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Guest Post: Gold And The "Zero Hour" Scenario

Tyler Durden's picture




 

Authored by Addison Wiggin via The Daily Reckoning blog,

It’s a Sunday night. October 2013. Parents are making sure the kids’ homework is done. Football fans are settling in for the night’s NFL matchup. Reigning champs, Baltimore, are about to lose. And all hell is breaking loose in the precious metals markets.

Moments before electronic trading opened at 6 p.m. EDT, Commodity Exchange Inc. — the Comex — announced it would settle a large gold contract in cash and not gold. To be blunt about it, the Comex has defaulted on its contract. Suddenly, everyone else with a gold contract — or a silver contract — started to wonder if they’d be next to get stiffed.

Gold, which ended that autumn week at $1,715 an ounce, starts gyrating wildly… but mostly up. By Monday morning, it’s up past $1,800. But good luck trying to get that price — or anything near it — at a coin shop or online dealer. Under normal circumstances, a $1,800 spot gold price would mean U.S. Gold Eagles around $1,890 — a 5% premium.

But on this day, buyers — desperate to get their hands on actual, physical metal because trust in the system is breaking down — have driven the price far above $2,000.

This is “zero hour” — the day you can mark on a calendar when the price of real metal breaks away forever from the quoted price on CNBC’s ticker. It’s the day you’ll be grateful you hold real metal and not a proxy like the GLD exchange-traded fund (ETF) (NYSE:GLD).

Sound far-fetched? Today, we’ll show you why it’s inevitable…

The Emperor’s New Clothes: Why Now Is the Worst Time to Give up on Gold

The “zero hour” scenario is the ultimate emperor-has-no-clothes moment. Hans Christian Andersen’s original 19th-century tale The Emperor’s New Clothes has become a 20th- and 21st-century touchstone for obvious truths overlooked by the masses. It is almost a cliche. But it is singularly appropriate for our purposes today.

The “emperor” here consists of central banks, commercial and investment banks and the commodities exchanges. The day everyone recognizes them as being buck naked — or in this case, stripped of the gold they claim to hold — will be “zero hour.” It’s the day you’ll be happy you held on, even as gold sank from $1,900 in September 2011 to less than $1,500 as we go to press.

You did hold on, didn’t you?

Well, you can “buy the dip,” at least.

Caution: What we are projecting here is nearly the ultimate in fat-tail events. It is the product of deep research by one of the gold market’s most plugged-in luminaries… plus our own informed speculation.

But make no mistake: Zero hour — in the form of a precious metals default on the Comex, or maybe the London Bullion Market Association (LBMA) — is coming sooner or later.

“The odds of it happening are about 100%,” says Eric Sprott.

Mr. Sprott oversees $10 billion within the Canadian asset-management giant that bears his name. Among those assets is the Sprott Physical Gold Trust (NYSE:PHYS) — our recommended vehicle if you choose to keep a portion of your gold holdings in a brokerage account. To understand why it’s a certainty is to go deep down the rabbit hole… into the vaults of the world’s central banks. Sit tight…

12 Years and Counting: Demand Runs Away From Supply

We don’t want to make it sound more complicated than it is. At root, zero hour will come when everyone knows gold supply can no longer meet gold demand.

“When I look at the physical data that I can see in gold,” Sprott told us in a recent interview, “the gold market has not changed its supply fundamentals in 12 years. It’s flat.” Add up supply from new mines and recycled scrap gold — mostly old jewelry — and the World Gold Council reckons it’s rock-steady at about 3,700 tonnes (metric tons) per year.

And what about demand? Since gold began its bull run in 2000, scads of new demand sources have come into the picture.

  •  Central banks, which were net sellers of gold in the ’80s and ’90s, became net buyers
  •  Exchange-traded funds like GLD and trusts like PHYS didn’t even exist before 2004
  •  Annual sales of gold coins by the U.S. and Canadian Mints have grown fourfold
  •  Chinese consumption of gold has nearly quadrupled
  •  Indian consumption (measured by imports) has grown 30% from an already high level.

