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Guest Post: Physical Gold Vs Paper Gold: Waiting For The Dam To Break
Submitted by Alasdair Macleod, via GoldMoney.com,
Introduction
In this article I will argue that the recent slide in the gold price has generated substantial demand for bullion that will likely bring forward a financial and systemic disaster for both central and bullion banks that has been brewing for a long time. To understand why, we must examine their role and motivations in precious metals markets and assess current ownership of physical gold, while putting investor emotion into its proper context.
In the West (by which in this article I broadly mean North America and Europe) the financial community treats gold as an investment. However, of the global pool of gold, which GoldMoney estimates to be about 160,000 tonnes, the amount actually held by western investors in portfolios is a very small fraction of this amount. Furthermore investor behaviour, which in itself accounts for just part of the West’s bullion demand, is sharply at odds with the hoarders’ objectives, which is behind underlying tensions in bullion markets. To compound the problem, analysts, whose focus incorporates portfolio investment theories and assumptions, have very little understanding of the economic case for precious metals, being schooled in modern neo-classical economic theories.
These economic theories, coupled with modern investment analysis when applied to bullion pricing, have failed to understand the growing human desire for protection from monetary instability. The result has for a considerable time been the suppression of bullion prices in capital markets below their natural level of balance set by supply and demand. Furthermore, the value put on precious metals by hoarders in the West has been less than the value to hoarders in other countries, particularly the growing numbers of savers in Asia.
These tensions, if they persist, are bound to contribute to the eventual destruction of paper currencies.
The ownership of gold
The amount of gold bullion that backs investor-driven markets is not statistically recorded, but we can illustrate its significance relative to total stocks by referring back to the time of the oil crisis of the mid-1970s. In 1974 the global stock of gold was estimated to be half that of today, at about 80,000 tonnes. Monetary gold was about 37,000 tonnes, leaving 43,000 tonnes in the form of non-monetary bullion, coins and jewellery. Let us arbitrarily assume, on the basis of global wealth distribution, that two thirds of this was held by the minority population in the West, amounting to about 30,000 tonnes.
This figure probably grew somewhat before the early 1980s, spurred by the bull market and growing fear of inflation, which saw investors buy mainly coins and mining shares. Demand for gold bars was driven by the rapid accumulation of dollars in the oil-exporting nations, as well as some hoarding by wealthy investors from all over the world through Switzerland and London.
The sharp rise in global interest rates in the Volcker era, the subsequent decline of the inflation threat and the resulting bear market for gold inevitably led to a reduction of bullion holdings by wealthy investors in the West. Swiss and other private banks, employing a new generation of fund managers and investment advisors trained in modern portfolio theories, started selling their customers’ bullion positions in the 1980s, leaving very little by 2000. In the latter stages of the bear market, jewellery sales in the West became a replacement source of bullion supply, but this was insufficient to compensate for massive portfolio liquidation.
So by the year 2000, Western ownership of non-monetary gold suffered the severe attrition of a twenty-year bear market and the reduction of inflation expectations. Portfolios, which routinely had 10-15% exposure to gold 40 years ago even today have virtually no exposure at all. Given that jewellery consumption in Europe and North America was only 400-750 tonnes per annum over the period, by the year 2000 overall gold ownership in the West must have declined significantly from the 1974 guesstimate of 30,000 tonnes. While the total gold stock in 2000 stood at 128,000 tonnes, the virtual elimination of portfolio holdings will have left Western holders with little more than perhaps an accumulation of jewellery, coins and not much else: bar ownership would have been at a very low ebb.
Since 2000, demand from countries such as India and more recently China is known to have increased sharply, supporting the thesis that gold has continued to accumulate at an accelerating pace in non-Western hands.
Western bullion markets have therefore been on the edge of a physical stock crisis for some time. Much of the West’s physical gold ownership since 2000 has been satisfied by recycling scrap originating in the West, suggesting that total gold ownership in the West today barely rose before the banking crisis despite a tripling of prices. Meanwhile the disparity between demand for gold in the West compared with the rest of the world has continued, while the West’s investment management community has been actively discouraging investment.
The result has been that nearly all new mine production and Western central bank supply has been absorbed by non-Western hoarders and their central banks. While post-banking crisis there has presumably been a pick-up in Western hoarding, as evidenced by ETF and coin sales and some institutional involvement, it is dwarfed by demand from other countries. So it is reasonable to conclude that of the total stock of non-monetary gold, very little of it is left in Western hands. And so long as the pressure for migration out of the West’s ownership continues, there will come a point where there is so little gold left that futures and forwards markets cease to operate effectively. That point might have actually arrived, signalled by attempts to smash the price this month.
