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Why Gold Is Undervalued
Submitted by Alisdair Mcleod via Peak Prosperity,
Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth.
First, I think a reminder would be timely. Those who seek to trade gold are at substantial disadvantage:
- they line themselves up against too-big-to-fail banks which have the implicit backing of the taxpayer to bail them out of their trading positions;
- furthermore markets have become so manipulated and dangerous that gold should be considered as insurance against systemic risk instead of a punt.
Because the majority of market investors don't fully grasp these risks, when the current global financial bubbles eventually burst, there will only be a tiny minority who end up possessing gold -- by which I mean physical gold held outside the fiat money system.
Technical Analysis & Gold
Using charts has the theoretical advantage of taking the emotion out of trading. So long as there is no significant change in the purchasing power of the currency against which it is traded, prices in the past have relevance to the future, because recent price experience sets an expectation in the human mind. The chart below shows the gold price since the peak in September 2011.
The chart shows a potential triple-bottom pattern formed over fifteen months, at just over $1180/oz. We know that the three bottoms were all at quarter-ends, strongly suggestive of price manipulation to enhance bullion bank profits and their traders’ bonuses. In each case, computer-driven traders had near-record short positions evident in this second chart, of Managed Money shorts on Comex:
This confirms that $1180/oz appears to be the point of maximum bearishness, in which case our triple-bottom pattern should hold.
However, this pattern is rare and should not be the first conclusion we jump to. The definitive work on Dow Theory (Technical Analysis of Stock Trends – Edwards & Magee) describes an unconfirmed triple bottom as “treacherous”. But the characteristics we're seeing in this current formation, with the third low on low volume and the subsequent rise on improving volume, are encouraging. Confirmation of the pattern according to Edwards & Magee requires the gold price to move above $1375, a level worth noting. Once confirmed, a triple-bottom “almost always produces an advance of distinctly worth-while proportions.”
The danger of course is non-confirmation. One can imagine a price rally to say, $1300, unwinding the shorts, at which point subsequent bears might then mount a successful challenge on $1180.
Additionally, since Edwards& Magee published their work, computers have allowed us to define trends by moving averages, and a commonly accepted indicator is the 200-day MA, which stands at about $1280. If that level is broken and the gold price stays above it long enough to cause the MA to rise, that should trigger computer-driven buying. So any price over $1300 will likely confirm the bullish case, yet it would be a mistake today to be unreservedly bullish on technical grounds alone until this price level is exceeded.
Valuing Gold
None of this reins in the truly subjective nature of tomorrow’s prices. Instead, we should turn to relative valuations to get a sense of whether gold should be bought today or not.
To do this, we need to compare the quantity of gold with the quantity of fiat currency. While we have reasonable estimates of the total amount of above-ground gold stocks over the last few centuries, we really don’t know how much the central banks actually hold, on the basis their figures are for “gold and gold receivables (i.e. leased, loaned or swapped and not in their physical ownership). Equally, the task of assessing the true total amount of the world’s fiat currency and how that has grown over time is too great to be a practical proposition.
Instead, I have devised a simple and practical approach, by comparing the increase in the world’s above-ground gold stocks with a measure of the increase in the quantity of USD fiat currency.
I've devised a metric called the "fiat money quantity" (FMQ) which reverses the process by which fiat money was originally created. Our forebears’ gold was taken in by commercial banks, which would issue currency notes and record deposits in gold substitutes (dollars payable in our forebears’ gold). When the Fed was created, the Fed took in the same gold from member banks and issued its notes and recorded reserves against that gold in its balance sheet. So FMQ is the total of cash, accessible deposits in the commercial banks and bank reserves held at the Fed, adjusted by temporary factors that affect those reserves such as Repos and Reverse Repos. More details on how FMQ is calculated can be found here.
The chart below shows how FMQ has grown since 1959. It shows a steady rate of exponential growth prior to the Lehman crisis, after which it has increased alarmingly:
One glance tells us that USD fiat currency is in monetary hyperinflation, which is not reflected in official price inflation statistics (but that's another story). Our objective is to try to get a feel for whether gold is cheap or dear, and the next chart shows how the gold price has progressed from the month before the Lehman crisis (nominal gold price in red, FMQ-adjusted price in yellow):
The message could not be made more clear: compared with fiat dollars, in real terms gold has fallen in price since the Lehman crisis despite the increase in its nominal price. With gold at $1200 recently, it has actually fallen by 41% in real terms from July 2008.
