Things That Make You Go Hmmm...Like Gold's Sudden Ignorance Of Geopolitical Risk

Tyler Durden's picture

Submitted by Grant Williams via Mauldin Economics,

For once this time really is different, notes Grant Williams in his latest letter, and the New Cold War is, as you can see from the chart below, apparently not even remotely troubling. In fact, gold is trading below where it was when the Russians first dipped their toes in Ukraine to test the water:


So when it comes to gold, there are the thinkers, like Koos; there are the traders, like the millions day-trading GLD for a penny here and there; and then there are the holders. The question for all of them is the same: why?

Traders of gold don’t want anything to do with physical gold. They are happy trading pieces of paper — scrapping amongst each other for pennies (and in some cases making a lot of them), but the “gold” they buy and sell could just as easily be Microsoft shares or an ETF that tracks lumber. It’s all about the price — not the ownership.

Many investors who claim to “own” gold as an insurance policy do so through the ownership of ETFs such as GLD. That’s just not the same as owning metal, I’m afraid. Doing that, you’re simply one of the traders. You’re NOT a holder.

Individuals (and institutions) who buy physical gold and hold it, unencumbered, outside the banking system are true holders. They aren’t about to alter their position in any meaningful way just because the price moves a few percent against them (or, for that matter, for them). They own gold as an insurance policy, and until the reason for owning it is proven wrong, they hold onto it.

That just leaves the central banks.

One could make the case that, given their consistent selling over a 40-year period, they are anything but holders. One could also say that, given the sudden about-face they made in 2009, they are nothing but traders (though trading far bigger trendlines than most).

But the simple truth is that, just like the investing public, they too are split — though not into traders and holders but rather, it would seem, into holders and buyers.

Ask yourself these four questions:

The last time the world faced a meaningful threat of a large-scale conflict between East and West, the gold price soared. This time it hasn’t moved. Why?


With gold consistently pouring into Eastern Central Bank vaults in exchange for dollars, what happens if there is another sudden panic of some sort and investors (including central banks) suddenly decide to stampede into gold en masse like they did in 2009?


Why are the most rapacious buyers of physical gold a group of countries that last time we saw an exponential rise in the gold price had no meaningful currency reserves but that now amongst them own a staggering 46% of total global reserves?


If you had the power to create money out of thin air as, for example, the PBoC can, can you think of a reason why you might want to convert as much of it into gold as you possibly could?

Just like George Smiley, if you can come up with plausible answers to these questions, you might just be able to figure out the ending to a tale of intrigue that has captivated millions around the globe.

I know how I think the story ends...

Read the Full Grant Williams letter here...


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Long-John-Silver's picture

Paper Gold is available in unlimited amounts to manipulate physical gold. That's what is different.

Bendromeda Strain's picture

If lizards like Jeff Christian are comfortable with 100x leverage during tranquil times, how much higher can convince themselves to jack it during "extenuating circumstances".

Stuart's picture

US is engaged in financial warefare with Russia and to a lesser extent China.  They're buying real physical gold so the US cronies are using papergold as a weapon against them. 

Cacete de Ouro's picture

Grant Williams needs to highlight the fact that the website he is hosted on, namely Mauldin Econmics, activlely plugs Hard Assets Alliance as a way of gaining exposure to gold and receives affiliate fees from Hard Assets Alliance.

Hard Assets Alliance LLC which runs the so-called "Alliance" is owned by Olivier Garrett, David Galland and Doug Casey. Olivier Galland is CEO of Mauldin Economics and CEO of Hard Assets Alliance and CEO of Casey Research LLC as well as being a director of Mauldin Economics. David Galland is a director of Mauldin Economics and a partner in Casey Research LLC. Doug Casey, Galland and Garret also own GGC Publishing LLC which is a governing director of Maudlin Economics LLC.

So, what has Grant Williams got to say about that?

Squid-puppets a-go-go's picture

so he's talking his book. so bloody what? everyone who has anything has a book to talk

would you take advice  to buy gold from someone who owns no gold whatsoever?


