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The Economist "Buries" Gold
Submitted by Pater Tenebrarum via Acting-Man.com,
A Proven Contrary Indicator
In early May, the Economist has published an editorial on gold, ominously entitled “Buried”. We wanted to comment on it earlier already, but never seemed to get around to it. It is still worth doing so for a number of reasons.
The Economist is a quintessential establishment publication. It occasionally gives lip service to supporting the free market, but anyone who has ever read it with his eyes open must have noticed that 70% of the content is all about how governments should best centrally plan the economy, while most of the rest is concerned with dispensing advice as to how to expand and preserve Anglo-American imperialism. We are exaggerating a bit for effect here, but in essence we think this describes the magazine well. In other words, its economic stance is essentially indistinguishable from that of the Financial Times or most of the rest of the mainstream financial press.
Keynesian shibboleths about “market failure” and the need to prevent it, as well as the alleged need for governments to provide “public goods” and to steer the economy in directions desired by the ruling elite with a variety of taxation and spending schemes as well as monetary interventionism, are dripping from its pages in generous dollops. It never strays beyond the “acceptable” degree of support for free markets, which is essentially book-ended by Milton Friedman (a supporter of central banking, fiat money and positivism in economic science, who comes from an economic school of thought that was regarded as part of the “leftist fringe” in the 1940s as Hans-Hermann Hoppe has pointed out). Needless to say, the default expectation should therefore be that the magazine will be dissing gold – and indeed, it didn’t disappoint.
Another reason is that the magazine has one of the very best records as a contrary indicator whenever it comments on markets. If a market trend makes the cover page of the Economist, it is almost as good as if it were making the front page of the Mirror or the Daily Mail. If you do the exact opposite of what an Economist cover story prediction indicates you should do, you can actually end up being set for life.
A famous example was the “Drowning in Oil” cover story which was published about two months after a multi-decade low in the oil price had been established, literally within two trading days of the slightly higher retest low. The article predicted that crude oil would soon fall from then slightly over $10/bbl. to a mere $5/bbl. – a not inconsiderable decline of more than 50%. Instead it began to soar within a few days of the article’s publication and essentially didn’t stop until it had risen nearly 15-fold – a gain of almost 1,400%.
One of the most ill-timed cover stories of all time – the Economist’s early March 1999 cover “Drowning in Oil”. In the article it was argued that there was such a huge oversupply of oil on the market, that a 50% price decline to $5 per barrel was highly likely.
From the “what really happened” department: within days of being left for dead by the Economist, oil embarked on a 1,400% rally – click to enlarge.
The Economist’s Disjointed and Irrelevant Musings on Gold
Unfortunately gold hasn’t yet made it to the front page, but the Economist has sacrificed some ink in order to declare it “dead” (or rather, “buried”). We hasten to add than during the recent trading range, every time we have written something mildly positive about gold, it usually felt as though we had jinxed it, often within hours. It is no secret that we are favorably disposed toward gold in the medium to long term, but we do as a rule inject some objectivity by mentioning the potential short to medium term downside risks that could become manifest should important support levels give way. It doesn’t seem very likely to us that this will happen (we believe a lengthy bottoming process is underway), but obviously the probability isn’t zero.
The Economist article is a typical “after the fact” denouncement – we wouldn’t have seen such an article appear in August/September 2011, when gold was still trading near its highs. It is also a disjointed mess, with many irrelevant arguments and non-sequiturs – basically a hit piece. However, since some of these arguments are at times mentioned by both bulls and bears, we thought it worthwhile to discuss their merit (or the lack of same). The article begins:
“Uncertainty is supposed to lift the gold price. But neither upheaval in the Middle East, nor the travails of the euro zone, nor startlingly loose monetary policy in the rich world is brightening the spirits of those who swear by bullion. After a big rally during the financial crisis, the price has sagged to about $1,200 an ounce, a third below its peak in 2011. Little seems likely to turn it round. “We’ve seen everything gold bugs could hope for: endless money printing, 0% interest rates (both short-term and long-term adjusted for inflation), rising debt and debt ratios in the public and private sectors…So where’s the damn hyperinflation?” asks Harry Dent, a newsletter publisher, in a recent blog post.”