So to summarize, before the Lehman crisis, investors’ appreciation of systemic risk was relatively low. After the crisis, there were concerns that we faced a deflationary price contraction, so the nominal price of gold dropped (from $918 to $651). When it became clear the Fed would successfully inflate the financial system out of immediate trouble, gold rose to its high-point in September 2011 -- but on an FMQ-adjusted basis the high was considerably less, reflecting the sharp increase in the quantity of new fiat money being issued: gold only rose about 20% from July 2008 on this basis. While there was undoubtedly some froth in the gold price at this point that needed correcting, given the circumstances the price level was otherwise reasonable. The subsequent bear market in gold since has taken it to an extreme undervaluation today.
Gold is not alone in having a market value divorced from reality. A bankrupt government such as Greece has had no problem borrowing 10-year money recently at only 6.5%, though this anomaly is beginning to correct. Other insolvent nations, such as Spain and Italy were recently able to borrow 10-year money as low as 2% and 2.2% respectively, though their bond yields have also subsequently risen slightly.
Think about this for a moment: the US dollar is the reserve currency and its government bond yields are the benchmark for global fiat money risk-free return. Governments with a demonstrably (much) worse borrowing record have been able to issue bonds at what amounted to a yield backwardation -- significantly lower than the US 10-year Treasury bond. This has never happened before, so far as I’m aware.
Key market valuations are totally screwed up in a world of 0% interest rates and manipulated markets. If gold was alone in its extreme undervaluation, without a counterbalancing overvaluation in fiat-currency bond markets, something would probably be wrong with our analysis. The fact that this is not the case offers confirmation that gold is mis-priced and incorrectly valued in markets that have become divorced from reality.
Defining the Gold Market
It is common knowledge that dealings in paper gold are greater than that in physical bullion. Paper gold includes the following categories:
- Unallocated gold accounts held with bullion banks.
- Sight accounts held with central banks on behalf of other central banks.
- Over-the-counter derivatives and options
- Forwards on the London market (deferred settlement never intended to settle)
- Regulated futures markets (Comex, Tocom etc.)
- Gold ETFs not backed by physical gold.
The total of these markets, for which there is no estimate, is simply enormous (by contrast GoldMoney estimates above-ground stocks of physical bullion total some 162,500 tonnes today, increasing at about 2,800 tonnes per annum.)
But we can get an idea of the overall interest in paper gold from numbers released by the Bank for International Settlements covering off-market derivatives, plus outstanding Comex interest. This is shown in the next chart:
The last data-point was end-2013, when gold coincidentally sank to $1180 for the second time. A significant portion of these derivatives can be expected to be hedges against bullion-bank liabilities such as unallocated accounts and perhaps positions in regulated futures, so they are a fair reflection of changes in outstanding paper interest. It is clear that over the course of the last thirteen years, in terms of tonnes equivalent, total gold derivatives have declined significantly. Some of this decline has been due to the increase in the gold price so the currency value of these derivatives would not have fallen so much; but from the peak in 2011 from which the gold price has fallen by nearly 40% in USD terms, outstanding paper gold has certainly accelerated gold’s decline.
This tells us that, given that their hedge positions are historically low, bullion banks have reduced their outstanding liabilities to customers with unallocated accounts, which would be consistent with the late stages of a bear market. Ironically, the unwinding of unallocated accounts has been hastened by the withdrawal of bullion from the London market redeployed to satisfy Asian demand, because ultimately physical bullion is the basis for the whole market. It is obvious that if the trend outlook for gold improves, given that the decline in outstanding derivatives has not led to reducing leverage on the physical market, liquidity could rapidly become a serious issue.
Meanwhile, physical gold goes from West to East.
Asian Demand
Physical gold features in the family pension fund for the average Asian. We are all familiar with this being the case for Indians, but it is also true for most other countries on the continent. The reason is simple: no Asian government has been able to suppress the ordinary citizen’s interest in gold as a store of wealth, and generally currency issuance has been badly abused by Asian governments. For example, in Turkey accumulating inflation from the 1980s led to six noughts being lopped of the lira in 2004. In India, since the 1960s the rupee price of gold has gone from INR160 to about INR76,000 per ounce today.
The history of Asian demand goes back to the oil crisis in the 1970s, when the Middle East suddenly became immensely wealthy from the rise in the price of oil. Naturally, they invested a portion of their new-found wealth in gold. The pace of gold acquisition by Arabs slowed in the early 1990s, because a new western-educated Arab generation began to manage the region’s financial resources, and these youngsters were doubtless discouraged by gold’s prolonged bear market. Instead they turned to equity markets and infrastructure investment. Then in 1990 India repealed the Gold Control Act.
This legislation banned Indians from owning gold in bar and coin form, which gave added impetus to smuggling and jewellery manufacturing. Its repeal was part of a process of economic liberation in the wake of a financial crisis which led to market-friendly economic reform. Since then, recorded private sector imports grew from a few hundred tonnes to as much as 1,000 tonnes annually before the Reserve Bank of India reintroduced import controls last year. Predictably the effect has been to restrict officially imported gold and increase smuggling.
