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Gold And The Real Change To Watch For

Tyler Durden's picture


Submitted by Simon Black of Sovereign Man blog,

It takes a lot of courage to go against the crowd.

Whether in investing, or acknowledging that your country is heading towards an epic fiscal crisis, it isn’t easy to stand alone… especially when everyone else is betting the other way.

Have you ever noticed, for example, that investors are often only interested in buying some stock or asset when its price is going up?

It’s as if a rising stock price is somehow validation that everyone else thinks it’s a good investment too.

Of course, these types of situations often make the worst investments. If you buy when everyone else is piling in, you could very well be the last sucker to enter a crowded room before the music stops.

The opposite is also true. When an investment has cratered and the price has fallen through the floor, nobody really wants to buy.

Realistically, the opposite should be true. And gold is an interesting example of this.

After more than a decade of positive returns, many investors have abandoned their precious metals positions. The conventional wisdom says that gold is ‘finished’. After all, the dollar price is falling… so it must be a bad ‘investment’.

Others, however, are looking at where gold is right now, where it probably will be a few years from now, and thinking that it’s a hell of a bargain.

Azerbaijan’s State Oil Fund (SOFAZ) is in this group. The fund recently announced that they were increasing their gold holdings by 33% over the next year.

This is a big move for the $35 billion fund, and they join other sovereign wealth funds from Qatar to China, plus central banks in places like Turkey, Russia, Mongolia, and Kazakhstan, who are increasing their gold holdings.

This is a significant trend that is unfolding.

Right now, the United States is in a privileged position because of the dollar’s status as the primary reserve currency. Mr. Bernanke can print trillions of dollars, then export much of that new money overseas.

Few other nations would be able to get away with this. In Argentina, for example, the government has engaged in similar wanton monetary inflation.

But Argentine pesos are not accepted anywhere else in the world. All of those pesos remain at home… and this has created debilitating inflation bordering on a currency crisis.

The US gets to spread its dollars all over the world, thus pushing the negative inflationary effects onto foreign nations. From Sri Lanka to Botswana to Ukraine to Cambodia, I’ve seen it first hand with my own eyes.

Foreign nations have long trusted the United States to maintain a sound dollar. But for decades, and especially over the last several years, America has abused this privileged trust.

That’s why it’s coming to an end. It’s absurd to think that the rest of the world will just lay down and suffer, indefinitely, so that Americans can keep buying McMansions, flat screen TVs, and cruise missiles.

Everywhere you look there are signs of this happening.

Russia has recently agreed to sell oil to the Chinese, accepting renminbi as payment. Fortune 500 companies from McDonalds to Morgan Stanley have issued bonds denominated in Chinese renminbi. Even the London Stock Exchange now has a thriving renminbi bond business.

The gold story in Azerbaijan is just one more brick in the wall. But it underscores this growing theme of the end of the US dollar’s dominance– one of the most critical trends in the world today.

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Sun, 10/06/2013 - 18:36 | 4028569 DaddyO
DaddyO's picture

I want that little nugget in the picture!!


Sun, 10/06/2013 - 19:38 | 4028732 Long-John-Silver
Long-John-Silver's picture

I found a peace of gold that looked like that (under a microscope). I worked all day for it. That was the last time I went panning for gold. It's far cheaper to just go buy it at current manipulated spot prices.

Sun, 10/06/2013 - 20:27 | 4028886 GetZeeGold
GetZeeGold's picture



Anyone that can look at the debt the world is facing and think gold is finished.....is smokin dope.


Any of you college freshmen taking Econ 101. Find the page in your textbook that says investing in gold is too risky......rip the page out and throw it in the trash. Don't tell the professor.....he'll flunk your ass!

Sun, 10/06/2013 - 20:31 | 4028904 akak
akak's picture

$17T (and rising) federal debt: This is your brain

"Gold is finished": This is your brain on Keynesianism

Any questions?

Sun, 10/06/2013 - 20:56 | 4028962 LongBalls
LongBalls's picture

I've taken a liking to pre 1933 gold coins. I have found it to be a great hobby and I could care less what the price is doing. Some people waste their money collecting stamps. I waste mine collecting gold coins. If you think it's a waste that is.

Sun, 10/06/2013 - 21:27 | 4029046 BigInJapan
BigInJapan's picture

Money, enoyed being wasted, is not "wasted money".

