp derp, societe generale

Sat, 04/06/2013 - 22:31 | 3417724 Long_Xau
Long_Xau's picture

Soc(ialist) Gen(eration).

Fri, 04/05/2013 - 22:48 | 3415317 Stuart
Stuart's picture

Sounds like SocGen has delivery issues like ABN AMRO.   

Sat, 04/06/2013 - 02:00 | 3415575 Zero Debt
Zero Debt's picture

ABN AMRO..that had a JV with Rothschild, yeah, that sounds like a trusted partner who will store your gold.

Sat, 04/06/2013 - 09:14 | 3415849 iBuddhaTrader
iBuddhaTrader's picture

Just in case anybody missed it...

http://forexmagnates.com/abn-amro-halts-physical-gold-delivery-another-s...

... does not really say if they stop charging for custody or any related charges as the vault seems clearly empty.

Sat, 04/06/2013 - 13:24 | 3416428 Bam_Man
Bam_Man's picture

Classic. They charge you storage fees, year after year - then when you say you want your Gold, they tell you you can't have it.

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