Turkey is the gateway to Iran and the Moslem world to the east beyond the Caspian Sea. Gold has been actively used as money by this region since time immemorial. According to the Borsa Istanbul, Turkey has imported 3,060 tonnes of gold since 1995. Some of this has gone to Iran and to the east of Turkey, but equally the rest of the region will have had other sources over the decades. Lastly, South-East Asia is populated with a Chinese diaspora, and since its industrialization in the 1990s this region has also been stockpiling significant quantities of bullion. But the big story is China itself, which we investigate in detail in Part 2 of this report
Summary (Part 1)
When the gold price is being smashed in western capital markets, it's easy to forget that Asia is quietly buying up not only all or most of its own mine and scrap supply, but significant quantities of the above-ground stocks held in western vaults as well. It's a process that dates back to the birth of the petro-dollar in the 1970s and has continued ever since. The three big ownership centers are the Middle East, India and China -- the latter two having in recent years enjoyed high rates of economic expansion, with increasingly wealthy middle-classes with a high propensity to save.
We cannot know in truth how much of the world’s above-ground stocks of gold are in the hands of these three centers. But they are only part of the Asian story, with Turkey and its sphere of influence plus the whole of South-East Asia, whose people also regard gold as a prime savings medium. All we can say is that it is likely that significantly more than half the world’s gold is in Asian hands. Importantly, over the last ten years the pace of Asian accumulation has increased, draining the west of its physical liquidity. And in this respect perhaps the most important indicator is the decline in outstanding OTC derivatives shown in the last of the charts above.
So not only do we have evidence that the price is based on western paper markets with declining liquidity, but by comparing above-ground stocks with the Fiat Money Quantity of the world’s reserve fiat currency, we can see that gold is extremely undervalued at a time of high, possibly escalating systemic and currency risk.
In Part 2:The Case For Owning Physical Gold Now we delve more deeply into the flows of bullion to Asia which will soon create supply shortages in the West, as well as detail the growing systemic and currency risk factors that few asset besides physical gold can offer protection against.
Click here to access Part 2 of this report (free executive summary; enrollment required for full access)
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Paulson still likes GLD. despite lowest holdings on record.
http://hedgeaccordingly.com/2014/09/paulson-stays-with-gold-etf-as-price...
Why is silver undervalued? Cuz I bought it when it was overvalued
Honesty and silver are both in bear markets.
yer - at $17 an oz, its $8 less than its average production cost
id buy silver miners if there was any hope of them remaining solvent
If you want to align yourself with China and India, by all means invest in gold. 3 Billion people can't be wrong.
Because prices never differed within varying geographic markets in the real economy. When the financial veil gets pulled and people realize that the Chinese and Indians simply will not sell their metal for paper, the regional markets will respond accordingly.
Until that time, which is likely to be in the distant future, equities look better.
Edit: Having said that, I'd take a good tract of farmland over both.
https://www.youtube.com/watch?v=2tiXrY18lo4
Click here to access Part 2 of this report (free executive summary; enrollment required for full access)
No thanks.
I enjoyed the first part of this article but NWIH (no way in hell) I am going to go register somewhere to read the second half....
Yep. it's just another newsletter advertisement. somewhere along the line we'll get to the important part; how to buy your gold from us. they don't have any more idea about whether gold is undervalued or not than you do. therefore it's a waste of time to even read the fucking thing. Only people in market kindergarten use phrases like undervalued. The price is what somebody will give you for it. Period.
My bank has expressed the death of gold for investment. I wonder what that means? They were actively making fun of a guy who sold stocks to buy some....
death of gold then death of gold mining industry.
Yeah, my wife has totally lost interest in gold jewelry. 'I'm so over it' she told me, 'instead of buying me a new necklace for my birthday, how about shorting a couple of tons on the Comex for me'. And see, she's usually on the same page as her friends, so I'm guessing there are hundreds of other guys shorting gold for their wives and girlfriends as we speak. Certainly sounds like the end of gold.... I bet those Indian brides are doing the same thing.
Here's what those Indian brides are doing
https://www.youtube.com/watch?v=fSRq-PHDOF0
Was that bangalore_equity stirring the curry pot?
I'm glad to see romance is still alive and well...
"don't get me a gold necklace?" I don't know man, when a wife says not to spend on me anymore I'd be checking to make sure she's not long on Johns...
Its a good thing we have found an alternative to gold for the electronics and dentistry industries. Like.... or how about.... or maybe........ yeah.
This is frequently done for cosmetic reasons only
http://www.travellerspoint.com/photos/90681/Gold_teeth..nd_sari.jpg
I think they frequently use gold options or gld certificates now - better price for the same thing.