Cacete de Ouro's picture

He's being disingenuous and misleading and not stating the connections between Mauldin Economics and Hard Assets Alliance LLC.

Hard Assets Alliance completely misleads potential customers about the fact that Casey and Co own the whole thing and that it's just a front for a white labelled version of the Gold Bullion International order routing platform.

Four chan's picture

the rothschilds own the largest gold mines in the world, invest along with them and hold

physical, but don't be perplexed by their manipulation of the short term price, they play the long con.

saveandsound's picture

Grant Williams' has got his numbers wrong.

Gold price was about 250 US$ per unce and not about 500 US$ per unce in 2000. So I quit reading at page 5...


BrosephStiglitz's picture

I quit reading at the title:

"Things that make you go hmmm.. like Gold's sudden ignorance of geo-political risk."

Gold is a living, breathing and sentient entity now.  Apparently.

Bleh.. gold is a fucking market, like any other market.  It is a tool for protecting savings.  That. Is. All.  But this article would have you believe otherwise.

Still holding my PMs but fuck this guy. Like, seriously.

SilverIsMoney's picture

So a bunch of gold bugs work together on different things and try to sell their stuff across a lot of spectrums. What's the point?

Cacete de Ouro's picture

Casey and Co are just marketeers, they'd sell their grandmothers in a financial newsletter if they could get away with it..

SilverIsKing's picture

The real reason that gold hasn't risen much in price the past few years has a lot to do with the fact that people have discovered that it's only a barbaric relic and you can't eat it. Before then, people didn't know these things.

swmnguy's picture

That's true.  In fact, I didn't know those utterly salient points until just now, when I read your comment.  So now I'm wondering what to do with all my physical gold and silver.  Or, rather, I would be wondering if it hadn't been for that most unfortunate boating accident.

Well, lucky for me I've still got plenty of iPads to eat.

TahoeBilly2012's picture

It hasn't moved because if it moves it ain't ever coming back.

OpenThePodBayDoorHAL's picture

It hasn't moved because investors know there is not a risk of a major war, this Ukraine-y stuff is just a setup. They want a continuous stream of hot little wars so they can continue to flow taxpayer dollars on all sides to defense contractors and spy agencies. Haven't you been paying attention? Oh, that and the fact that someone can rock up on a Sunday night with 25,000 sell gold futures contracts and nobody asks who they are, why they're there, and where/if they got the money...

BrosephStiglitz's picture

It hasn't moved because most individual investors are 5% of the grains of sand on a stretch of beach. 95% is tied up in businesses and within funds (hedge/pension/sovereign wealth etc.)

So gold and silver are reacting to what the big boys are doing.  It is literally that simple and right now they are most likely:

-Looking for a way to wind down their positions in some sov. debt markets.
-Looking for somewhere to park their liquidated assets from their wound down sovereign debt market positions.
-Unsure of what comes next?  Inflation or deflation with deflation being most likely in some instances (and globally), but hyperinflation looking likely in others based on geographical markets.

Until banks start going insolvent again gold and silver will not move up, and even then expect a time-lag as people liquidate to cover their revalued asset losses since a banking crisis will most likely follow on from a triggering debt crisis elsewhere.

BobPaulson's picture

With that in mind, it looks like you are pretty much obliged to sell your hoard of physical gold. You might want to wait for an ideal Gordon Brown opportune moment to sell though.

LetThemEatRand's picture

"it's only a barbaric relic and you can't eat it"

You can't eat it, but you can chew with it.

sessinpo's picture

 Long-John-Silver   Paper Gold is available in unlimited amounts to manipulate physical gold. That's what is different.


I wonder how you explain the Great Depression when PMs went down and there wasn't this paper gold to blame?

BrosephStiglitz's picture

+1.  Couldn't be because cash-strapped people/institutions who hoarded gold/silver were looking to liquidate their assets for cash to get by month on month could it?

Oh wait..

robertsgt40's picture

I wish the author could have given a hat tip to silver.