“The mere combination of only five separate sources of demand,” Sprott writes in a recent white paper, “results in a 2,268-tonne net change in physical demand for gold over the past 12 years — meaning that there is roughly 2,268 tonnes of new annual demand today that didn’t exist 12 years ago,” when supply and demand were more or less in balance.

Something's Gotta Give

And those are only the official figures. “There are lots of other purchasers of gold that I don’t have records of,” he elaborated in our interview.

“So for example, when somebody physically buys a gold bar, whether it’s [hedge fund manager] David Einhorn or the University of Texas endowment or someone like that, there’s no place that I can go and see how many bars were purchased. There’s no public documentation if Russian billionaires are buying gold.” For every story that makes the news, like Einhorn or UT, there might be 10 purchases that occur sub rosa.

Summing up, nearly 2,300 tonnes (officially) of new demand each year are coming into a market where supply is still stuck at roughly 3,700 tonnes. “So where’s the gold coming from?” Mr. Sprott asks rhetorically. “Who’s supplying this gold?”

After a research project that’s gone on as long as the bull market in gold, he’s left with only one plausible explanation — the one that makes default on a major commodity exchange inevitable.

“The Western central banks,” he tells us, “are surreptitiously supplying gold by leasing theirs out.”

The Central Banks’ Shell Game in Gold: “It’s Here… No, It’s Here”

“Wait a minute,” you’re asking. “You just said central banks became net buyers of gold in the last decade.”

True… but all the buying has come from developing countries like Russia, China, India and Kazakhstan.

Meanwhile, the numbers from the big developed countries — the U.S. included — have been static.

Remember the main reason central banks are in business — to benefit their biggest and most powerful member banks.

And what’s beneficial to U.S. and European banks is gold leasing. Commercial and investment banks lease gold from a central bank at bargain rates — usually less than 1% a year. Then they sell that gold into the private market and plow the proceeds into… well, anything that yields more than 1%. It’s a sweet deal if you’re a banker.

“But then the gold is gone, right?” Yes. If the central bank wants its gold back from the commercial and investment banks, those banks would have to buy gold on the open market — driving up the price. That’s a bad deal if you’re a banker.

So usually, there’s a tacit understanding: Central banks don’t ask for their gold back, and the commercial and investment banks roll over their gold leases. As long as they’re earning more than 1%, the debt service is easy peasy.

But if a central bank asks for its gold back, it’s game over.

“They can get away with [the leasing],” Sprott explains, “because on their financial statements, the one line they have for gold says ‘gold and gold receivables.’ A receivable is not real gold, physical gold… and we don’t get a breakdown between the receivables and the physical. They’ve not provided that.”

Look below and you can see the guile central bankers use to concede their gold “holdings” is not limited to bars in a vault.

How Western Central Banks Describe the Gold Reserves on Their Books

“It would not lend much credence to central bank credibility,” Sprott writes, “if they admitted they were leasing their gold reserves to ‘bullion bank’ intermediaries who were then turning around and selling their gold to China, for example.

“But the numbers strongly suggest that that is exactly what has happened. The central banks’ gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back.”

Add it all up and we’re getting much closer to zero hour.

 

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Thu, 06/06/2013 - 20:15 | 3631886 kliguy38
kliguy38's picture

its ALREADY settling in cash.....everybody and their brother knows it and are taking delivery of physical 

Thu, 06/06/2013 - 21:30 | 3632195 DoChenRollingBearing
DoChenRollingBearing's picture

Here's another estimate (12 May 2014):

http://www.freegoldclock.org/

Thu, 06/06/2013 - 22:11 | 3632326 OutLookingIn
OutLookingIn's picture

Gold facts from the Census Bureau monthly trade data for 1991 to 2012

Net gold exported at 5,504 tonnes

US mine supply and recycling at 7,532 tonnes

Gold demand at 6,517 tonnes

That leaves only 1,015 tonnes for export.

Where did the other 4,489 tonnes come from?