(emphasis added)
We would submit that with developed market stock markets at one of their most overvalued levels in history and government bond yields recently trading at absurdly low and even negative yields, there are exactly zero signs of “uncertainty” in the financial markets. The St. Louis Fed’s financial stress index is presently at one of its lowest levels in history. As we have mentioned previously, gold has primarily lost its “euro break-up premium”. The question should actually not be “why is gold down one third from its highs”, but “why is it still up by 400% from its 1999 lows?”
The sentence “little seems likely to turn it around” is, well, golden in a sense. When a market trend changes, is always seems as if nothing could possibly turn the market around. Of course that doesn’t necessarily mean that a market turn in gold is imminent – we merely want to point out that the phrase used by the Economist perfectly describes the conditions found near major market turns. The above discussed “drowning in oil” article from early 1999 is a very good example of just such a situation.
Uncertainty? There is none – the “financial stress index” is near the lowest levels in the history of the data series. The faith of market participants in central banks and their policies is close to an all time high. One should ask why gold is still trading at such high levels, not why it is down from the euro crisis peak – click to enlarge.
The remark by Harry Dent is downright bizarre. Where was the “hyperinflation” when gold rose from $250 to $1,900? There wasn’t even a single mild inflation scare over the entire period. Is this meant to indicate that Dent believes “hyperinflation” is required for the gold price to rise? If so, then he should really refrain from commenting on the gold market. Although the true US money supply has increased by a chunky 265% since the year 2000, it would be ludicrous to expect “hyperinflation” anytime soon. The probability that we will experience hyperinflation over the next several years is so extremely low, it is hardly worth mentioning.
However, the process that historically ends with hyperinflation has always begun in a very similar manner: government debt rises to such an extent, that debt monetization by central banks is initiated. For many years, nothing happens. Occasionally, the pace of debt monetization is slowed down again, only to speed up again a short while later. Eventually, the price effects of the enlarged money supply begin to migrate from capital goods and asset markets to consumer goods (especially if the economy’s structural integrity becomes severely compromised by incessant credit expansion). At this point, it is still possible for the authorities to arrest the inflationary trend by abandoning the inflationary policy. Only when they consistently fail to do so, will the public’s confidence in the currency be suddenly lost. The actual “hyperinflation” process usually plays out in just a few short months – as the final conflagration in a process that takes many years, sometimes even decades, to play out. So we would advise Mr. Dent to be patient. Hyperinflation does not seem likely from today’s perspective, but a time may come when it does become likely. You will almost certainly read about it here if/when that should happen. In the meantime, rest assured that gold can easily rise to much higher prices than today’s, even if “CPI inflation” remains perfectly tame.
Gold vs. the y-y change rate in CPI – the direction of the latter seems to matter empirically (see “In Gold We Trust” by Ronnie Stoeferle and Mark Valek) – falling rates of inflation (“disinflation”) tend to be gold bearish, rising rates as well as “deflation” tend to be bullish. Hyperinflation is not required at all – click to enlarge.
The Economist continues:
“The biggest pressure on the gold price comes from the expectation that interest rates in America will rise later this year. Matthew Turner of Macquarie, a bank, says that low interest rates cut the opportunity cost of owning gold. Higher interest rates, by contrast, raise the cost of holding non-interest-bearing assets. Mr Turner thinks expectations of rising rates are already built into the gold price; if they do not materialize as quickly as expected, there could even be a rally.”
While it is true that the opportunity cost of holding gold is an important factor influencing its price, nominal rates are irrelevant – only real interest rates count. The idea that fear of Fed rate hikes exert the “biggest pressure on gold prices” is largely a myth however (even though Mr. Turner may turn out to be correct that if the Fed fails to hike rates soon, gold could rally for a while). If the Fed were to raise rates by 15 or 25 basis points, they would still be at levels that are among the lowest in history. Moreover, if inflation expectations rise by a similar amount, absolutely nothing would change for gold. If they were to rise at a faster pace than the Fed’s rate hikes, then the real interest rate backdrop would turn increasingly bullish for gold. As Steve Saville has recently pointed out though, if one looks closely at when the gold price has put in lows and reversed upward since 2013, it turns out that whenever an announced tightening of Fed policy (tapering, end of QE3) became reality, the gold price has started to rise instead of falling further.