X.inf.capt's picture

i personally think that during wars, governments need currency and credit...and now, at least to goverments, dont look at gold and silver as money...the rules have changed...abit...

and on another note, the elite would rather fight wars with each other, than revoltutions in their own countries,,,wars are safer for them, but not their subjects...

sessinpo's picture

X.inf.capt    i personally think that during wars, governments need currency and credit...and now, at least to goverments, dont look at gold and silver as money...the rules have changed...abit...

and on another note, the elite would rather fight wars with each other, than revoltutions in their own countries,,,wars are safer for them, but not their subjects...


I gave you an up vote. What one needs to understand is that governments use its working population as gold. The governments credit is backed by the production of its citizens (taxes). When that fails, watch out. Default means its time to reduce the population. That is the SHTF that many expect.

X.inf.capt's picture

excellent point!


over our working lives, we as tax payers generate alot of revenue to various entities...we are quite valuable (so much so that we have 'serial numbers' like good delivery bars)...when things look like civil unrest is about to HTF...then comes a big war...most everyone wins (banks make LOTS of money, like julius morgan did (father of j.p. morgan) financing both sides of the Crimean war (loser always pays), corporations make $$$ on defense contracts, unemployment falls (in 1944, the u.s. unemployment rate was at 1.4%, THATS one point four percent, record tax revenues, rationing, etc, etc,...just hope you dont have to fight it, or GET IN THE WAY!

GrinandBearit's picture

The fix is 100% electronic now... how convenient. 

TPTB are going to fix the PM prices until the very end.

One day everyone will want gold and it will sky. 

Until then extreme patience will be required.

Da Yooper's picture







I was told the reason gold & silver were not moving was due to


"Market Forces at Work"


I guess the clown that told me this forgot to mention all the rigging & manipulation by the Fed & bullion banks - The Morgue & dont forget the US GOVERNMENT


& now we have another scam 100% eeeeelec-tronic price fixing


what a scam & they think we dont see it


Got Rope?

Timebandit-44's picture

I believe telling the truth has become illegal. The Department of Truth
will have your ass soon for that.

Dr. Engali's picture

The action of oil during all if these geopolitical 'crisis' is telling me that these risks aren't as bad as they are made out to be.

Uber Vandal's picture

Unless it is telling us the global economy is crashing, sort of like how oil went from $145 (July 2008) to about $37 (Feb 2009) per Barrel.

Another possibility is one of the last tools left in the tool box to try to hurt Putin, by cutting into his oil income.

swmnguy's picture

Perhaps it's all of the above?

Dr. Engali's picture

I don't buy the hurt Puti theory. Oil much lower than we are now kills shale oil. It is possible that oil's price action is telling us the global economy is crashing, but if these geopolitical risks were as severe as they say they are (think the flooding of Bagdad) then oil would be through the roof.

Winston Churchill's picture

I don't either Doc.

The roles have reversed since that brought down the soviet union.

Now the US is schlerotic,militarily over extended, and only exports paper.

Mind you, our ivy league geniuses don't seem capable of original thought,

prolly too much inbreeding, so they might be dumb enough to try it again.

It won't work if they are.

Greenskeeper_Carl's picture

i agree that it has nothing to do with hurting putin. It will also hurt the other countries, like saudi arabia, who we depend on to keep the petrodollar alive. I think its becuase the global economy is collapsing, so demand is down. The baltic dry index is way down as well, indicating that global trade is grinding to a halt, and we have those fields full of unsold brand new cars just sitting there.

malek's picture

That is flawed thinking. Oil much lower pauses shale oil, yes, but from a resource standpoint that's OK as it would seem one could buy enough oil from other sources.

And with the exaustion rate of shale wells, the shale oil companies are running on hand-to-mouth ROI anyway, so they can handle "pauses" pretty good.

disabledvet's picture

In fact the crises are putting a bid into dollar denominated assets. "What's that you say?" Uhhhhh...oil, natural gas, refined products, chemicals, finished goods, industrial machinery, food, diapers....and on and on it goes!

Hence "even the dollar is starting to catch a bid here."