This admittedly broad-brush assessment has important implications for the price stability essential to bullion banks operating in paper markets as well as for central banks attempting to maintain confidence in their paper currencies.
Precious metals in capital markets
In the West itself, the attitudes of the investment community are fundamentally different from even those of the majority of Western hoarders, who are looking for protection from systemic and currency risks as opposed to investment returns. Western investors are generally oblivious to the implications, the most fundamental of which is that falling prices actually stimulate physical demand. Before the recent dramatic slide in prices the investment community undervalued precious metals compared with Western hoarders, let alone those in Asia, encouraging physical bullion to migrate from financial markets both to firmer hands in the West as well as the bulk of it to non-West ownership. There is now irrefutable evidence that these flows have accelerated significantly on lower prices in recent weeks, as rational price theory would lead one to expect.
Pricing bullion is therefore not as simple as the investment community generally believes. It is being put about, mostly on grounds of technical analysis, that the bull markets in gold and silver have ended, and precious metals have entered a new downtrend. The evidence cited is that medium and longer-term moving averages have been violated and are now falling; furthermore important support levels have been breached.
These developments, which arise out of the futures and forward markets, have rattled Western investors who thought they were in for an easy ride. However, a close examination of futures trading shows the bearish case even on investment grounds is flawed, as the following two charts of official statistics provided by weakly Commitment of Traders data clearly show.
The Money Managers category is the clearest reflection in the official data of investor portfolio positions, representing sizeable mutual and hedge funds. In both cases, the number of long contracts is at historically low levels, and shorts, arguably the better reflection of money-manager sentiment, remain close to high extremes. On this basis, investor sentiment is clearly very bearish already, with the investment management community already committed to falling prices. Put very simplistically there are now more buyers than sellers.
Money Managers are in stark opposition to the Commercials, who seek to transfer entrepreneurial risk to Money Managers and other investor and speculator categories. The official statistics break Commercials down into two categories: Producer/Merchant/Processor/User, and Swap Dealers. Both categories include the activities of bullion banks, which in practice supply liquidity to the market. Because investors and speculators tend to run bull positions, bullion banks acting as market-makers will in aggregate always be short. A successful bullion bank trader will seek to make trading profits large enough to compensate for any losses on his net short position that arise from rising prices.
A bullion bank trader must avoid carrying large short positions if in his judgement prices are likely to rise. He will be more relaxed about maintaining a bear position in falling markets. Crucially, he must keep these opinions private, and the release of market statistics are designed to accommodate these dealers’ need for secrecy.
Bullion banks’ position details are disclosed at the beginning of every month in the Bank Participation Reports, again official statistics. They are broken down into two categories, based on the individual bank’s self-description on the CFTC’s Form 40, into US and Non-US Banks. Their positions are shown in the next two charts (note the time scale is monthly).
In both gold and silver, the bullion banks have managed to reduce their exposure from extreme net short over the last four months. The reduction of their market exposure suggests that they have been deliberately transferring this risk to other parties, and is consistent with an anticipation that bullion prices will rise. It is the other side of the high level of bearishness reflected in the Money Manager category shown in the first two charts. The bullion banks control the market; the Money Managers are merely tools of their trade.
There has been little reduction in open interest in gold and it has remained strong in silver, because risk has been transferred rather than extinguished. Daily official statistics on open interest are provided by the exchange and summarised in the next two charts (note that data is daily).
From these charts it can be seen that recent declines in the gold price are failing to reduce open interest further, and in silver open interest remains stubbornly high. Therefore, attempts by bullion banks to reduce their net short exposure by marking prices down are showing signs of failure.
We can therefore conclude that investor sentiment is at bearish extremes and the bullion banks have reduced their net short exposure to levels where it risks rising again. Therefore the downside for precious metals prices appears to be severely limited, contrary to sentiments expressed by technical analysts and in the media.
This market position is against a background of a growing shortage of physical bullion, which is our next topic.
Physical markets
Casual observers of precious metal prices are generally unaware that the headline writers focus on activity in the futures markets and generally ignore developments in physical bullion. This is consistent with the fact that market data is available in the former, while dealing in the latter is secretive. However, as with icebergs, it is not what you see above the water that matters so much as that which is out of sight below.