Fri, 06/07/2013 - 00:02 | 3632473 sitenine
sitenine's picture

Rehypothication - a scheme so simple that not one in a thousand will have it figured out until it's too late. We live in a system were 'investors' don't actually give much of a shit about whether or not the gold will ever be delivered. Hell, most 'investors' don't give much of a shit whether any actual gold exists at all - it is irrelevant since they are only interested in making paper gains. See, after thousands of years of alchemists failing to turn lead into gold, central bankers figured out how to turn paper into gold! All contracts that I'm aware of stipulate that the 'delivery' can be satisfied in paper. EVERYONE KNOWS THIS! They don't care! The only way to bring this all down is to start caring. Take delivery! Demand the physical while you can still get it close to spot! More people need to understand this. More people need to protect their wealth from what is about to happen.

[edit] Afterthought - The 'debunkers' out there would do well to have an honest conversation with 'gold bugs'. The discussion needs to center around the difference between paper and physical. So called gold bugs don't necessarily advocate buying gold, they advocate buying physical over paper (for reasons listed above as well as others). This is an IMPORTANT distinction because the debunker should not necessarily ridicule the gold bug for the wrong reason.

Fri, 06/07/2013 - 00:10 | 3632615 Pinto Currency
Pinto Currency's picture

 

Read the Comex Rulebook rules 2-230k; 7B01, and 7B14.

http://www.cmegroup.com/rulebook/NYMEX/

Do  you see anything requiring public announcement of forced settlement of cash instead of gold or silver?

How do we know that this is not happening right now with confidentiality clauses in return for premium cash payment?

Fri, 06/07/2013 - 11:57 | 3633899 Thisson
Thisson's picture

Answer: we know it's not happening because every day, jewelers take physical delivery to make things such as wedding rings.  Do you see any sudden shortage of wedding rings?  Nope!

Fri, 06/07/2013 - 00:16 | 3632622 Colonel Klink
Colonel Klink's picture

Isn't this the same story of banking over and over?

https://www.youtube.com/watch?v=7I_k0tAnQ7U

signed

-Goldsmith, Goldfarb, Goldman, Goldstein, et. al.

Fri, 06/07/2013 - 04:56 | 3632827 cloudybrain
cloudybrain's picture

sell gold and buy toilet papers

Thu, 06/06/2013 - 20:17 | 3631904 Kirk2NCC1701
Kirk2NCC1701's picture

<-- Bets on Eric Sprott storing the gold outside the US

<-- Bets on Eric Sprott storing the gold ootside Canada

Thu, 06/06/2013 - 20:51 | 3632043 Sokhmate
Sokhmate's picture

How do I vote both?

Thu, 06/06/2013 - 23:57 | 3632596 Bastiat
Bastiat's picture

+1 for "ootside Canada"

Fri, 06/07/2013 - 04:43 | 3632824 TheFourthStooge-ing
TheFourthStooge-ing's picture

Baby it's gold ootside, eh.

Fri, 06/07/2013 - 05:13 | 3632834 Bearwagon
Bearwagon's picture

+1 for "Baby, it's cold outside"  ;-)

Thu, 06/06/2013 - 20:18 | 3631905 jcpicks
jcpicks's picture

Good luck in demanding physical delivery.

Thu, 06/06/2013 - 21:01 | 3632086 achmachat
achmachat's picture

luckily the wholesalers still provide the European dealers with one-ounce gold Maples, Australian Nuggets, Philharmonics etc. IF you keep your requests reasonable.

You just need to wait around two weeks longer than not too long ago.

Let's see how long until those two weeks become a month, two months... and eventually never.

Fri, 06/07/2013 - 00:50 | 3632657 Davalicious
Davalicious's picture

Yes, I bought a bunch of gold Krugs from the Guernsey Mint. They delivered in about 10-12 days. Said they were overwhelmed with demand. GM have their prices fixed to te London Fix. So I was able to buy a dip. Shockingly, the UK doesn't have tax on gold coins (they have it on Silver).

I have a few KG Gold in Bullion Vault (Switzerland) and then some CEF (Central Fund of Canada). I'd go 100% physical except I can't hold it where I'm living.