Why is this so? The explanation is that the gold market is very much a forward-looking market. It senses trouble long before anyone becomes consciously aware of it. If one looks closely at the final phases of stock market bubbles in recent years, the gold price always stopped falling even while the stock market was still rising (at times sharply), but closing in on its peak. Anything that is bad for “risk assets” will be good for gold. Many people buy gold as “insurance” (even Ray Dalio has a sizable percentage of his personal assets in gold, if we can believe what he recently stated in a Q&A at the CFR). These people represent a steady stream of demand, that is usually buttressed by strong reservation demand that tends to surge whenever “bubble talk” with respect to other markets becomes prevalent. In short, because certain percentage of market participants recognizes the danger posed by the bubble, a floor is put under the gold price.
In order to understand the reasoning of gold buyers and gold holders who don’t sell at current prices, we only have to gauge our own demand for bullion, including our reservation demand, and consider what motivates it. Would we sell any bullion here? There isn’t a snowball’s chance in hell of that happening. What is the motive? We regard the monetary experiments performed by central banks in recent years as extremely dangerous. Furthermore, we believe that most of the Western world is suspended in a state of “pretend solvency”.
A giant confidence game is underway, in which a critical mass of people still pretends that governments are fiscally sound and that the banking system is in fine fettle. It seems to us that the reality is a tad more sobering, and while we have a lot of faith in the ability of what remains of the market economy to generate real wealth, we doubt it will suffice to stave off a less than happy outcome. On the day a sufficiently large number of people stops keeping up the pretense, we will have reached a fork in the road: either much of the world will get the “Cyprus treatment”, or we will indeed see hyperinflation emerge. It will be a default either way. Is there any possibility to hedge against such an outcome, or even a slightly less apocalyptic one, that still involves a great deal of financial and economic distress? If anyone has a better idea than gold, we’d love to hear it.
The Economist continues:
“That cannot come soon enough for gold producers. Nikolai Zelenski, the boss of Nordgold, which has mines in Africa and the former Soviet Union, says that half of all producers have negative cashflow. Some are heavily indebted, too. If the price does not rise, production could fall on a scale not seen since the two world wars.”
That is of course irrelevant for the gold price, but we would point out that gold producers somehow survived the bear market from 1980 to 1999 as well, and their production actually surged rather dramatically that time period. What Mr. Zelenski seems to be forgetting is that mining margins are a moving target. They depend not only on the gold price, but also on input costs.
The Economist continues:
“Gold bugs are determinedly optimistic. Gold is priced in dollars, so the fact that it stayed stable while America’s currency was rising (making gold more expensive for buyers in foreign currencies) is cause for cheer.”
With closed-end bullion funds trading it discounts of almost 10% to NAV, we have our doubts about the size and importance of this allegedly “determinedly optimistic” group. Anecdotal evidence actually suggests that most “gold bugs” are at best frustrated at this point. It is however true that it is a bullish sign when gold stays strong in the face of a strengthening dollar.
“Chinese consumers are buying more gold, after a sharp decline sparked partly by an anti-corruption campaign. So are Indians, the world’s biggest consumers of gold, after the government removed restrictions on imports last year. Yet the fact remains: gold is in a rut.”
This is one of the points often made by gold bulls: see how much gold China is importing! This is however at best of tangential importance, roughly on a par with the ups and down in mine supply. Gold is not an industrial commodity, it is a monetary commodity (for an explanation of the difference between the two see our previous missive “Misconceptions About Gold”). When gold moves from COMEX warehouses to warehouses in Shanghai, it is not a bullish event, but a completely irrelevant event. Having said all that, we do believe that Chinese investors could play a role in the eventual blow-off move we expect to occur a few years down the road. However, this is just speculation on our part.