Mon, 10/07/2013 - 03:18 | 4029598 Gief Gold Plox
Gief Gold Plox's picture

"Submitted by Simon Black"

Stopped reading right there. Like I need "Mr. I've just had a very secure password I've been using for decades hacked" to tell me what he thinks.

Mon, 10/07/2013 - 01:44 | 4029544 fourchan
fourchan's picture

same here, those st gaudens are amazing works of art compared to the crap in circulation today.

they may as well just be making that trash from plastic and cardboard, really what would be the difference.

Mon, 10/07/2013 - 01:43 | 4029545 fourchan
fourchan's picture

same here, those st gaudens are amazing works of art compared to the crap in circulation today.

they may as well just be making that trash from plastic and cardboard, really what would be the difference?

Sun, 10/06/2013 - 21:49 | 4029093 Trampy
Trampy's picture

Anyone that can look at the debt the world is facing and think gold is finished.....is smokin dope.

Nonsense!  You obviously don't know anything about drugs and their users, where MJ and other psychedelics are favored by some of the smartest people around.

Anyone who now  thinks gold is finished is just plain STUPID ... and the favorite drugs of the stupid are alcohol and tobacco.

If they're smoking a controlled substance it's most likely crack ... the second choice from their favorite: insufflated cocaine.

Here's a fix for ya

Anyone that can look at the debt the world is facing and think gold is finished.....is smokin crack.


Mon, 10/07/2013 - 01:03 | 4029502 RafterManFMJ
RafterManFMJ's picture

I stapled all my gold coins to Simon's skull, so I know they will always be safe as he would never go where gold can be confiscated.

Mon, 10/07/2013 - 07:21 | 4029729 Nothing but the...
Nothing but the truth.'s picture

As much as the Fed keeps trying to supress PM's , gold and silver will outlast all their efforts - they've got 2000 years of universal acceptance going for them. The Fed is fighting a losing battle.

Mon, 10/07/2013 - 14:11 | 4031139 Manthong
Manthong's picture

Late comment, but the average fiat regime lasts about 90 years.. the only reason the FRN is still around and kicking is that it was maneuvered into a global reserve and that has been no war or black swan to displace it.. yet.

The FRN is getting a little long in the tooth and the US is doing all the right things to get that tooth knocked right out the skull.

Sun, 10/06/2013 - 18:37 | 4028574 mvsjcl
mvsjcl's picture

The Golden Age is yet to come.

Sun, 10/06/2013 - 18:48 | 4028608 GVB
GVB's picture

Understand the environment will not be pretty. This is all about inflation. And you don't want to be part of it when that financial monster explodes. Really

Sun, 10/06/2013 - 20:12 | 4028827 Constitutional ...
Constitutional Republic's picture

Gold is an insurance policy no one of serious mind would ever want to use. Just like we buy fire insurance, there may be a time when that is the only thing that preserves one's belongings, and life perhaps.

Once upon a time, it was conventional financial advice to hold 10% of one's investment pyramid in physical gold; up to 30% in times of turmoil.

Charlie Munger is a jerk; so are the other profits of the modern fiat. Many Jews fleeing Nazis survived because gold coins were sewn into their clothes. The same will be true for the modern equivalent: if you don't own some physical gold and silver, then you will be left at the mercy of the chaos when this latest experiment with fiat implodes - or explodes in WWIII.

Interesting, little known fact: certain covert British military ops are given gold coins to sew into their clothes in case of their caputure in hostile territory. The coins are documented, and must be returned upon the operatives return to base.

Just my opinion. Do as you please.

Sun, 10/06/2013 - 22:25 | 4029227 BillyTheBlade
BillyTheBlade's picture

This is true bout the military and gold coins, at least with the SAS during GW1....Read Bravo Two Zero.

Sun, 10/06/2013 - 23:22 | 4029338 Richard Head
Richard Head's picture

For combat sorties over Iraq, we always had a 1 oz. Krugerrand.  Plus a Sig Sauer 9 mm, "blood chit", and standard survival gear.

Mon, 10/07/2013 - 01:06 | 4029506 RafterManFMJ
RafterManFMJ's picture

I'm unclear here, after you burned the gold on a wild night with 3 Iraqi whores, what came next?  Kinda pathetic a pilot is give ONE fucking barbaric relic. Hell, Major Kong got more gold and a real fucking pistol.