Or how about 1/10 gram golden notes you can carry with your fiat in your wallet
http://valaurum.com/
That's only toy gold, for real LBMA gold bullion for the man or woman in the street, and to profit from it, mail me at auroraassociatesdublin@gmail.com with Zerohedge in the subject line.
great post, Al. you crack me up.
Peak Prostituterity
Well, yea.. for jewelry..'yellow gold' is tacky as a muva fucka. I can see why she said stop buying it.
Platinum is what the ladies want today. TRUST!!
As far as collectibility for real money, yes..gold is popular indeed. But please, stop givin that tacky yellow crap for her to wear.
(go ahead, ask what she would prefer. Maybe if you've given alot of gold in past, she mayspare your feelins and not admit that you wasted/spent the money on somethin she dont love.)
;)
Listened to an audio of Keith Barron last nite. Says we're at peak gold.
If my bank ever went beyond just expressing their opinion on that, I'd immediately take all my business elsewhere. My investment handler came dangerously close to that when I went all cash before the 2008 meltdown.
Gold tells you the REAL value of your assets, in the currency you're using. Right now gold says shit is cheap, and getting cheaper...Prices across-the-board should be tanking.
But they don't listen, they insist their shit is worth more, and detach from gold, propping up markets at impossible price levels...
Eventually gold will say fuck it, and because, like water, it finds its level, it will rise in price and you'll find out its TRUE value against your artificially-inflated portfolios.
Gold does not rise and fall in value when viewed over the long term. It is CURRENCIES that are moving, becoming more worthless as they are devalued in an attempt to "dilute the liquor" to hide the fact that you've been pinching it, while passing it off as full-strength.
Nobody wants it no matter how many articles you write about it.
People want things that are going up. If you want people to buy gold buy some large contracts and demand delivery. Writing articles does nothing when nobody wants the depreciating asset and everyone who bought it post 2011 is losing big time.
People buy the sizzle not the steak.
https://www.youtube.com/watch?v=dzmTtusvjR4
That is fucking nonsense. Are you watching China, Russia, Turkey and other countries stockpiling gold the last few years?
You're a US/Western MSM brainwashed retard.
Devo
Everyone who bought it post 2011is losing big time?
You mean measuring it in units of dollars.
'Muppets want things that are going up/ have gone up'
There...fixed it for ya'
Those with brains on the other hand want things that a profoundly undervalued and will go up significantly...like gold.
Me, I can't get enough of the stuff. I love what it represents in that it sticks a middle finger up in the faces of the corrupt bastards cheating society.
Gold says 'fuck you, I'm not playing your bullshit game'
I like that the price has been falling as I get to buy more of the bankers' money...and they don't like that.
Gold is undervalued because it's in a bear market? Not quite, it's because it has no industrial application and really is hard to defend, transport and exchange. I'll stick to my currency thank you very much. Maybe when gold gets back to historical norms, under $300/OZ, I'll consider diversifying 5% of my portfolio.
There was a chap called AP or American Patriot on other boards that sounds exactly like you. Except his lower point was 345. Are you him?
I think that he just put his ring finger on the 3 and rolled his left hand toward his right...
So at $300 you will consider, at what price point to you buy?
Dream on dreamer.
For some people zero is too high. Zero! Come back to me when it is less!
better yet, how about a negative gold price? bullion banks pay YOU to get that worthless and barborous relic off their hands.
seems they need the vault space to store all the paper.
lol @ $300 gold.
Gold is quite simple to defend, transport and exchange. Much moreso than a 1961 Ferrari GT250, or a vintage Patek Philippe Grand Complication perpetual calendar chronograph, or the Picasso a that childhood friend thought he could "improve" upon (much to his grand parents' displeasure), or even the wine collections hiding elite ebola bunkers everywhere.
Furthermore, with gold one can avoid the hassles & headaches of dealing with Persian Rug pirates, Jewish diamond cutters, or Bo Diddley at the local pawn shop. But for the convenience oriented, bottom dollar, high speed trader, there are probably more appropriate investment vehicles, which entail other risks.
For turning a quick buck, there are certainly more practical vehicles, which can be transported at near the speed light through fiber optic cables.
Hence, all the disclaimers about "Please consult your investment, tax or legal adviser for more information regarding your personal situation" as well as "If you have to ask the price, you can't afford it" attributed to the same paper pimping oligarch who said “Money is gold, nothing else.”
Funny, gold is a historical tool of Royalists to oppress. Gold is a feudalist relic that only morons would support and retain where it is clearly observably a non-performing "asset".
Invest in a business you believe in. Your money is a vote and to select gold is so backward and counter-intuitive, I have a hard time imagining such an unwitting dupe exists.