Fri, 06/07/2013 - 04:05 | 3632797 Going Loco
Going Loco's picture

Duff information. See http://www.taxfreegold.co.uk/krugerrandinfo.html

Your purchase was in Guernsey. Not part of the UK.

The only coin that is worth buying in the UK is the gold sovereign which is legal tender and therefore not subject to VAT or capital gains tax.

Fri, 06/07/2013 - 07:37 | 3632970 BigJim
BigJim's picture

No gold in the UK is subject to VAT. But you're right - Sovereigns (and the other UK-issued 'legal tender' coins Britannias & English Roses) are the only ones not subject to capital gains taxes.

Fri, 06/07/2013 - 15:40 | 3634958 thisandthat
thisandthat's picture

No, within EU all investment gold is VAT exempt; gold jewellery and collectibles (and silver) are subject to VAT (although legal tender silver coins/coinbars pay reduced VAT, unlike bullion - eg: 7%, instead of 20%+).

Thu, 06/06/2013 - 20:19 | 3631913 lolmao500
lolmao500's picture

They gonna CDO that shit...

http://stream.wsj.com/story/markets/SS-2-5/SS-2-245966/?mod=wsj_streamin...

One of Wall Street’s Riskiest Bets Returns

In a sign of how hard Wall Street is trying to satisfy investor demand for higher returns, J.P. Morgan Chase and Morgan Stanley bankers are moving to assemble synthetic collateralized debt obligations, or CDOs.

Thu, 06/06/2013 - 20:26 | 3631945 Bear
Bear's picture

 synthetic CDO's ... I'm all over these

Thu, 06/06/2013 - 21:01 | 3632089 Its_the_economy...
Its_the_economy_stupid's picture

really FUNNY!

Fri, 06/07/2013 - 00:07 | 3632608 Colonel Klink
Colonel Klink's picture

I've heard you can even eat them with enough salt.

Thu, 06/06/2013 - 20:21 | 3631930 Bear
Bear's picture

Zero Hour comes when Zero Hedge says so ... stayed tuned

Thu, 06/06/2013 - 20:23 | 3631939 Charles Nelson ...
Charles Nelson Reilly's picture

My Ravens are like gold, everyone hates them.

Thu, 06/06/2013 - 20:24 | 3631943 Caviar Emptor
Caviar Emptor's picture

Shhhhhh! Don't scare the children....

Thu, 06/06/2013 - 20:24 | 3631946 ZH11
ZH11's picture

Always becoming and never being...

Fri, 06/07/2013 - 01:24 | 3632688 Milestones
Milestones's picture

Goethe I believe.           Milestones

Fri, 06/07/2013 - 13:29 | 3634394 ZH11
ZH11's picture

Even earlier my friend, Plato.

Which says it all really, thousands of years of 'civilisation' and the development of man only for the limbic system to remain firmly in control.

Our friend above has clearly not come to this realisation yet and still believes in absurb ideas such as rationality and order.

"The Aneristic Principle is that of apparent order; the Eristic Principle is that of apparent disorder. Both order and disorder are man made concepts and are artificial divisions of pure chaos, which is a level deeper than is the level of distinction making."

Thu, 06/06/2013 - 20:25 | 3631953 q99x2
q99x2's picture

What happens to Bernanke when everyone finds out that he gave the US Governments gold reserves to Jamie Dimon?

Thu, 06/06/2013 - 20:45 | 3632027 freewolf7
freewolf7's picture

What happened to Obama?
What happened to Holder?

Thu, 06/06/2013 - 20:56 | 3632067 El Oregonian
El Oregonian's picture

"What happens to Bernanke when everyone finds out that he gave the US Governments gold reserves to Jamie Dimon?"

We tell him to bend over and grab his Bernankles...

Thu, 06/06/2013 - 21:31 | 3632201 Jam Akin
Jam Akin's picture

Isn't the bend over grab ankle thing BO's department?

Thu, 06/06/2013 - 20:29 | 3631957 Cognitive Dissonance
Cognitive Dissonance's picture

How many paper Gold "owners" can you fit in a phone booth with one physical ounce of Gold? I'd say 100......if they're lucky.

