Why The Game Is Not Over Yet For Gold

Tyler Durden's picture

2013 was a brutal year for precious metals investors. Santiago Capital's Brent Johnson begins his excellent presentation "#$1%!k##!!***#$$" with a mea culpa for the worst year in a dozen even as Santiago topped the list of precious metals funds. But crucially, Brent points out, "it is only half-time" in this fight and "if gold investors will stick with the fundamentals - which is very hard to do sometimes - the second half could be very rewarding." Simply put, he notes, the only reason the level of water in our economic bucket has increased slightly is not because the holes are fixed... but because we are pumping dollars in quicker than they are leaking out. "Excess Reserves are a ticking time bomb," Johnson adds, and the second half of this monetary game will be very different from the first.

Part 1 - "The First Half Of This Monetary Game" -

Fund performance, Mea Culpa...


What the Fed has done so far, holes in our economic bucket..."the only reason the level of water in our economic bucket has increased slightly is not because the holes are fixed... but because we are pumping dollars in quicker than they are leaking out"

money printing, the housing 'recovery', and stocks vs the real economy... "if you spend $8 trillion and can't throw a good party, you should be thrown in jail"

Part 2 - "How The Second Half Will Play Out"


Where has all the QE money gone? Why inflation has remained tame... "excess reseves are a ticking time bomb"


Fed reassuranes are bullshit. How reverse repo will work and how the second half of non-expanding monetary base will be a problem. Simply put, if the Fed cannot get monetary velocty to pick back up then they will not be able to continue tapering... and velocity increasing is inflationary.

They can't rase rates as they are now in extreme forward guidance mode that they will keep interest rates low for an extraordinary period of time...

This will end badly - its a matter of "if" not "when"... but as Johnson goes on, there are still challenges (e.g. India) but selling gold now is concentrating assets not diversifying them... and we are going to win in the end.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Big Slick's picture

Gold... bitchez!

Long-John-Silver's picture

2013 was a good year for buyers of Gold (and other PM's).

lineskis's picture

"If they continue to taper, velocity must go up."

I doubt the monetary base is the only factor influencing money velocity. Taxes and governments hunting down capital seems to make velocity go down, no?

SafelyGraze's picture

a reminder for all you operators out there:

men should not ride in buckets


and at 5:00, "men shall not work near dangerous banks"

rio tinto 


acetinker's picture

lol!  How bout "men shall not work for rio tinto"?

markmotive's picture

Eric Sprott says 'yes'.


Of course, it helps to be bullish when you have a horse in the race.

X_mloclaM's picture

GDP revisions to include research !Buried *velocity* the symptom  cough.. the recovery is over now ..  omg  ... noo

RaceToTheBottom's picture

Reserve requirements can be further decimated, along with accounting standards all allow the WS Banksters to play looser and that will speed up the Velocity, I think.

Get ready to clean up their mess.

dmger14's picture

I believe he said that velocity must go up in order for them to taper.  The reason for QE was to combat declining velocity.  They can't taper with velocity declining or the markets and economy crash.

TheRideNeverEnds's picture

If you liked gold at 1200 you are going to LOVE IT at 600!

Ulterior's picture

I am still underwater with my positions, we probably live in differenet univereses

N2OJoe's picture

I have a little math problem for you: If gold is $600 and there's no gold left in Fort Knox, yet the Chinese and Indians continue buying at a breakneck pace, then how long till there's no gold left in the west and paper gold ceases to exist?

Stack on bichez!

Harbanger's picture

Helmets for bread, Bitchez!

The_Ungrateful_Yid's picture

Long on Glocks, Ak-47's, and Ammo...

Schmuck Raker's picture

"#$1%!k##!!***#$$"... bitchez!

DoChenRollingBearing's picture

Give me another 24 hours and I will finish my near-epic "Gold and Bitcoin" piece.  Gold, fishez!  But, BTC may have a place too...  Stay tuned!

Muppetrage's picture

So I was just kinda thinking about bitcoin, and I've come to some conclusions. I'm probably wrong, so help me out here.

Ok, so assume that everything they say is true: unhackable, open source code, and limited supply.

Ok then, next week the Fed comes out and says we now have Reservecoin, exact same open source code as bitcoin, unhackable, and limited supply. Accepted everywhere bitcoin is accepted.
So what happens next? People rush in to make big gains just like bitcoin.