It's not supposed to "perform". It's insurance against central banker screw ups. But I guess you don't believe in insurance and that's why it's required by law to drive a car. Only you though are responsible for your welfare in the event of a financial melt down. Go kiss uncle warrens feet but don't listen to his father.
Let's try an experiment: bury your savings in your wall, let the ZHers bury their gold in the ground. Come back in 20 years and see who can buy more.
when the dust settles., after the great paper implosion, no one will ever have to physically trade the PMs. they will be held, let's say at the SGE, and its owner will get a debit card that will tick off the gold held and spent in micrograms.
Gosh how many times do I have to hear the same moronic claim "gold has no industrial application".
Gold has many industrial uses only it is too expensive to use because of its value as a scarce fungible monetary asset.
It even has a dozen uses at this price, though.
I think you're wasting your breath on these knuckle-draggers.
Does your historical norms take into account inflation? Cause if they did and you read the article, you would know they are already down to the rough area around 300-400 post inflation
Fiat will go back to it's historical norms; zero net worth
What he said; but nobody ever says. if something is going to go back to its historic trend line why not paper money which always ends up at zero? that's always, as in 100% of the time; a number that impresses me.
...throw in "fire burns it" , "it decomposes over time", and "it doesn't wipe my ass very well" and you'd be talking about paper money.
Talk about not having an industrial application; fiat doesn't even wipe ass!
Go ahead and try it; wiping ass with some fiat.
It's like wiping with fucking rope.
because it has no industrial application
You're only right if you exclude all the electronics components and jewelry industrial uses. So, you're ....
Thanks for reminding me why I ignore technical analyst chartmonger BS.
And it looks like some unnamed European country is secretly getting their gold back:
https://www.goldbroker.com/news/repatriation-gold-secretly-taking-place-...
http://srsroccoreport.com/jp-morgan-gold-inventories-fall-33-in-one-day/...
Holy crap @ the JPM COMEX inventory. Surprised Tyler missed that one!
That's not a small move, but it's consistent with the long-term drawndown JPM has had. It'll be interesting to see if the same amount pops up at another bank in tomorrow's report, or if it's just flat out of the system.
If you can't hold it you don't own it! If there was a buy and sell market across the country (no pawn shops) in physical gold I would be in it - until then I will not be swayed by empty talk. I buy land and useful products for a more secure future.
edit When they killed the gold standard they opened the door to our 18 tril debt - without an asset value the money is paper and the country is screwed.
It will be interesting to see if the Swiss vote to go back to the gold standard - they may teach us a lesson yet.
"The Crucial Questions Financial Journalism Won’t Ask And Central Banks Won’t Answer – New Orleans Investment Conference Presentation By GATA’s Chris Powell"
http://thenewsdoctors.com/?p=231979
Amazing how bad the gold threads have become here on ZH. Its sad reading these comments. Bunch of dummies compared to Chris Powell.
Point of correction -- that article would be from Alasdair Macleod, of the Clan Macleod, and he is actually one of the all time good guys on sound currency and criminal practices of the banks, and he also knows.... there can only be one.
Alasdair Macleod: "Sound money should be made to be another explicit basic human right. Banks should never be allowed to force you to use their currency and then endeavor to devalue the currency as they please. It should also be a basic human right that money put into a bank is still owned by the individual who deposited the money, not the property of the bank."
What world do you live in - dreamer
Joel the gold bug‘s aghast,
the flag on his house at half-mast
Due to timing mistakes,
the metal’s price makes
full Netflix a thing of the past
From the CBC-TV (Canada)
Top Secrets of Gold
Full Documentary
http://www.youtube.com/watch?v=ksPXgtOV4KQ#t=2417
A couple of days ago I was in a barber shop where a discussion was taking place about gold. One chap pulled out a 1/4 oz gold coin and said he had got it for $300. I then asked him if and when he was hungry, who would he be able to sell it to or trade it to for fair value - he had no idea.
That just means that he's an idiot and you're an idiot for not offering him $250 for it becasue he's an idiot.
He would not sell because he had drunk the kool-aid and believed that it could save his life when push came to shove. A misguided belief in self sufficiency.
That belief was not kool-aid for thousands of jews who escaped nazi Europe. History is not one of your strong points.
That was when gold still had a monetary value at most financial institutions.
For your information that gold did not pass immediately to financial institutions. It paid bribes and transportation. And holders of gold in Zimbabwe or Argentina today? How did they fare against a hyperinflating currency? You really haven't been anywhere have you?
You presume too much. I'v been to many countries and can tell you that its not gold being traded on the street, its US dollars and produce.
I know one thing; if the SHTF and I'm in the bugout vehicle, I'll give a desparate guy a ride that throws some PM my way. I won't be stopping for stacks of green paper.
Hotties ride free.