<You're gonna need a bigger boat booth.>

Thu, 06/06/2013 - 21:03 | 3632098 Its_the_economy...
Its_the_economy_stupid's picture

FUNNY!

Thu, 06/06/2013 - 21:05 | 3632104 Hulk
Hulk's picture

Phone Booth ??? Man, where have you been ??? Mrs Cog, you'd better unchain the Mr from the bedpost and let him see if he can find a phone booth anywhere !!!

Thu, 06/06/2013 - 21:17 | 3632153 Cognitive Dissonance
Cognitive Dissonance's picture

Phone booths are sooo pre-Cog.

<Unchain my heart....>

Fri, 06/07/2013 - 00:10 | 3632616 Colonel Klink
Colonel Klink's picture

Unchained melody...for the missus.

http://www.youtube.com/watch?v=qiiyq2xrSI0

Fri, 06/07/2013 - 01:29 | 3632694 Milestones
Milestones's picture

Well, how aqbout a Ray Charles fan then.         Milestones

Thu, 06/06/2013 - 20:30 | 3631976 eddiebe
eddiebe's picture

As long as the same big boyz stay in charge, fundamentals or any other reasons don't matter. Gold will do what they say it does.

Thu, 06/06/2013 - 20:37 | 3631996 Tinky
Tinky's picture

Nonsense. They've lost control already, and are desparately trying to maintain an illusion.

Time's running out. Rapidly.

Thu, 06/06/2013 - 20:42 | 3632014 Caviar Emptor
Caviar Emptor's picture

There is a chance of a cascading set of events that would upset their apple cart: If gold skyrockets that could be the very first domino to fall, taking the global economy with it. Of course at this poin, any major upset in the fragile global equilibrium could set it off.

Thu, 06/06/2013 - 20:56 | 3632059 Lets_Eat_Ben
Lets_Eat_Ben's picture

"Gold will do what they say it does."

 

To a point and then they lose their credibility. That is happening right now. Also, a large part of the large commercial shorts have repositioned and they may be ready to make money on the way up.

Thu, 06/06/2013 - 20:33 | 3631986 Mad Mohel
Mad Mohel's picture

I like AU, but your article turned me off with "plugged in luminary". Very queer.

Thu, 06/06/2013 - 20:39 | 3632003 F22
F22's picture

And Jamie sold it to China....

Thu, 06/06/2013 - 20:58 | 3632074 sgorem
sgorem's picture

@f22, you just earned a bonus greenie for your avitar, thanx...............

Thu, 06/06/2013 - 20:49 | 3632037 ultimate warrior
ultimate warrior's picture

CNBC said gold is going to $500/ounce. They seem honest and dependable so I trust them. Just stay the course & buy stocks and real-estate, they can only go up.

/sarc/

Thu, 06/06/2013 - 21:04 | 3632101 Money 4 Nothing
Money 4 Nothing's picture

When the wheels come off this wagon, Gold will dip hard, remeber September 2008? Don't freak, it bounces right back.

The first person to come forward with the only option or solution when the dust settles are the guilty party.

Thu, 06/06/2013 - 21:06 | 3632112 Winston Churchill
Winston Churchill's picture

Of course they are right.The premum will be $10K per ounce at that

point. If you can get anybody to sell it for green toilet paper, that is.

Thu, 06/06/2013 - 21:17 | 3632152 americanspirit
americanspirit's picture

And checking out Maria Buttaroma., I would invest heavily in Botox.

Fri, 06/07/2013 - 00:20 | 3632627 Harbanger
Harbanger's picture

Stocks and RE are not really comparable.  Don't lump them together.  Your land is for you to work, maintain and make value of, stocks are speculation on the work of others.

Fri, 06/07/2013 - 21:17 | 3636011 Weisshaupt
Weisshaupt's picture

If I see $500 again every liquid paper dollar I have is buying ... oh I guess if everyone does that it won't stay $500 very long will it.. 