It is not often understood in investment circles that gold and silver are commodities for which the laws of supply and demand are not overridden by investor psychology. Therefore, if the price falls, demand increases. Indeed, the increase in demand has far outweighed selling by nervous investors; even before the price-drop, demand for both silver and gold significantly exceeded supply. Evidence ranges from readily available statistics on record demand for newly-minted gold and silver coins and the net accumulation of gold by non-Western central banks, to trade-based information such as imports and exports of non-monetary gold as well as reports from trade associations reporting demand in diverse countries such as India, China, the UK, US, Japan and even Australia.
All this evidence points in the same direction: that physical demand is increasing on every price drop. There is therefore a growing pricing conflict between futures and forward markets, which do not generally involve settlement but the rolling-over of speculative positions, and of the underlying physical metal. Furthermore, analysts make the mistake of looking at gold purely in terms of mining and scrap supply, when nearly all gold ever mined is theoretically available to the market, in the right conditions and at the right price. The other side of this larger coin is that if the price of gold is suppressed by activity in paper markets to below what it would otherwise be, the stimulus for physical demand, being based on a 160,000 tonne market, is likely to be considerably greater on a given price drop than analysts who are myopic beyond 2,750 tonnes of annual mine production might expect. The numbers that are available confirm this to have been the case, particularly over the last few weeks, with reports from all over the world of an unprecedented surge in demand.
This is at the root of a developing crisis of which few commentators are as yet aware. Demand for physical has accelerated the transfer of bullion from capital markets to hoarders everywhere and from the West’s capital markets to other countries, which has been the trend since the oil crisis in the mid-Seventies. This is what’s behind an acute shortage of physical gold in capital markets, explaining perhaps why bullion banks feel the need to reduce their short positions.
While we can detail their exposure in futures markets, meaningful statistics are not available in over-the-counter forward markets, particularly for London, which dominates this form of trading. Forwards are considerably more flexible than futures as a trading medium, generating trading profits, commissions, fees and collateralised banking business. The ability to run unallocated client accounts, whereby a client’s gold is taken onto a bank’s balance sheet, is in stable market conditions an extremely profitable activity, made more profitable by high operational gearing. The result is that paper forward positions are many multiples of the physical bullion available. The extent of this relationship between physical bullion and paper is not recorded, but judging by the daily turnover in London there is an enormous synthetic short physical position. For this reason a sharply rising price would be catastrophic and any drain on bullion supplies rapidly escalates the risk.
Overseeing this market is the Bank of England co-operating with other Western central banks and the Bank for International Settlements, whose combined interest obviously favours price stability. They have been quick to supply the market if needed, confirmed by freely-admitted leasing operations in the past, and by secretive supply into the market, which has been detected by independent supply and demand analysis over the last 15 years. Furthermore, as currency-issuing banks, central banks are unlikely to take kindly to market signals that suggest gold is a better store of value than their own paper money.
We can only speculate about day-to-day interventions by Western central banks in gold markets. In this regard it seems that the slide in prices on the 12th and 15th April was triggered by a very large seller of paper gold; if this market story and the amount mentioned are correct, it can only be central bank intervention, acting to deliberately drive prices lower. Given the market position, with Money Managers in the futures markets already short and highly vulnerable to a bear squeeze, the story seems credible. The objective would be to persuade holders of physical ETFs and allocated gold accounts to sell and supply the market, on the assumption that they would behave as investors convinced the bull market is over.
Conclusions
For the last 40 years gold bullion ownership has been migrating from West to elsewhere, mostly the Middle East and Asia, where it is more valued. The buyers are not investors, but hoarders less complacent about the future for paper currencies than the West’s banking and investment community. There was a shortage of physical metal in the major centres before the recent price fall, which has only become more acute, fully absorbing ETF and other liquidation, which is small in comparison to the demand created by lower prices. If the fall was engineered with the collusion of central banks it has backfired spectacularly.
The time when central banks will be unable to continue to manage bullion markets by intervention has probably been brought closer. They will face having to rescue the bullion banks from the crisis of rising gold and silver prices by other means, if only to maintain confidence in paper currencies. Any gold held by struggling eurozone nations, theoretically available to supply markets as a stop-gap, will not last long and may have been already sold.