@Latitude. Even before Zimbabwe, in Rhodesia, there was such strict currency control, one was allowed very little hard currency - this was because the govt rightly feared that if people could get out their assets they would all leave. I used to scan the small ads in newspapers and buy a Krugerrand whenever I saw one. When I finally left - I was only a youngster - that handful of Krugerrands enabled a smooth transition to a job in Durban. I remember going into a jewellers they day I arrived there, and exchanged the coins for cash at around the going spot rate. I remember laughingly asking the guy how do we know they're genuine? He looked at me seriously, once you've held one or two in your hand you always know. here's your cash. The whole process took less than five minutes.
Financial institutions will not be open for business in a financial crisis.
There has always been financial institutions and unless we are blown back the 16th century, there will be some form of institution. A wagon load of turnips can only travel so far to exchange for a load of coal. The dentist may not always accept your chicken for payment - a system will be established.
I was born in Europe and know of what my parents went through. Some people did make it out by trading valuables but most of the gold ended up in Nazi hands or in German vaults in Switzerland. If you are stupid enough to think that most Jewish or other denominations other than Aryan heritage had their businesses and homes saved by gold then you do not know anything about the war. The people that were the most unaffected by the war in countries taken over by Germany were people on the land. They occasionally had livestock taken, some horse feed, some food (milk, eggs, vegetables, etc.) by the Germans and even by the allies later on in the war. These people did not rely on gold for trade but on what they could produce - gold was only good if you could get to the Americas and cash it in at a financial institution. Most people were lucky if they had enough to fill a cavity in a tooth - so save that gold and hope you can trade it for food some day.
If you want to know what was most important, it was knowledge kept out of the hands of the Germans and that pistol you had hidden for the underground. Cities were locations for control by jack boots and starvation for many. So tell me how you intend to survive in that concrete jungle with your ten gold coins in your pocket but watch your back.
I have the gold watch my father carried with him when he was leaving the old country and Germany in advance of the Slavic and Jewish "work camp" trains. The band has more gold than the watch and therefore is worth more. He also carried cigarettes and nylons.
Funny, FRN notes weren't part of what he carried....
A rather significant portion of the "greatest generation" made it through the great depression on self sufficiency.
Yes, thy were differnt times. Rural population was relatively speaking, large. Making do with what you had,, or could create yourself was pretty common among the rural class.
Reliance on a shiny metal as your only item of value in case of calamity is pretty poor planning, in my estimate.
It definately has it's place though.
Back to killin' snakes...
Paulson is not a good indicator, he was a loser sleeping on friends floors until he got lucky in the mortgage trade, since that trade his record sucks and he is pissing away all his winnings, he should heed Cramer "Stop trading!"
The stock of gold is always irrelevant. Most will sit untouched for generations. Likewise fiat. It could double overnight.
The main point to understand about gold is that it's price has always been suppressed by the structure of the various paper systems that saw gold as competition. The purchasing power of gold will soon explode. It went from 35 to 850 between 1971 and 1980. This was a rapid 24 fold increase. That was soon suppressed by the fiat system.
I believe soon we see an even larger restatement of gold's value and this time, with the failure of the current type of fiat system (in which fiat pretends to be a store of value) it will emerge into a new system in which it is able to maintain its value.
If you study the ECB balance sheet you can see the nidus of those thoughts.
I do not need to read the article. Gold gets fucked by the ETF derivative markets. It is the same with silver. It is a small physical market but pulling a margin call is very hard to do. i.e. show me the metal on delivery.
My brother asked me a great question: Why do they care so much about us and our metals? That is a very valid question to ask. So why does anyone care if anyone stacks gold and silver? Is there a reason for that and if so why?
The reason is robbery from your back yard to the bankers of the world
Who is this "they" that care so much about your bother's metal? I've never had anybody give a shit about my gold purchases and sales. Only issue is capital gains (if you declare :) and money laundering issues like all assets (i.e., having to declare over $10k worth when going through airports).
The GLD ETF got started in 2004 when gold was trading for decades around $400 and lower. I'm not saying that correlation is causation but going back to pre-ETF prices kinda runs against an argument that gold is currently under-priced.
I was referring to the market prices and how all of that works on ETF VS physical. Even I have been in gold and silver a lot longer than 2004. My brother, who is older than I. even longer. We do not need a lecture on how to buy gold or silver. What we want to know is why these metals are undervalued. It is a simple question.
why? it's very simple. it has nothing to do with any interest in your or your brother. it has all to do with August 15th, 1971
which was such an important event that it even allowed the end of the (1934) gold ban in the US, in 1974
"All that glitters is not gold" Well, actually, no. In the final analysis, gold is pretty much the only thing that glitters because everything else just turns to dirt and, as we know, dirt doesn't glitter very much.