 

Got that everyone? I got dibs.  If gold goes to $500 none of you can buy till I have had my fill. :)

 

Thu, 06/06/2013 - 21:01 | 3632088 belogical
belogical's picture

They already know demand out paces supply. Their issue is the market it to small for them. The gain they make is not worth the lose on the paper side. So, they will only move into gold when the system starts to break or more likely when geopolitics with China force the price movment.

Thu, 06/06/2013 - 21:06 | 3632107 Its_the_economy...
Its_the_economy_stupid's picture

I am so sad, this all depresses me greatly. Why then do I sometimes laugh really hard at some of these comments?

Fri, 06/07/2013 - 00:00 | 3632600 Bastiat
Bastiat's picture

That's why we come here.

Thu, 06/06/2013 - 21:45 | 3632242 chubbyjjfong
chubbyjjfong's picture

No bank would partake in such dastardly fraudulent activity, surely.  I am truly shocked.

Thu, 06/06/2013 - 23:23 | 3632527 lakecity55
lakecity55's picture

Is he on drugs?

Thu, 06/06/2013 - 21:08 | 3632119 JuliaS
JuliaS's picture

I love these heartworming stories (being a goldbug myself), but they're way too emotional. Have a plan and price targets. Have a set of "if's". The article talks about decouping and the price of physical breaking to the upside. If you like the sound of that, be equally prepared for an exact opposite.

Gold has been pushed to the upside over the last decade almost exclusively due to paper demand - people gambling in closed pool systems never intending to take delivery. If those players were not contributing to the demand the price of the actual thing would be lower.

There are 2 decoupling theories. One says prices will go up, the other says the prices will go down. If certainty existed, everyone would be on the same side of the trade, there'd be no risk and we'd all be guaranteed a safe retirement.

 Enjoy your metal, but avoid sentimental attachments. Those will kill ya.

 Buying dips is good and all, but has a condition for selling as well. Ask yourself what would make you buy gold. Flip the coin. Would an opposite condition then make you sell it. If not, then your strategy is as good as no strategy at all.

Think China and India are buying? Great! What if they're lying. What if they're selling. Will you sell gold then in favor of some other valuable asset?

 JPM is shorting silver? Great! Let's put it out of business by going long. Right?! Well, what if the next day you find out GS is long silver. Do you stay long then as well?

Thu, 06/06/2013 - 21:30 | 3632199 Seasmoke
Seasmoke's picture

Gold is going to the moon. This I am sure. If it does not I am willing to go down with the ship. I have made up my mind. Nothing else even interests me any more.

Thu, 06/06/2013 - 23:48 | 3632333 JuliaS
JuliaS's picture

Oh, gold will go to the moon. Just make sure you're on the right side of the planet when it takes off.

Thu, 06/06/2013 - 22:32 | 3632400 Pareto
Pareto's picture

keep talking about gold in fiat and you become increasingly less cedible.  Gold is not an investment (unless you can lease it).  Its a protection of value of property of wealth.  It don't matter whether the fiat price of gold goes to $50, or, $5,000.  The ONLY thing you would want to concern yourself with is which world would you prefer to live in.  Gold is not measured in fiat.  It is measured and traded exclusively in ounces and it has an exchange vale (real exchange value) that is relatively constant.  Fiat price changes are more a reflection of changes in currency, interest rates, confidence, and so on, and have little to do with demand and supply.  Nobody cares if China is buying or lying or whether JPM is long/short silver.  All represent demonstrated preferences of individuals and institutions.  You have price targets.  Which means you still believe that $5000 gold is worth more than $50 gold.  Which means you still believe fiat as a marker.  Which means you are holding gold for entirely the wrong reasons.  Which means it is really only you that doesn't have a plan. 

Thu, 06/06/2013 - 23:02 | 3632476 Taint Boil
Taint Boil's picture

 

 

Gold is not measured in fiat.......

Bingo, I tried to make this point before. Gold is insurance and not an "investment". Physical gold is a preserver of wealth and not an instrument to "get rich quick". I get my PM in 4-5 days (ebay etc) last time I bought from a bullion dealer it took almost a month, I’ll pay a couple of bucks more for a Sliver Eagle, I don’t care for me the fiat is just fiat. Spot price? LOL what ever.........