This will likely develop into another financial crisis at the worst possible moment, when central banks are already being forced to flood markets with paper currency to keep interest rates down, banks solvent, and to finance governments’ day-to-day spending. Its importance is that it threatens more than any other of the various crises to destabilise confidence in government-backed currencies, bringing an early end to all attempts to manage the others systemic problems.
History might judge April 2013 as the month when through precipitate action in bullion markets Western central banks and the banking community finally began to lose control over all financial markets.
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His priest falls asleep during his confession.
He complains that his elderly mother never calls.
In idle moments, drying paint and growing grass watch him.
He is .... the least interesting man in the world.
"Stay stupid my friends."
Classic akak + 1,000
You believe that human creativity is over? What a sad life you must lead.
Pudtz: We're still waiting for your original eistein thought regarding what is a better store of wealth than gold. Heck, give us an unoriginal thought.
Come on troll. You can do it!
The truth is that PUD has no suggestions for a better store of value than gold. It's a thought experiment he's never taken, and does not care to ever take. Those concerned with store of value are by definition individualists. Why would a collectivist be concerned with how individuals can retain the value of their wealth? It does not compute to the collectivist. When you should be subordinating to the needs of the group, the country, the world, the planet, etc., your individual concerns are irrelevant. No, I don't think PUD much cares about stores of real value. Honestly, I don't think he thinks very highly of those who do.
Hey, PUD, how do you manage to type out so much drivel while simultaneously fondling the genitalia of the children you so adore?
You must be at least ambidextrous and a worst a robot with multiple functional arms.
Sooner or later, you will either crawl quietly back into your hole of self-indulgent pity and pathological human abusive behavior or disassembled and the world will be a better place.
In the meantime, rest assured that myself and the rest of the ZH gold and silver "hoarders" will continue unaffected by your blatant howls for attention.
I couldn't have thought of that shit if I had twenty years...
Long dreams.
@ PUD:
There once was a troll named Pud,
Whose game was slingin' the mud.
He'd troll a gold thread, wishing us dead,
Since we didn't buy into his crud.
>> The earth would breathe a sigh of relief,
The same could be said for oil, or people for that matter. Over population has done much more damage than gold mining. If you feel so strongly about the envirmental damage done by gold, you have it in your power to lessen the burden the earth feels due to over population.
yes, thank God no other extractions have these effects. And ironic, since it's the lack of financial stability and physical benchmarks that extract your concerns
You're so ridiculous. How can you make gold "collapse", exactly?
You really think if some computer at the COMEX claims my gold is "worthless", that will suddenly make billions of people not consider a store of value anymore? Just because the COMEX said so?
I'm eagerly awaiting the day the COMEX quotes a gold price of $0. because its true market value will be revealed soon after that. And no, there won't be any amount of dollars capable of buying a single ounce.
Holding gold under some nations' laws, already gives the police and gov't a presumption you are a criminal:
« Under the Proceeds of Crime Act of 2002 (known as POCA), valuables and cash above £1,000 are presumed by the police to be the proceeds of crime, unless you can prove otherwise, a total reversal of the presumption of innocence. Aside from those three dozen or so people found guilty, the vast majority of the 3,500-plus box owners have turned out to be innocent. Yet their money was confiscated, and in many cases is still being held, by the Metropolitan Police or the Inland Revenue. The owners have spent nearly three years and thousands of pounds in uncompensated legal fees having to justify why they kept their personal belongings in safety deposit boxes and how they came by them in the first place. Worse still, when people have had their belongings returned, in some cases cash and jewellery has been missing.
Many of the box owners were Jewish or Asian; their families had fled Nazi Germany, escaped the bloodbath of post- partition India, or been thrown out of Uganda by Idi Amin. ‘These are people who have a history of having to move fast,’ says Siobhan Egan of Lewis Nedas, the London solicitors who represented over 100 of the box owners. ‘Many had come to the end of their business lives. They traditionally keep cash and jewellery quite legitimately.’ Lewis Nedas put an advertisement in The Jewish Chronicle and was inundated with responses from outraged Jewish pensioners. ‘A client of mine had a great deal of jewellery taken, another had £100,000 in cash, another £120,000,’ says Egan… »
http://www.standard.co.uk/lifestyle/operation-rize--the-inside-story-on-...
Don't worry. As soon as gold hits £0, this law will no longer affect us. In case of inspection, we can just say our stack is "worthless barbarous relic" and they'll be gone.