Ok then a few weeks later we have.
JPMcoin, Citicoin, BofAcoin, HSBCcoin, Muppetcoin,accepted everywhere.

Then weeks later, PayPalcoin, Amazoncoin, Ebaycoin, Visacoin,Mastercoin,Discovercoin,citgocoin,shellcoin,BPcoin,etc...etc...etc...

Wouldn't we just effectively have Unlimitedsupplycoin???

Oracle of Kypseli's picture

The concept of competing parallel currencies is a good one. The one that survives is determined by the markets and the principle of "Bad money drives out good". (Gresham's Law).

Let them then offer whatever alternatives they want. I am sticking with PM's.

TheRideNeverEnds's picture

I am putting my money on Cryptosheckel for the long haul.  

disabledvet's picture

the value of gold hasn't changed...just the game of getting it has. Epic Failure 2013 happen for a reason...namely, the time for mining on earth is past for all intents and purposes. Your tell has always been South Africa. They keep mining but the currency has never rallied once after the collapse.

Now Venezuela is hyperinflating? And Argentina...again?

I would argue "get zee gold" has simply entered a whole new ballgame that's all. Doing everything possible to keep energy from being imported into the USA is the "last gasp."

samcontrol's picture

do Chen

just like your epic advice on Argentina?

living on the edge's picture

This will end badly - its a matter of "if" not "when"

I say it is a matter of "when" because "if" already left the building...

fockewulf190's picture

You need to act as if "when" is always tomorrow.  Keep preparing,  Keep stacking.  If "when" doesn´t show up the next day, all that means is you have recieved a 24 hour pass.  When this system implodes, it will probably be sudden and out of the blue, even though the writing on the wall is so obvious to see.  And for your own sake, don´t worry about the damn fiat price for phyzz, just get as much as you can as soon as you can.

saveandsound's picture

Altough I have a crush on PMs, I wouldn't place all eggs in one basket.

Just saying.

youngman's picture

I agree it will be a fast eruption..probably a Sunday night episode again....when deliveries can not be made....that wil be the red flag...

Greenskeeper_Carl's picture

Wasn't a bad year for me. I bought a lot more a lot cheaper than I ever thought I would get. And we are at 17t in debt, which will undoubtably double by 2025, assuming this is still a country/currency by then, and as a less than 30 year old, I am in it for the long haul. They can keep it down here for years if they want, and I will keep buying. Eventually their paper games will stop working and gold/silver wil be able to find their true value, in the mean time I will continue to enjoy the sale. Thanks ya fuckers

Miffed Microbiologist's picture

Carl, I think your age group has the best chance of surviving this charade when it finally blows up. Being 20 years older, it looks a bit tenuous for me the longer this goes on. Everything purchase we make now is geared to hunkering down for a highly uncertain future. Next up is a week battery backup for our solar panels. Thanks to Benny's inflation, major purchases are difficult to save but not dumping cash in worthless trinkets, new cars and mindless entertainment frees up cash our sheeple associates seem to spend without a second thought. Of course, they look at us and snicker. This does not incline me to help them much when the time comes.


Callz d Ballz's picture

Miffed- wind is a great compliment to solar, the non-commercial home brew type are incredible coupled with the right gear. If you're in a good area for it, it's a no brainer.

Miffed Microbiologist's picture

I have a neighbor who home brewed a nice set of little turbines. Mr and I were very fascinated with his set up. The final verdict was a thumbs down. Our area has seasonally very gusty winds ( up to 80mph) but otherwise very calm. He said it over all wasn't very cost effective. A constant breeze would have been better. It's too bad, we were very hopeful. I'm sure other places would be better. However, when it comes to sunshine we can't be beat by too many.


Tall Tom's picture

You can write that again. No rain this winter. Sunny skies.


Unfortunately this is setting up to be a Tinder Box year for Wildfire Season. (And most think it is the Earthquakes which threaten our Southwestern Corner Cul-de-sac.)  Those damned Santa Anas will blow down any Wind Turbines.


Get rid of those Oil Filled Eucalyptus Trees. (Although they might tell you if thar is coluah in da ground underneath yer property.)



