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Gold Not A Safe Haven On Terrorism, Middle East Bombing, Russia, Ebola ... Yet
With escalating conflict in the Middle East, an unresolved conflict in the Ukraine, and various other geo-political risks on the horizon such as the contagion risk of Ebola, it would be expected that the longstanding 'safe haven' qualities of gold would come into play as they have done in the past.
In September 2008, during the financial crisis, the gold price rose $50 in one day, September 18, as investors sought refuge in the one asset that they perceived to be a safe-haven of high liquidity and high credit quality. This one day move in September 2008 was the largest one day move since February 1980.
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Back in late 1979 and early 1980, some of the key drivers that propelled the gold price higher were the Russian invasion of Afghanistan and the Iranian hostage crisis.
Just looking back at old newspaper gold market commentaries in 1979 and 1980 will highlight that a lot of the key drivers for the rise in the gold price at that time were geo-politically related.
Today, the world appears to be as uncertain if not more uncertain. Indeed, in 1980 there was little risk of terrorism - state sponsored or otherwise.
In the late 1970s and early 1980s, the gold futures markets did not have nearly as large an impact on the world gold price as they does now, and the gold price was primarily driven by physical demand for gold, a lot of which was Middle Eastern and Asian demand.
The concept of unallocated gold accounts in the London market was in its infancy and was only being discussed by the five gold fixing bullion banks as a security issue in not having to move gold shipments around London so often. The practice of having unallocated gold not fully backed by allocated gold was not encouraged at that time.
Fast forward to today, and the 'flight to quality' and 'financial insurance' characteristics of gold should in theory be as important now as they were in 1979-1980 given similar invasions and occupations in various countries, not least in the Middle East with ISIS, and the renewed bombing in Syria/Iraq by the US and/or a US coalition.
Coupled with these worsening geopolitical developments, global macro economic risks remain elevated, with official interest rates at historically low levels, continued central bank balance sheet expansion through quantitative easing programs, and continued fiat currency debasement in the US dollar, Euro and other reserve currencies.
Inflationary risks therefore remain at the forefront. But at the same time, the gold price barometer is not signalling these inflationary risks either.
The key driver of the gold price at the moment is perceived to be the relative strength of the US dollar, yet the US dollar is only stronger compared to the other main currencies because these currencies, such as the Euro, are weak due to their economies remaining weak and their money supplies having been debased.
The economic recovery in the US is tentative at best. With the current weakness in the gold price, there is a growing cacophony that the safe haven qualities of gold are no longer relevant. Indeed, some in the financial markets are saying that the current gold bull market is dead.
It would appear to us that the factors that would make gold a safe-haven asset have not gone away.
In fact these factors are strengthening, as described above. The only rational explanation appears to be that gold remains an investment safe-haven as it has always done, but that this is not yet being recognised by the price discovery process in the market.
Adding in the fact that there is a continued disconnect between, on the one hand, the global physical gold market primarily driven out of China and India, and on the other hand, the New York gold futures market and unallocated London bullion market on the other hand, then this disconnect should not be expected to persist over the medium term.
This is especially the case given the heightened geopolitical and macroeconomic risks.
With the gold price not yet signalling the geopolitical and macroeconomic alarm bells that many would have expected it to, the question of gold price manipulation remains a valid question.
Recent gold price manipulation by an investment bank for commercial reasons has been established in the case of the successful prosecution against Barclays by the FCA regulator.
For strategic reasons, central banks do not welcome a disorderly increase in the gold price because it makes their fiat currencies look vulnerable and adds to inflationary expectations.
It is therefore not unrealistic to think that some of the current gold price weakness may be related to nonpublic gold market interventions by some of the world's central banks such as the Federal Reserve and the ECB, perhaps under the auspices of the Bank for International Settlements (BIS).
There is plenty of documentary evidence to suggest that the G10 central banks have historically discussed the gold price during their regular meetings and they also are very cautious on allowing more recent document releases through freedom of information requests.
For different reasons, the Chinese government welcomes a low gold price since it allows China to continue to accumulate gold in large quantities. Even if this accumulation of gold by China is being done for other reasons, it does act as a way of hedging China's exposure to its vast holdings of US dollar denominated Treasuries. Time will tell if this has been China's strategy.
Most markets these days are being manipulated. Therefore it seems very possibly that the gold and silver markets are too. This could be one of the factors in the precious metals surprisingly poor performance in recent weeks despite significant geopolitical and indeed economic uncertainty.
The Middle East is a powder keg that seems likely to explode. The U.S. and western nations have taken a hard stance against an increasingly powerful Russia. This is effecting an already fragile Eurozone and other economies.
Brinkmanship and a failure of diplomacy has brought the world close to a serious military conflict.
Gold has protected wealth throughout history from financial crises and war. We believe it will continue to do so in the coming years
It is very likely that tensions will lead to safe haven demand for gold and higher prices. An economic war has broken out between major world powers and the historical record shows that sanctions and protectionism tend to lead to military confrontation and war.
Everybody should own some physical gold as a hedge and a safe haven asset to protect against the significant risks challenging us today which include bail-ins, currency wars, terrorism and war.