"“Central banks stand ready to lease gold in increasing quantities, should the price of gold rise,” - Alan Greenspan
It appears that Greenspan's gambit is now failing. Fortunately there is no futures contract or leasing of rope, because we will need a lot of it when the time comes to try, convict, and hang these bankers.
It's not failing. It did work... for a while.
Demand is 'robust' the local store says.
@ CheapBastard
Was lookin' at my old woman as I read your comment.
She's lookin' pretty "ROBUST" her own damn self.
But is it antifragile?
Has anyone ever assayed every single ounce of these "tonnes"??
When a store runs out of bread, does the price go up?
Nope
When a troll runs out of specious anti-gold arguments, does his paycheck from DHS go up?
yes but it buys less
In btc, yes.
Yes in fact it does, idiot. If you enter a store wanting bread and it has none, you must spend time and energy to travel to another store to buy it.
I could sell gold for $10 an ounce if I didn't have any.
Did you ever pass a gas station that has been closed for a long time and thrill to the low, low price on the sign?
Twinks go up: http://www.theatlantic.com/technology/archive/2012/11/on-ebay-the-starti...
Unless there's a guy standing outside the store who happens to hold a couple of extra loaves he's willing to part with for the right price.
Watch it wiggle, see it jiggle, Jello brand gelatin.
Does the price go up on what? On the bread that is not in the store and cannot be purchased at any price? Did gas prices go up on 9/11 to ration current supply? Yep.
Right, but tommorrow the'll have more bread on the shelves. Not so with a streched supply of gold and silver. That has to be dug out of the ground, shipped, refined, minted, etc.
Good article, but why does Alasdair have to perpetuate the use of the implicitly pro-confiscation, anti-gold word "hoarder" in relation to those who hold gold?
Why does nobody consider other investors or savers to be "stock hoarders" or "bond hoarders" or "cash hoarders"?
Enough with these Orwellian "hoarder" and "hoarding" words already when discussing gold.
Indeed.
I prefer the terms:
"Paperbugs"
"stock-freaks"
"bond-hoarders"
in the end, they will be bulimic
akak
thats a big 10- hoarder 4
"Hoarders"? I prefer the term "Street Smart".
Nobody pisses down my back and tells me it's rainin'.
Having traded paper all these long years, western banksters seem to have forgotton that putting real, valuable items on sale spurs purchases. They must be scratching heads wondering why all the muppets aren't selling after slamming the price....
Every asshole not buying physical right now is an asshole
I buy some every month but I'm disappointed by the premiums being charged. I understand the demand is high and that the dealers are able to get higher premiums, but it's still a little disappointing when the spot price of silver comes down 30% and the price charged by dealers is almost the same. It's not right.
.
Supply.
Demand.
Same old, same old.
I agree, supply and demand. Dealers are having a difficult time re-stocking their shelves, not to mention that they don't want to lose their shirts on the PMs they are selling. If you want it now, you're going to pay extra premium for it. End of story.
With regard to small dealers, i.e., local coin shops and pawn shops, many of them will simply cease to exist as viable businesses unless they are well-capitalized and/or very savvy dealers.
I see very few "we buy gold" ads on the teevee lately, a sign that the end of local speculation is upon us.
Most of these people are small-time entrepreneurs who will find new avenues to exploit, and I use the word "exploit" in the most favorable light.
New article by the same author as this one. Good read.
http://www.goldmoney.com/gold-research/alasdair-macleod/gold-market-repo...
Rioting is sooo 2012. The muppets are buying metals, stealth guerilla is the new weapon, and internet facilitates.
(1) Wall street and the Fed had been controlling the market for so long that physical demand is but forgotten.
(2) Most of the 'modern portfoliot theory' were manufactured for main steet to believe. This time wall street happened to believe it because lies have been told/retold too many times.
(3) Physical demand was awakened by Wall street-Washington-ECB-Tokyo. The question is how to squeeze the toothpaste back into the tube.
I'm standing on the beach watching a sunset. Off in the distance, I see something dark and possibly ominous approaching. Could it be an tsunami or is it my imigination...I'm still looking as the waves wash up on the shore. I wonder what is coming.
The Dark.
And if you are watching the sunset, it means the dark is coming up behind you. Unseen.
Had a dream last night depicting going to the metals dealer and the price of silver was down to $15 something an ounce.
Meanwhile, the news is people do not want to hear the slop-bucket slime from the LSM (lame stream media) any more at all. The babylonians are losing their grip on the masses, especially in America.