Winston Churchill's picture

Or the economy is really tanking hidden beneath the 'adjusted' Govt. stats.

We know the Q2 gdp print was bullshit, to be dropped after November.

BDI is dying.

Anybody checking electricity consumption ?

FieldingMellish's picture

Bullion banks exiting their short positions? Next COT (if believable) should be interesting.

WTFUD's picture

' Let's get Physical ' , let me hear your FIAT talk.

brushhog's picture

Just means you can get gold at a government subsidized discount. Take advantage of it and get as much as you can while the fix is in and supply is still available.

disabledvet's picture

Meh. You do have bullion banks...all they do is buy gold...but heir asset base has been annihilated over the past year so certainly not a good form of banking.

They greatest cataclysm in World History (world war II) was about as gold bearish an event ever. By 1945 the USA was sitting on 50,000 tons!

We're still pulling a thousand plus tons of gold out of the ground a year...obviously "miner 49's" are net sellers as that is a HIGHLY capital intensive enterprise. And of course you have scrap dealers and your pawn shop folks...they gotta pay the rent and the utility bills. "They'll sell the gold to do that."

Good time to be an "assayer" of course. But you can still buy 99.999 percent fine minted by Governments around the world.

Once you start talking "let's fund NASA!" and I think you start to see the problem here. There are millions of tons of gold "out there"...let alone what's just floating around in the Earth's Oceans. What there isn't floating around out there these days is an economic recovery worthy of the name.

"The money is shitty and so are the trading strategies." The irony of course is that Main Street is booming...which is why CNBS's ratings are only going to get even worse from here and why Republicans looked to be poised to sweep to power come November.

Talk about "lame duck" if that happens. Besides Generalan Ost what do bob sides of the aisle agree on here?

Haole's picture

Dead money until a decision to the contrary is made for us and that could be next week or not in some of our lifetimes.

NOTaREALmerican's picture

Gold is a measure of people's lack of confidence in government and society.   However, most REAL American know - in their hearts - that, overall, the government and the financial institutions which made this country great, basically, want what we all want:  prosperity for this great and glorious nation, which - sure - has some challenges - I mean who doesn't have challenges at some point in their lives - but this is America (cue: slow motion eagle) and we've always risen to great challenges like this because (cue: slow motion flag) because America is about freedom and democracy, and about doing what it takes to get the job done, because winners never quit and American never quit which is what makes them, and their children, above-average winners.  (cue:  fighter jets over sports stadium).  

So, really, no wonder gold is worthless.   As somebody famous once said:   Never bet against America !

greatbeard's picture

I miss the slow motion Saturn rocket launch but I guess NASA in old news now.



NOTaREALmerican's picture

Yeah,  simplier times, I miss 'em.   The good guys and bad guys were clearly defined.   NASA in a race with the godless commies to get to moon.   Truly the golden age of the society (not counting the riots and wars and all that, of course). 

Otrader's picture

I hope nothing happens to the bankers and financial institutions that made this country great. /s

DirkDiggler11's picture

You know, last time I checked my gold count not go "Bankrupt", have a flash crash, or have its shares halted due to a "trading irregularity".
I think I feel very comfortable that my gold is exactly where I left it, and that it will ALWAYS have value. While it's on sale I plan to continue to buy more AGE's so my existing ones can have more friends. Enough said.

Wahooo's picture

I believe we have passed by the era of bullion, gold and silver. It is no longer a standard of wealth, it's just smelted ore. No more of value than necklaces of sea shells from the primitive days.

greatbeard's picture

>> we have passed by the era of bullion

I have to concur.  Proof would be that wise investor who keeps dumping a billion or so first thing in the morning.  He must have a lot of billions of gold and really know what he's doing.

SWCroaker's picture

If you are saying that we've entered into an era of idiocy, where electronic bits from anyone can be counted on to hold their value, and the creators of electronic bits are deemed trustworthy stewards who have the common good as their only goal, then maybe you have a point.

Luckily, idiocy tends to suk as a Darwinian survival trait, and your new era will expire shortly.