DOWNLOAD ‘GOLD IS A SAFE HAVEN ASSET’ Here
The death of safe haven gold has been greatly exaggerated.
Gold is a hedging instrument and a safe haven asset as seen in history and much academic research in recent years. That is not apparent in recent weeks but we believe it will be in the medium and long term.
by Ronan Manly , Edited by Mark O’Byrne
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The slide in the price of gold is a true reflection of the paper price, that is, worthless. This may simply be the death knell of the paper ponzi naked short manipulation of the price. It's becoming worthless. This may be the death throes that the paper price must experience, it is screaming at us to buy and hold physical.
BUY AND HOLD PHYSICAL WHATEVER THE HELL YOU DO BECAUSE THIS PAPER MARKET IS COMING DOWN.
A 'safe haven’….
After the EMP, you’ll all be wishing you bought draft horses as the safe haven.
“Anyway, like I was sayin’, draft horses is the fruit of the land. You can barbecue it, boil it, broil it, bake it, sauté it. There’s draft horses-kabobs, draft horses Creole, draft horses gumbo. Pan fried, deep fried, stir-fried. There’s pineapple draft horses, lemon draft horses, coconut draft horses, pepper draft horses, draft horses soup, draft horses stew, draft horses salad, draft horses and potatoes, draft horses burger, draft horses sandwich. That, that’s about it.” -Bubba
Or Unicorns.
The more desparate the central banks, the more the PM price suppression
Libor case: made public
FX case: made public
Central Banks buying stocks: made public
silver manipulation: quashed.
Spot the reeeeal centre of economic gravity. PMs
If you want to understand gold pricing, well, you'll have to dig deeper than a ZH ad piece. So far fofoa is the only guy with a consistently valid story but even he doesn't do timing.
We wait for dollar collapse. I'm not planning on feeling rich until then.
Been there , done that .
The Mongol-founded Yuan dynasty (Chinese: ?, 1271–1368) also attempted to use paper currency. Unlike the Song dynasty, they created a unified, national system that was not backed by silver or gold. The currency issued by the Yuan was the world's first fiat currency, known as Chao. The Yuan government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government. Inflation in 1260 caused the government to replace the existing paper currency with a new paper currency in 1287, but inflation caused by undisciplined printing remained a problem for the Yuan court until the end of the Dynasty.
After further attempts that ended in inflationary disaster , silver became basis for coinage , mainly because of relative abundance .
The old 'easy' money vs 'harder'money story..In this case silver was the harder money. Now (as in the late 1800s silver is the easy money. Debtors cry for easier money with which to pay their debts. As long as both exist in the currency system there will be struggle. This will come as a surprise but when gold is removed from the monetary system (and the temptation to manipulate it) it will find a much truer value/price.
Russia-China-India are major stackers. They are accelerating their stacking. They are keeping much of it secret. They are doing all they can to manipulate the price lower to facilitate their stacking, while simultaneously taking control of the physical market so that the U.S. will be unable to make price moves they don't like.
In other words, Russia-China especially are moving rapidly to corner and control the physical market for generations to come. Why? Are they stupid drunk, or are they wily smart?
Remember: They have gone thru currency crises since 1998 that were profoundly painful and that subjugated them to the dollar, the IMF and thus to the U.S./Europe. When you go thru that much pain, for that long, you tend to get smarter, you tend to see your vulnerabilities that much clearer, and you tend to make solid strategies to prevent that kind of pain ever taking you down again. I believe that Russia-China, in all their many strategic discussions since 1999, have paid a great deal of careful attention to this very problem and have worked out a strategy to deal with it.
I also think they are imperfect just like the rest of us and have needed a kick in the ass at various junctures to get them to do what is required, rather than to take their ease. World events orchestrated by the Empire of Chaos have provided those needed kicks in the ass. So here they are, racing down the path of major global stackers....
It's a pretty safe bet that Russia-China are on the correct path. It's also a pretty safe guide for what we should do individually. Nothing is 100% certain in this world, except death and taxes. But stacking now, while it can be done, is what Russia-China are doing, and it continues to make fundamental sense in the foggy environment of clouds and clouds of risky, contrived, convoluted paper asset contraptions that the crowds of lemmings are chasing after.
This entire global wealth fog has to get clarified eventually by hard experience and when it does, it has to boil down to hard assets only - that's the stuff you get out of the ground that's extremely rare or limited - food, PMs, oil, gas, farm land, etc.
Paul Craig Roberts wrote a piece last few days.
http://www.paulcraigroberts.org/2014/09/25/will-russia-china-hold-fire-war-alternative-paul-craig-roberts/
I more or less agree that Russia/China could bring this down anytime. Maybe they only wait. Wish I knew wish I knew wish I knew.
All gold is "fools gold." The gold shills remind me of the real estate shills or the "make 1000% profit" shills in any category. Gold and silver are just cold relics of another day and time. In today's world, what is gold good for? Nothing, absolutely nothing. Stop shilling.
Very easy. You don't want it you do not own it. Simple as that. For mit it is I want it, I own it. And guess that I do not care about your opinion about it. I'm a fool, sure I am. Not everyone can be that outstanding as you and your insights are.