The assertion that “gold is in a rut” is clearly a matter of perspective. It is certainly back in a bull market both in euro and yen terms, while going sideways in dollar terms. The chart below illustrates the current situation. Note that both in euro and yen terms, it is impossible to not see that a textbook technical bottoming process has taken place. Of course, the Economist hasn’t exactly lost its magic touch either: Since the article appeared, gold has risen by $45 in USD terms as well.
Whether one thinks that gold remains in a “rut” clearly depends on where one happens to reside. Could it be that all that money printing in the euro area and Japan does have an effect on the gold price after all? Just asking – click to enlarge.
The Economist continues:
“One reason may be that investors have so many more options nowadays. Humble citizens who distrust their own currencies can buy assets ranging from shares to bitcoins. Laurence Fink, the chairman of BlackRock, the world’s biggest asset-management firm, said in March that gold had “lost its lustre”, thanks to the wider availability of property and even contemporary art. “It’s become much more accessible for global families worldwide to store wealth outside their country.”
Obviously, the chairman of Blackrock is at odds with the chairman of Bridgewater, which is another one of those “largest asset management firms” in the world. Judging from what Fink says, we actually doubt that he has any expertise with respect to gold. Shares and Bitcoins? Property and contemporary art? Three of these four asset classes are in egregious bubbles, which clearly depend on confidence being maintained. The fourth is at the moment pretty much a burst bubble (Bitcoin has declined from $1,200 to a little over $200, so if people indeed see it as an “alternative to gold”, it has proved to be a rather poor one). It is in principle true that all these asset classes compete with gold to some extent, but it is a bit misleading to call stocks, property and works of art an “alternative” to gold. Gold is sought after when these assets are not – it is not merely an “alternative” to them, it is their antithesis.
Bitcoin – a bubble that has burst for now (it may well make a comeback though, and as we have previously noted, Bitcoin is likely here to stay) – click to enlarge.
Gold is currently dormant precisely because people are confident enough to pay absolutely ludicrous prices for assorted “risk” assets (recently a Gauguin painting sold for a record $300 million – a sign that some sectors of the economy are indeed displaying almost “hyperinflationary” characteristics by now). At the same time, the fact that these bubbles have grown to such exorbitant heights (there are countless breath-taking property bubbles underway around the world along with those in contemporary art and stocks) is a major reason why it makes sense to hold gold as insurance.
Gold is akin to money – although it is currently not money in the strict sense, as it doesn’t serve as the general medium of exchange, the market “knows” that it would be money if the market were free and treats it accordingly. So Fink’s statement is simply yet another non-sequitur. People were able to buy stocks and art works between 2000 and 2011 as well, and yet gold was the preferred asset in most of that time period, because confidence frequently faltered.
Gauguin’s “Will You Marry Me” – certainly a nice picture, but 300 million smackers? Come on…
Finally, the Economist cannot fail to get one last dig in, by letting us know that only the evil Vladimir Putin and his henchmen in Moscow are buying gold (either they are stupid, or it is a sign that gold is only bought by foaming-at-the-mouth crazies, take your pick!):
“The main exception to the trend is Russia, where the central bank has been a notable buyer of gold, tripling its holdings since 2005. It bought 30 tonnes in March alone, bringing its hoard to 1,238 tonnes. The Kremlin’s growing stockpile does not so much reflect a belief in gold’s prospects, however, as a distaste for the American dollar. Whatever Vladimir Putin’s other qualities, most investors would hesitate to take him on as a financial adviser.”
First of all, neither the Economist nor anyone else can properly judge Putin’s qualities as a “financial advisor”. Russia’s central bank may have very good reasons for buying gold. As Alan Greenspan once remarked, gold it is the only form of payment that will always be accepted. He dissuaded the US treasury from selling its hoard, precisely because extreme situations can arise when gold ownership can prove very useful. We would assume that strategic reasons are the Russian government’s main motive for buying gold as well – we doubt it cares much about where gold trades next week, next month or even next year.