Fri, 06/07/2013 - 04:18 | 3632808 theliberalliberal
theliberalliberal's picture

Exactly-Insurance!!

 

Isn't my fire insurance worthless until my house burns down?

Isnt my car insurance worthless until I crash?

 

Funny how the masses spend money on insurance they will likely never collect.  

But spend money on gold and you are an idiot.  Well the best thing is,  the insurance you buy with gold doesnt need to be renewed every year.  Its an insurance that lasts forever!

 

Fri, 06/07/2013 - 21:23 | 3636021 Weisshaupt
Weisshaupt's picture

Why does hardly anyone get this?  If Gold goes to $50,000 it means that the price of a Hamburger is  over $250. 

You will not, I repeat NOT get "rich" as that term is currently defined. .  You might, however, get to eat, something worth way more than $50,000 in current terms when most people aren't - the New Definition of "RICH" - but the good news is that everyone with a Job will earn over $250K a year so Obama can tax them all as if they are "rich"  even if they are just then settling into a nice 3rd world standard of living. 

 

 

 

Thu, 06/06/2013 - 21:12 | 3632138 criticalreason
criticalreason's picture

governemnt will just tax transactions in physical gold so it will never become a currency unless the government also fails....retailer demand may b up but I dont see a shortage when I look on apmex.com

 

Thu, 06/06/2013 - 21:51 | 3632257 ultimate warrior
ultimate warrior's picture

I know every fiat currency the world has seen has eventually failed. When this happens governments fail. I hold pm's for insurance for these events that seem highly likely to occur in the near future. If this happens pm's can be used to buy other assets on the cheap during the rebuilding phase of our economy/gov/society. At least that's my way of thinking.

Fri, 06/07/2013 - 08:10 | 3633038 auric1234
auric1234's picture

If you want to get an idea on how will gold be used, have a look at how USD are used in many parts of South America.

 

Thu, 06/06/2013 - 21:21 | 3632169 Ban KKiller
Ban KKiller's picture

All I KNOW is that "inflation" is real where I live. The rest is a guess....but history is a great guide. Monetary failures have occured, no?

Thu, 06/06/2013 - 21:43 | 3632235 WTFUD
WTFUD's picture

The russians stopped selling their gold a long time before the chinese to the refiners here in the uk and i could not get my hands on their coins as i like to collect a variety ( krugers, nuggets, maples, eagles etc). Thankfully i managed to purchase 10 ounce chinese pandas before they stopped selling them on the market. They are my favourite ( aah just like big teddy bears) really beautiful.
If i scour the sites i sometimes come across those pandas but the premiums are huge and i only like to deal with my regular refinery, one of the biggest in the uk, and yet, i still get them checked. Not that i don't trust them but with the increase in custom from my visits and soon to be stampede one has to be careful with all that tungsten going around.

Thu, 06/06/2013 - 21:57 | 3632280 Debeachesand Je...
Debeachesand Jerseyshores's picture

Another heart warming post on Gold.I have to wipe the tears from my Gold Eagles.

Thu, 06/06/2013 - 22:09 | 3632317 logicalman
logicalman's picture

All the talk of gold in terms of fiat is nonsense.

When TSHTF the only important thing will be do you have it, or don't you.

Those who have Au and Ag will do better than those that don't.

Simple.

Thu, 06/06/2013 - 23:06 | 3632488 Godisanhftbot
Godisanhftbot's picture

 suggest your gold bars be forged into shape  that can be used for , well, let's just say, insertion.

Thu, 06/06/2013 - 23:13 | 3632503 Taint Boil
Taint Boil's picture

 

 

I have got some bars but from now on it will only be American Silver Eagles because it is the most trusted and recognized piece of silver out there … ?? and small enough denomination …??

Fri, 06/07/2013 - 03:38 | 3632786 Black Swan 9
Black Swan 9's picture

Yes, no bars etc for me, just eagles, but also hold junk silver, smaller denominations, pre-1964, recognizable quarters & dimes. Silver is silver, in the end, if things get that bad, but familiarity & trust in historically known silver units will be important in the beginning.