Latitude 25
Go ahead and buy the gold, sit on the gold, look at the gold - get blinded by it.
I will sit in my garden, feed my animals, build my stock of 3 b's, take care of my tools, stock up more on fire wood, learn new skills, etc and I will think of you when the hungry times come.
3 bs?
I think both could be part of a rational plan. Self sufficiency and PMs.
beans, bullits, bandages
3bs.... Thankyou sir.
Put this crap in the trashcan. Real interest rates go up, gold goes down. Period.
Much more interesting action in the credit space. Term risk had its run, credit risk is now on a tear. HY spread tightening is pretty white knuckle.
Gold will get violated below the triple bottom. It will be done because they CAN and it will run stops and more loyalists will be puking blood.
Keep your powder dry because it is not a buy here. I'm not saying it's right, just saying. Mark my words boys.
You are as likely to be right as the article author. Flip the coin and take your chances.
HA HA!! I pity the fool that thinks valuations matter in this market. Beside the author didn't even consider the obvious war with Russia over physical goods, gold, sliver, and oil driven lower to break the back of the Bear...pity us stackers we probably have tunston neatly stored earning no interest and losing value...yes fundemenatls don't matter in the slightest when people are hungry or have alternatives that provide a yeild...looks like the slide will continue for some time
Gold is not undervalued, everything just costs too much.
Gold is undervalued, because everything else just costs too much.
Fixed it for ya.
Gold is "undervalued" because the banksters need it to be.
They won't be able to keep it "undervalued," and on that day, the shit will hit the rotor blades.
An American, not US subject.
I am wondering if some kind of crisis could cause mass liquidation of gold in Asia. Something no one expects.
how much would you pay for a vaccine, to save your childs life?
No mention of Dubai and their massive new gold refinery.
(Reuters) - In the desert on the outskirts of Dubai, one of the world's biggest gold refineries is under construction. When completed next year, it will help to alter the balance of power in the global gold industry.
Growth in demand for the precious metal is shifting east, to Asia's fast-growing economies. But key industry activities such as refining and clearing - matching investors' buy and sell orders - remain dominated by Europe and the United States.
The $60 million refinery being built by Kaloti Precious Metals in Dubai is part of efforts to change that pattern, as is a plan by the Dubai Gold and Commodities Exchange to introduce a spot gold contract this June.
“Dubai is already a top global centre for gold trading," Tarek El-Mdaka, chief executive of Kaloti Precious Metals, said in an interview. "The refinery is part of the next stage, making Dubai a top centre for physical gold refining and clearing.”
What's the point of this article again? ALL markets are properly priced because they are active and their is enough price discovery - look at the bid /ask spreads for stocks; when they are a $0.01, then the price is being considered 'fair' by the participants.
Depending on the individual's perceptions, the price may not be 'accurate' but then it has never been about the individual, just the market.
Stop moaning about gold being undervalued. The value comes from the individual. I see it as a battery to store my excess economic production. Nothing more, nothing less. I can aalso store it in binary 1's and 0's, pieces of paper that are fungible for goods and services; pieces of paper that are fungible for other pieces of paper; and finighed goods. I choose some of all of them.
Batteries do come in handy though.
also, in the financial markets, it is easier to take the 'money' of the minority that believe the price is wrong, beccause it will move in the diretion of the majority belief.
Just hours earlier, De Margerie had met Russian Prime Minister Dmitry Medvedev at his country residence outside Moscow to discuss foreign investment in Russia. In his speech hours before the plane crash that took his life, de Margerie said U.S. and European Union sanctions on the country were “unfair and unproductive,” and that he opposed efforts to render it “isolated from the major global economic and political process.”
De Margerie was a keynote speaker last spring at Putin’s annual economic summit in St. Petersburg—an event that many Western executives decided to skip—where he signed a deal with Russian oil group Lukoil (LUKOY) to develop shale oil in Western Siberia. De Margerie also pressed ahead with major Russian investment, including the $27 billion Yamal natural gas venture in the Arctic led by Russian gas group Novatek (NVTK:LI), even as sanctions against Novatek and one of its owners, Gennady Timchenko, have complicated financing.
De Margerie told Bloomberg News recently that he was “doing everything” to move the Yamal project forward, in keeping with his belief that politics and business should be kept separate. Total, the world’s No. 4 non-state-owned energy group, has said that Russia could become its largest supplier of oil and gas by the end of this decade, up from its fourth-biggest supplier in 2013.
De Margerie’s death removes from the scene a businessman who rarely shied away from geopolitical debates and became one of Russia’s most outspoken allies in its efforts to avoid economic quarantine, willing to say what others only dared think. Although European corporate giants from Siemens AG to Renault SA (RNO) have built close relationships with Russia, most business leaders have preferred to keep their lobbying private to avoid offending governments committed to punishing Putin.