  • Survival kit contents check. In them you'll find: one forty-five caliber automatic; two boxes of ammunition; four days' concentrated emergency rations; one drug issue containing antibiotics, morphine, vitamin pills, pep pills, sleeping pills, tranquilizer pills; one miniature combination Russian phrase book and Bible; one hundred dollars in rubles; one hundred dollars in gold; nine packs of chewing gum; one issue of prophylactics; three lipsticks; three pair of nylon stockings. Shoot, a fella' could have a pretty good weekend in Vegas with all that stuff.
Mon, 10/07/2013 - 05:50 | 4029675 JoBob
JoBob's picture

+1 for echoes of Slim Pickens.

Mon, 10/07/2013 - 06:59 | 4029713 GetZeeGold
Sun, 10/06/2013 - 20:42 | 4028913 Kirk2NCC1701
Kirk2NCC1701's picture

Gold's future is intertwined with not only the future of the USD, but with money in general.

For more info on the "Future of Money", see this presentation that Jim Rickards made recently in Bratislava

The Future of Money – Jim Rickards   http://www.youtube.com/watch?v=9fXHV6MnP0E

Mon, 10/07/2013 - 00:32 | 4029454 it aint easy
it aint easy's picture

Someone linked this here recently, I thought it was very interesting: http://www.marketwatch.com/story/why-uncle-sam-is-hoarding-gold-2013-10-...

From the article:

The Treasury has considered that option (selling the gold), among the many others, and rejected it. “Selling gold would undercut confidence in the U.S. both here and abroad,” a spokeswoman said, “and would be destabilizing to the world financial system.”


Now what I want to know is how something that the Treasury claims ensures confidence in the U.S. (and indeed the world financial system) worldwide is only worth $340 billion? How many months of QE is that? Yea, 4 months.

4 stinking months.

Sun, 10/06/2013 - 18:39 | 4028575 Xibalba
Xibalba's picture

Buy it, but if you don't hold it you don't own it.  

Sun, 10/06/2013 - 19:51 | 4028779 Silveramada
Silveramada's picture

And hold it very tight! the weak players are shaken like dry leaves at any paper sell off...



Sun, 10/06/2013 - 18:41 | 4028577 M9L
M9L's picture

I am sorry, did not expect such a weak article from you guys. 33% increase of what position? And honestly $35bn is peanuts in a grand scale of things.

Postpone the doom and gloom scenario and you will see that supply outsrtips demand, gold producers committed to higher prices and will sell at a loss to minimise fixed costs therefore pushing the price higher, easy to do in a homogenous market. 100 tonnes demand from China is done, it can not grow much more, prices are falling at the jewelery markets. Couple that with stupid money outflows from the ETF funds and later on a QE pullback and you will be wondering how it still is hovering around 1300 mark.

Sun, 10/06/2013 - 18:44 | 4028589 CCanuck
CCanuck's picture

Simon, painting pictures for you; he likes to finger paint.

Sun, 10/06/2013 - 18:44 | 4028597 DaddyO
DaddyO's picture

My empirical evidence is just the opposite.

My LCS guy has told me repeatedly that the majority of his business is buying from the public on the dips because they think the sky is falling.


Sun, 10/06/2013 - 19:06 | 4028632 akak
akak's picture

Oh Jon Nadler, how many times are you going to repeat those same lame arguments while reality continues to slap you in the face?

By the way, you forgot to mention all those mountains of scrap gold just littering the landscape, as well as to cast a few gratituous aspersions at your fictional "Radical Goldbug Extremists".  Your bankster overlords are not going to be happy with your sloppy work here.

Sun, 10/06/2013 - 19:12 | 4028654 Deacon Frost
Deacon Frost's picture

That’s right akak, these trolls never source any facts or citations in trying to support their positions.

Sun, 10/06/2013 - 20:06 | 4028815 auric1234
auric1234's picture

$1300? The paper crap can go to zero. Who cares? I know I'm selling any of mine at that ridiculous price.

When it hits $55,000 and people are out of their minds trying to buy it.... then we can talk.


Sun, 10/06/2013 - 23:28 | 4029345 TheDarkKnight
TheDarkKnight's picture

$35bln valued in todays dollars.

What happens when the dollars reserve currency is abdicated? What would that gold be valued at in market with gold backed currency? What would that gold be valued at in a market of gold as currency? 


Sun, 10/06/2013 - 18:42 | 4028583 Seize Mars
Seize Mars's picture

Let's see. Gold: a 5,000 year history. It's never failed. Ever.

Paper money: 100% failure rate - it's a question of when. Most seem to last about 30 years or so.