Just my thoughts.

Thu, 06/06/2013 - 22:20 | 3632352 yogibear
yogibear's picture

Bernanke and the Central banksters are fearful of fiat dumping. Once the US dollar is in free-fall the Fed will have lost all control. 

Do they let the US interst rates rise double digits or let the US dollar crash

Thu, 06/06/2013 - 23:05 | 3632483 Godisanhftbot
Godisanhftbot's picture

 That's right, when zero hour comes, all of you with phys gold, and phys bitcoins will become the new world masters. We will all bow down to your great wealth and brilliance.

 

lol

Fri, 06/07/2013 - 00:50 | 3632658 Deo vindice
Deo vindice's picture

When one's point is weak they generally type it in bold letters.

Fri, 06/07/2013 - 03:09 | 3632773 Non Passaran
Non Passaran's picture

Ekm take notice. Also the poster from a West European non-state.

Thu, 06/06/2013 - 23:28 | 3632536 bill1102inf
bill1102inf's picture

I bet Tulips were sold amongst the people for much more than what was written on the official looking chalk board.

 

Just because you are having to pay a larger and larger premium to BUY gold does not mean a damn thin positive. In fact it means the opposite. It means that if you want to SELL gold, you will be getting the official price MINUS profit for the buyer, MINUS premium for who the buyer is going to sell it to.

 

Get it yet thick skulls?!?! If you buy physical for $100 over spot, you had better hope it moves up $200 ON PAPER just so you can 'break even' if you have to sell.

Fri, 06/07/2013 - 03:08 | 3632771 Non Passaran
Non Passaran's picture

Yo, idiot, I'm going to sell (exchange for productive assets) when the heavy premium kicks in.

Fri, 06/07/2013 - 04:25 | 3632811 theliberalliberal
theliberalliberal's picture

no,  you just have to get a better dealer,  or cut out the middle man.

 

Sell it on gumtree or craiglsit or what have you.  If you sell it for spot,  and someone buys in for spot,  you are both winning.

 

If you are going overseas, and have the time,  hang around the airport before you go (or when you get there) and wait for another flight going the other way between countries.  Split the buy/sell prices shown at travellex and both parties win.

 

 

Thu, 06/06/2013 - 23:28 | 3632538 lakecity55
lakecity55's picture

Kangaroos are hopping my way even as we speak.

Fri, 06/07/2013 - 01:49 | 3632720 fukidontknow
fukidontknow's picture

kookaburras are coming home to roost

Fri, 06/07/2013 - 00:16 | 3632624 ebworthen
ebworthen's picture

C'mon Zero Hour!

Fri, 06/07/2013 - 03:00 | 3632769 Debugas
Debugas's picture

gold is a "passive" asset that is not an investement but an insurance.

I would like to move out of gold and invest somewhere but right now everywhere i look government regulates and taxes everything to the point that there is no place to invest safely.

That is the government intervention into the economy is the reason the gold is so popular

Fri, 06/07/2013 - 04:40 | 3632820 toadold
toadold's picture

The price of anything is more dependent on emotion more so than logic.  Most people base their decisions even financial on their emotions rather than logic.  If a crash hits and starts out deflationary people will sell gold and relatives for cash.  If inflation is perceived they'll go for gold.  I suspect the number of individuals who have actually purchased physical pm is very small in comparison to the overall market.

IMHO owning some PM is like owning a pocket pistol, you may never need it but it is better to have it when you need it. Both can keep you out of the grave.  

Fri, 06/07/2013 - 07:25 | 3632941 RECISION
RECISION's picture

No.  the gold price will just slide lower and lower.

Probably quite slowly, until it reaches Zero.

Because all it is, is a paper promise of gold.

An actual market for Physical will be locked up in back rooms, and Halls of Power.  And sightings of the real thing will become rarer and rarer.

Joe-Public wont have to worry about such a barbaric relic, that will all be looked after, far away, by his betters.

Anything you see "quoted" will be a lie - in all sorts of ways.

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