You are going to get a lot of critism Kumquat, but you are correct, I think, Gold was the medium of exchange, one time, and it may again become the medium of exchange at the government to government level, but for the average Joe?? Well give it a try, take some of your gold and buy a tank of gas, or a cart of groceries, and report back to us about your experience!
Maybe not in the big supermarkets, but trust me on a local market and black market it is no problem at all to buy stuff for gold or silver as long as your price is right.
rookies at life. the pair o yez
kum
you aremissing gold's one valid function...wealth storage.
There are many many students of economics/ of commodities/ of history that disagree with your viewpoint.
I can only suggest you begin reading some alternate and very valid viewpoints. Get back to me when you have.
You're an idiot - stackers aren't trying to make a profit like the rest of the greedy investment world. They are looking for a safe have - period.
But, I like the idea of so many idiots like you - it leaves the PMs for the rest of us.
He will beg the forces of evil to confiscate your stack to feed his myopic misdeeds that result in severe ketosis. AND, he'll win. The system is geared to solicit perpetuity out of the foolhardy's votes. After all, they are now the majority.
Current CB policy makes comparisons to past price moves largely irrelevant.
Theoreticallty, fed expansion should be good for gold; but it's created an environment where actors want all of their money chasing dollars and equities. Gold won't turn until investment sentiment turns, and that won't happen until confidence in the CBs drops precipitously. As long as it seems the CBc can levitate the US markets, gold will be stagnant. That may take a while; retail money is still on the sidelines, they won't let the bubble burst until ma and pa are invested.
Seems like people should be worried that the government(s) will sieze gold, for pennies on the iflated dollar, again if and when TSHTF. Central banks have no need to worry it is Joe Public who has to worry.
Since it has happened in the past by definition it can happen in the future. Be careful.
Only the sheeple will give up thier gold. There will be a black market economy of unimaginable vastness...
Those several large countries that are openly loading gold are clearly getting ready for the demise of the dollar. That is in the works.
Clear thinking by TPTB dictates one step at a time. It is a slow, boring, tedious manipulation of all things. But, the outcome is very clear.
These gold ads tire me.
I feel spent.
Like a man forced to wear his genitals like a pendant.
--Dieter on Sprockets
Keep the faith brethren...if you give up, they win.
Just keep stacking...
Don't let the opportunity pass you by to fuck this corrupt system in the arse really hard.
Unfortunatley I am of the belief that gold goes lower still. Maybe back to the $900's and silver to the $15.
Do not underestimate the danger of a rabid animal who is cornered.
So yes down we go again I think. (but me? I have oz. of gold I bought at $275/300....and on up ). People forget that gold is not valued in US dollars but the other way around for all currencies.
So if gold sinks to $1000 the idiots will cheer the strength of the US dollar but is that really true?
I'm envious...I didn't get the bug until a few years ago and my first 1.7kg came in at 1889/oz...and I've been buying ever since.
Doesn't bother me though as the sale price is the one I'll concern myself with as we will see over the next decade that current prices are at crazy discount rates.
I would rejoice at 1000/oz as it means I can just stack all the harder.
Just keep stacking...
A 1964 Washington (90 pct silver) quarter is still worth more than a gallon of gas.
See how much gas a 2014 quarter will buy.
hey when the shit hits the fan I can eat my precious metals all the iron will be good for me. seriously I believe the price topped out because our govt doesn't want anyone to make anything unless you buy thier stocks and then they can take it all and because the stocks are in insured it will be your own fault that you put your money there. atleast with my PM i own it it won't disapeared and if they try to confiscate I have a middle finger and they would have to kill me to find.
They can have my shiny phizzz once I've delivered all my dullish lead to them...and not a moment sooner.
I stare at gold all day long thinking dam I have to get some of that shit then I remember I am saving up for the new I 6.
nah, GPRO is the new safe haven asset/sarc.
it is a safe heaven if the powers to be say it is a safe heaven .... otherwise ... good luck
Oddly enough that is exactly what will happen.
Eventually the value of paper will be transferred to gold.
This will happen because much of the world does understand gold and central banks own a bunch of it. When paper fails, gold will be there to store that wealth.
Currencies seem all important today, in the long term they are just a tool to keep track of wealth. They are not wealth and when they fail they can be replaced in a heartbeat. When they are, gold will be found to have far more purchasing power than it has now. When the paper gold market fails with the paper currency market only then will we see this happen. It could even be priced in 'The New Dollar'.
The naked short paper gold monsters are busy buying up true value in physical gold. The transfer is ALREADY underway and someday soon holding paper gold will be like holding fiat and neither will be a good way to pay for the I 6.
"Oddly enough that is exactly what will happen."
Why oddly? it is logical if you delete all the talk and hate shows ... its power will come if it will be used as a medium of exchange ... and that can be decided only by the powers to be .... as simple as that.
" the gold price rose $50 in one day,"
..when they lose the handle, next time (again), one hundred dollar days will not be unusual.
The Great Pumpkin will come, and you'll be sorry..., you'll see!