Hmm, which to choose?

Sun, 10/06/2013 - 18:44 | 4028590 M9L
M9L's picture

Unless they invent immortality there is a very high chance we will not see that failure. IMHO Modern Macro tools are quite advanced, it is hard to imagine a major currency failure.

Sun, 10/06/2013 - 18:46 | 4028601 DaddyO
DaddyO's picture

Have you been taking lessons from MillionDollarBonus?!?


Sun, 10/06/2013 - 18:53 | 4028614 fonzannoon
fonzannoon's picture

Pretty soon no big ticket items will be allowe to be bought with cash. we are talking about a digital money failure this time.

Sun, 10/06/2013 - 18:54 | 4028617 Pure Evil
Pure Evil's picture

MDB is like a reptilian, quite capable of shape shifting. From Harry Wagner to MDB to quite possibly M9L.

Let the games begin.

Sun, 10/06/2013 - 19:03 | 4028629 LawyerScum
LawyerScum's picture

"Macro tools are quite advanced, it is hard to imagine a major currency failure."

Sounds like something a Dr. Krugman would say right after bragging about his Nobel Prize.

Sun, 10/06/2013 - 19:19 | 4028684 radiotom
radiotom's picture

I think MDB is satire. Have you read those articles on his website?

Sun, 10/06/2013 - 22:51 | 4029284 Greenskeeper_Carl
Greenskeeper_Carl's picture

I've often thought that too. I went from thinking he was the biggest idiot in the world to thinking just maybe he is doing this as satire, as a big joke. It looks like all the dumbest parts of the comments section from a krugman article rolled into one. I think he is just fucking with everyone on this sight. But, then again, this is America. He very well may be that stupid.

Sun, 10/06/2013 - 18:50 | 4028611 Arius
Arius's picture

"Modern Macro tools are quite advanced"

where have i heard this before? Oh yes, another more sophisticated version of "this time is different" ... trust me.... yeah right ... i hope you are right but i wont bet money on it

Sun, 10/06/2013 - 18:54 | 4028615 SilverDOG
SilverDOG's picture





Are you 5 yrs old or 3?

Sun, 10/06/2013 - 19:19 | 4028676 TrulyBelieving
TrulyBelieving's picture

 You are right, it is hard to imagine a currency failure, but yet it is coming.  Once you have acknowledged that the laws of physics and mathematics are extremely stable then you can apply them to what is happening and the end result is quite predictable. This is why history repeats itself, same actions (1 plus 1 is always equal to 2) equal same results. And the results of what these greedy fools are doing will be disaster.

Sun, 10/06/2013 - 20:38 | 4028920 indygo55
indygo55's picture

The government puppets by way of their true rulers do is  spend tons of money hiring and training these trolls to scour sites like ZH to spread a shadow of doubt. What they don't understand is that the regulars here are already so AWAKE that nothing they can do will work. This is one of their weaknesses. They have many but they are not all obvious. They can be defeated. I am hopeful.



Sun, 10/06/2013 - 19:33 | 4028715 slyhill
slyhill's picture

He admits fiat fails, then fucks the strawman with no reacharound.

Sun, 10/06/2013 - 19:45 | 4028751 xtop23
xtop23's picture

Oh my.


Sun, 10/06/2013 - 20:04 | 4028809 Rubbish
Rubbish's picture

I have my six month supply of cash, but every penny I now generate goes to PM's. How many more out there like me?


Be very afraid....

Sun, 10/06/2013 - 18:53 | 4028619 dark pools of soros
dark pools of soros's picture

in the old days the Silk Road accepted gold...  seems like things DO change

Sun, 10/06/2013 - 21:18 | 4029015 Kirk2NCC1701
Kirk2NCC1701's picture

I like gold.  I love gold.  Heck I own 'some'.  But there's a first time for everything. 

The 5,000 yrs notwithstanding, I can easily foresee a scenario where gold does us little or limited good while within the US:  If, rather when we get a global currency -- the SDR.  Then, depending on what the SDR is based on, gold will play "some" role, or none at all.

When the "Thou shall peg thy currency to the SDR!" point is reached, gold will see a ONE-time adjustment for a very long time.  Hedge accordingly.

Mon, 10/07/2013 - 00:11 | 4029423 it aint easy
it aint easy's picture

I often feel that the most sober view isn't so much about whether gold will reclaim it's value contra fiat, but rather if we'll live long enough to see that day.


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