Lamestream Media: TV titans lose US viewers over slanted stories:http://www.youtube.com/watch?v=SkbytLyOjWQ
I had the same dream.
Except it was back in the Sixties and I could buy silver for $1.86/oz.
Ah yes, those were the days.
How do all you stackers plan to preserve wealth while we go through another decade of deflation, as the elite banksters protect their petrodollar?
Gold will hit 750 and silver 12. What will you say then?
Deflation under a fiat currency regime is the propaganda of malevolent sociopaths and the fantasy of historically ignorant fools.
Well said.
I guess we'll say we were wrong. And if it goes the other way I suppose you'll say you were wrong. What else can one say? Isn't it rational to act on what you think you know?
I will continue to trade in my paper for real value metal instruments. Lower prices just mean I can get more for less.
However, anyone believing that currency will retain value in a deflationary economy that continues to suffer production shortfalls and warfare has a much bigger problem than pm inventory- they haven't the brains god gave a goose. Yen values in a continually defaltionary environment are still falling AND they are purchasing less.
You might want to pay attention, there isn't going to be a test takeover nor extra credit...
As the predators destroy every economy, the only thing that will be worth anything is real, physical goods, especially operating productive equipment that produces additional real, physical goods. If you don't like gold, who cares? Go pick some other real, physical good that you prefer. But if you think any paper asset will save your bacon, you have a huge shock coming.
PS: There is one aspect of deflation that makes sense. When humans are stupid in mass in a fiat world, they may get into excessive debt in mass. Example: today. Once the large majority is in deep debt, they certainly do have less spending money, as much of their income goes to debt service. This drives demand down, which can drive prices of real, physical goods down (as well as fiat paper assets like stocks).
But every human who continues to produce more real, physical goods than he consumes will have no problem meeting his needs and desires. Humans who produce fiat stuff, however, will find it increasingly difficult to find customers, as others are forced to distinguish what they need from what they are used to buying.
I measure my wealth in ounces of gold, but my income is measured in FIAT paper.
Therefore, every time the price of gold falls in FIAT terms, the value of my income automatically increases because I can buy more ounces with the same amount of FIAT.
Therefore, please, PRETTY PLEASE, bring it lower IDIOTS.
Woopee, lets go get more and cost average. I would love to buy at those prices. Alas, it will not happen
.
750 What? Barrels of Oil?
12 what? Bushels of Wheat?
Hmm, I think you may be right for once.
I daresay that gold and silver will retain strong relative value to paper currency regardless of which way said fiat moves. Inflation/deflation means nothing to the precious metals. They remain precious without regard to the directions of fiat.
So much for your schadenfruede dreams.
You, however, will likely not prosper under either monetary condition.
I think too often the many lose sight of the END GAME! and it's easy to do...
In on 1
Hoarders or whorders.I'm going to whord not whore some Gold.
This is NO dress rehersal!
The emperor's costume is nakedness. For all to see - if they look!
Those with their heads in the sand, are in effect blind and will be too late to the party.
Don't be late. Open your eyes and look around. Most of all, listen. What do you hear? The bell is tolling.
The word "hoarder" has a 100% negative connotation.
Is the author semantically tone deaf?
Hugh Heffner hoards physical beautiful women as an asset, but rehypothicates paper images of them for profit.
Where do they tattoo the last use date on them?
The date tattoo is airbrushed out.
"Is the author semantically tone deaf?"
When in Rome...
Of course the word "hoarder" has a negative connotation! That is why you are being set up to have your gold confiscated.
As a student, I watched my famous economics lecturer prattle on about gold being a barbarous relic. And that was his line - right up to when Russia invaded Afghanistan. The possibility that America might go to war over that event made him into an instant gold advocate.
If there is war, pestilence or civil commotion there will only be one currency for international trade - gold.
Watch the pundits make a similar instant transformation if TSHTF.
[double post]
They'll make the next rhetorical step and claim that anyone who "hordes" something must be "greedy" and if they're not "actively using it" then it should then be "made available for everyone/the common good"
That's what they'll claim anyway.
The want you to not have your cake and not call it cake either.
Why do you think that Pro-Establishment Propaganda Channel #47, er, "The National Geographic Channel", runs a program ridiculing, mocking and demonizing "hoarders", called, not surprisingly, "Hoarders"?