PetroDollar War – French Energy Giant Total CEO AssassinatedThe second point is that gold only has value in an rational society where survival is NOT job one, but 'taken for granted'. If things go Mad Max, gold has no more value. In other words, it can act as a battery for excess economic production so long as everyone (or most) agree that it serves that purpose. Otherwise, it is pretty and shiny.
If society breaks down, anything that enhances survival has value. As always, luxuries become redefined and have extra value. Watch cigarettes become the new money for a generation in an extreme crisis - not to mention water, beans, tuna, rice, and SALT. Lead will be more precious than gold.
However, it takes something extreme and uncontrolled to end a civilization. TPTB and their .01% masters do not want to have to work to survive. They need sufficient hoi poloi to provide the economic production necessary to keep their growing descendants in ease and relative luxury.
"The second point is that gold only has value in an rational society where survival is NOT job one."
Tell that to the people in Zimbabwe during their hyperinflation episode. They had to pan for gold in a despereate attempt just to keep bread on the table. And in a Mad Max scenario, do you really think the need for trade will just dry up and go away? Barter is inefficient, which is why we have currency and PMs-- I am confident that gold and silver will continue to help facilitate exchange of goods and services even after the SHTF.
Most miners today at or near all-time lows despite average $1300 gold price which is more than quadruple it's base from the bear market end of 13 years ago... So if the miners are going bankrupt at $1300 then it's not over valued and likely costs a lot more to get out of the ground.
Most minerals are underpriced as to cost of production. And, most are subsidized in the great government give-away, helping to transfer what little wealth remains into the hands of the plutocracy. Why should gold be any different?
Craig
Additionally, since Edwards& Magee published their work, computers have allowed us to define trends by moving averages, and a commonly accepted indicator is the 200-day MA, which stands at about $1280.
This article is lots of words and not much reality.
First, regarding the 200-day MA. If you examine the period from January 2013 to May 2013, this measure was perfectly flat. This is a statistical impossibility. That could only happen through number plugging ... pure raw manipulation. Once you know you have this kind of manipulation, the only analysis that is valid is a forensic one ... who's fudging the numbers.
Next, gold's real value is in its real use. Use in art "is not" real ... it's symbolic. Use as money "is not" real ... it's symbolic. Use in electronics "is" real. Use in dentistry "is" real. With that in mind you lay out the supply and demand curve. Real new supply comes from digging dirt. Reclaimed supply comes grinding electronics, melting art, and pulling teeth from cadavers. Real demand is obvious. Symbolic demand "must be ignored".
Since gold is obviously not money, any representation of gold having a value of money is false. It can only become real by propaganda or legislation. Both of those are in the control of the government ... even as government collapses. It will only be replaced by other government with other symbolic rules.
The best thing the government could do in this regard is adopt "proper management of the medium of exchange". This means creating money corresponding real promises to complete trades over time and space (e.g. you promise to trade 360 future monthly payments for a house now). It means monitoring those trades for defaults. It means collecting interest equal to those defaults ... immediately. The result is zero inflation and a perfect perpetual balance between supply and demand for money (as there is a perfect balance in all actual trades and trading promises ... it's the nature of a trade). Money is record keeping ... it's not stuff. You're keeping track of trading promises and delivery thereon.
Thus, any rational analysis of the price of gold is subject to the whims of government. And that isn't rational or predictable.
Gold is OVER valued. people are sheep - we have been in a gold bubble for a long time.
Historical value for gold is one oz Troy = 1 week work average american worker's wage.
Average weekly wage today: About $900 according to "official" reports. Actually it may be lower, but I would not buy a spec of gold for more than $950.
And with deflation, value of gold in dollars will drop! Deflation does not mean price of stocks - it means wages.
Craig
edit: The real value of gold is as an electrical conductor, where its value far exceeds what is worth as a coin. As a coin it iwas only used because it was easy to stamp the face of the new despot over the old. i.e. it is soft and malleable. Likewise, for that reason it was used in decoration because it could be hammered to extremely thin sheets and used to cover stone and wood, creating an illusion of wealth that belied the actual poverty of the edifice invovled.
There is no reason to keep gold unless you are planning to build computers.
Craig
There is some sort of retard disease in the west.
Some wag offered a gold coin for a burrito and the valley girl in the window wouldn't trade. The stupid really burns in some of you. Some domesticated turkeys actually drown in their water troughs. Others starve to death with piles of food available. And some won't trade a burrito for a gold coin.
Glenn Beck, is that you out there posing?
You can't cure stupid. Some people dance around shouting obama obama obama. Some watch hunny boo boo or something as idiotic. Some sit in their closets holding their stash of gold and slowly starve to death.
Gold has always blinded some people throughout history.