Miffed Microbiologist's picture

So right! The Cedar Fire started 4 miles from my home. I was one of those poor saps who called 911 to report the fire and they poo pood it. Now if you report a wisp of smoke, four trucks come with sirens a blazing. Euks are bad but palm trees are worse. Go up like a Roman candle and explode shooting embers everywhere. We have lots of Manzanita that do burn like the dickens but quite hardy and come back. Obviously naturalized to this high fire area.

Our biggest fear is though we have a 10,000 gallon cistern, when the fire takes out the power, the solar is designed to shut off ( to prevent it from sending power onto the damaged grid which can hurt repair crews) and we have no way to pump our water. Then the fire trucks sweep the area and drain everyone's cisterns to fight the fire. This happened to us during the Cedar fire.

Winds are blowing hard now. I'm nervious some idiot may take advantage.


quasimodo's picture

Not so sure about that miffed, I think your era and mine(40's) are going to see things blow up too before we are unable or too feeble to make a difference in our own lives. 

That chicken on Wall St? That SOB can only go around in the rotisserie for so long. The skin turned a nice, golden brown some years ago, and right now it's on the verge of edible and burnt to a f-ing crisp.

Pardon the cheesy analogy but anything else requires too many other colorful words.

Miffed Microbiologist's picture

Yes, you are probably right. Everything I want to do seems to get farther and farther out of financial reach. Then I'm not so sure if making our home a survivable fortress is even wise. What if conditions occur requiring us to move. Right now we are in extreme drought conditions here. If it lasts long enough will our well still produce? It's just impossible to prepare for so many contingencies and it's what you don't see is what slaps you in the face. This is why I try to balance the doomer prepping with lots of pleasures today for who knows what tomorrow will bring.


MeelionDollerBogus's picture


Dewpointe Atmospheric Water Generator

my advice: inspect the idea, see if you can find it cheap & do be ready to move. The USA will collapse & imagine nearly everywhere being Detroit.

fedupwhiteguy's picture

Thanks for the link. I didn't know those existed as home units. I plan on researching that and see if the power draw can be lowered by eliminating the hot & cold aspect. Room temp water is a bit better for  you than cold water.

MeelionDollerBogus's picture

I'm betting the UV filtering is most of the draw.
The cold is what you need to condense, I don't think that's optional.
Taking it from the air, however, I'd imagine a lot of excessive UV filtering is easily turned off & not needed.

Tall Tom's picture

Are you in North County or East County?

fedupwhiteguy's picture

i believe she's in the East County as am I.

fedupwhiteguy's picture

wow! so close. i just sold house and am making plans to move everything 955 miles north.

Miffed Microbiologist's picture

Well, that will take you out of Cali. Congrats. If I lose my job we will probably make our move because my husband can work from anywhere. He absolutely loves Colorado around the Durango area. Since I dragged him to this god forsaken shit hole 30 years ago, I feel he has first pick to our new home.


skyun's picture

Carl sounds like you just birded #3 and just cant waite to tee it up on the reachable par 5 #4. Good luck bro.

BoNeSxxx's picture

Much like your user name Carl, you are wise beyond your years.

Donewidit's picture

I keep going back to that dow/gold ratio chart, speaks volumes.

satoshi101's picture

ONLY in hindsight does the DOW/GOLD ratio speak,

The last time  the DOW-GOLD ratio 'signalled' BUY to the stackers is when the 3X GOLD-ETF's fell 50% in one day...

Go ahead and follow the GOLD/DOW ratio, but DO opposite what the stackers tell you to do.

[ I own GOLD, of course I do, living in ASIA, I keep gold in the house for insurance, ... just in case, but so does everybody, ... its like saying "I like sex", ... it doesn't need to be said, unless your an idiot ]

NoDebt's picture

20 years ago I couldn't imagine the day when pot was legal to buy but gold wasn't.  Well, we're halfway there now.  The problem in the future won't be the value of gold, it will be that it's illegal to buy or possess, thanks to coming capital controls.  That's the future speed bump that stands in the way of basically everything that isn't tied inexorably to the dollar.

I expect some down arrows here, so please provide an explanation after you hammer me.  I could be wrong about this.


prains's picture

I could be wrong about this.


NoDebt, if you're married this goes without saying