Although I understand the premise, in general I don't see investors paying big premiums for physical precious metal as wise or necessary. There are other options, such as CEF or the Sprott trusts that are legit, liquid, and don't involve large premiums. Sprott has a piece out this weekend discussing the South Africa situation and highlighting PGMs. I agree.
Further there is a generational opportunity in select mining shares. I will be posting Monday morning on a couple more out of the lower capex advanced stage names that were indiscriminately marked down in the April fire sale. I strongly believe there will be some strategic takeouts and at big mark ups. The creme de la creme is available at prices that will be even more shocking in hindsight. Costs are coming down in the sector, just as the price of the product improves.
Mining costs falls for all prodcuers:
http://winteractionables.com/?p=1306
I would have thought Sprott's platinum article should have mentioned Russian production and Canadian production and of course stock piles but no mention. A supply - demand equation has to be global, no?
I haven't looked myself, just sayin'.
Don't the Rothschilds control a lot of platinum? I think, yes..
LOL, KABOOM!!! Right in the bankster's faces. Paper PM's implodes.
They will decide the public is harming themselves engaging in an insane quest to possess a useless rock. They'll confiscate it and put it into (literally) Ft. Knox so no one can be tempted by its extreme uselessness.
Question is, how many will be prepared to die to take a relic from me
Shit man, in Boston they sent SWAT teams to roust grannies looking for a 19 year old kid. What is to stop them from sending one to your house? And if you fire one shot at them, they bring in the serious weaponry and Dorner your ass.
Up voted you. The only way to make a stand is organized opposition. Trying to make stand at your front door, by yourself is a death sentence. If you have neighbors or friends that are willing to make that stand with you, then maybe they'll think twice.
deleted
I predict that the "Dam will break" when...
1. The BRIC+ countries have enough Gold in their CB's to back their currency with gold
2. China has enough country-to-country FX swaps for their currency. Beyond Brazil, UK, France, Australia, India, Iran (and Saudi Arabia).
3. BRIC CB's precipitate another paper-gold dump (using US Treasuries) and the bullion-run is at the Avalanche-ready condition. This could be started by China and quickly followed by other Asian/BRIC countries.
When #1 and #2 are in place, a real or contrived "black swan" event will lead to China to use #3 as the Avalanche Trigger Event. IMO.
TPTB in the West (Fed, BoJ, BoE, BoF, Bundesbank, BoI) know the Big Reset is inevitable. But it's also delay-able to a point. That's why they are devaluing/debasing/printing in synch -- like in Synchronized Swimming at the Olympics. The 0.1% Elite is "prepping" for life after the Big Reset. Like all of us, they want to maintain their lifetyle. And they plan to keep their power, if possible.
Seems resonable. Any time frame on all of this? Another 10 years of this game would be an absolute nightmare.
BTW - does the author still actually believe the CFTC numbers? Does anyone?
No longer need JP Morgue and the LBMA we now have the HAA.
Gold Hoarding by private individuals (lets call it a population), is a less well understood topic than say central bank gold reserves 'holdings/hoardings".
France throughout the 20th century and up to the 1980s was known as a hotbed of hoarding with over 4000-5000 tonnes hoarded by the French. Its more realistic to assume that this is still the case for France as opposed to not being the case. Germans are also big gold hoarders and a huge amount of krugerrands were exported to Germany. The Swiss and Austians also used to at least love to hoard gold.
In the 1970s IMF gold auctions, a lot of the successful bids went to german banks, increasingly so in the later auctions. Commertzbank was famous for hovering up a lot of the auction offerings. Admittedly a lot of this was thought to be on behalf of Saudi royals etc acting in their private capacity.
Which brings me to my next point. Arabian interests (lets call it GCC countries players) have huge hoards of gold built up over long periods. ARAMCO used to (and maybe the modern equivalent still does) pay oil royalties in gold to the saudi rulers. Throw in the IMF auctiin gold above also. When SAMA (saudi arabian monetary authority) announced that their gold reserves had suddenly increased they clarified that it was just a reclassification from some other accounts. Other accounts? Just keep this in mind.
Then there are the vast gold hoards of India both by the polulation in general and by temples, and previous royalty.
Don't forget the Rothschilds gold vaults also..
So all I'm highlighting is that the topic of private gold hoarding is not very well covered by research and analysis. I know its a hard area to get information on but surely someome is up to the challenge.
Any contributions of info (and gold) welcome....:)