Secondly, just because the Russian central bank is one of the few known big official gold buyers certainly doesn’t mean one has automatically hired Putin as one’s financial advisor when investing in gold. Incidentally, what Russia’s central bank is doing is not directly relevant to the gold price. What it buys in an entire year trades in London and Zurich in a few hours every trading day. It is a pittance compared to the total supply of gold.
Lastly, we still remember how Bloomberg, another viciously statist mainstream financial medium that disses gold at every opportunity, tried to scare less well informed would-be gold buyers by asserting that Russia would be forced to sell its gold reserves! See “Will There be Forced Official Sellers of Gold” for our assessment at the time. We have so far been proved right, but obviously we can’t win, because now Putin is our “financial advisor”!
Meet our evil new financial advisor, Vladimir Putin.
Conclusion
We enjoy picking on the Economist of course, but our main motive for dissecting its editorial on gold was to show that the gold market remains widely misunderstood. Moreover, given the Economist’s record as a contrary indicator, it might prove to be a useful marker, although we don’t want to make too much of this (if it had been a cover story, we’d recommend mortgaging the house and renting a vault). In the meantime, the fundamental backdrop for gold remains largely in neutral, with some factors improving and others not. However, buyers seem to be willing to step in every time gold dips below the $1,200 level. Technically it remains in no-man’s land in dollar terms, but continues to look encouraging in euro and yen terms. Maybe the Economist has managed to ring the bell after all? Stay tuned …
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Whenever gold is buried it is always dug up.
My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.jobs-review.com
What do you expect from a "newspaper" owned by the Rothschilds ?
Fuck the Official Organ of the NWO. Try to discredit gold (why bother if it's not so important and held in all those high security vaults by CB's... Du Fucking H) and even now going so far as to try to discredit cash. Cash? The child of the CB's, the neo-Keynesians print MOAR and now that it's fucked up, blame the citizenry by banishing cash.
Fuck the Economist and Godless (note it's almost an anagram for goldless) Statist neo-Keynesians
Gold is fer spendin, not saving
This is hogwash:
'The explanation is that the gold market is very much a forward-looking market. It senses trouble long before anyone becomes consciously aware of it. If one looks closely at the final phases of stock market bubbles in recent years, the gold price always stopped falling even while the stock market was still rising (at times sharply), but closing in on its peak. Anything that is bad for “risk assets” will be good for gold.'
That's simply untrue. Gold is not being purchased by clever traders. It's being purchased by China, India, and Russia. What's about to happen is the end of the post-Nixon mutation of the Bretton-Woods global monetary system. Looking at gold prices relative to stock prices in the last four decades is irrelevant. What's relevant to gold is what has happened when a pure fiat currency system falls apart. The reason Indians and Chinese hoard gold is that they have something we in the West don't have - long-term memory. The US has had currency failures as well - but we take a lot of Xanax and watch a lot of TV here so it's not going to be a popular theme until the ballon goes up.
Think about $5T of sovereign debt trading at negative interest rates. How is that possible? The answer is we're really not issuing debt any longer, we're issuing money without collateral. We're shooting adrenalin into the heart of dying developed world economies.
Impecable timing as usual. Just as the price of Gold has definitively bottomed and is now rising. The Economist does it again. He who controls the Gold calls the tune. And that, unfortunately for The Economist and its masters, is China and Russia. When the new CNY denominated Physical exchange and fix begin (Very shortly), at which time China will already control much of the Gold) expect the Yuan price of physical Gold to start rising. If the paper ffutures markets don't follow , the USD will de fact appreciate against CNY. So expect the price of Gold to rise in the USD furures markets in response such that there can be an ongoing managed decline of the USD. If so, China wins because its massive Gold holdings increase in value in both CNY and USD terms. If not, China still wins because its competitve export position will remain in place as it unpegs the CNY and the USD appreciates against it. Check? Mate?
"The answer is we're really not issuing debt any longer, we're issuing money without collateral."
I like this sentence. It does a nice job of pointing out the current environment. Debt suggests repayment, either by production or by seizure of collateral. The current system is falling apart because we all instinctively know there is way insufficient production and collateral to balance out the "debt" carried. It's no longer even a promise anymore. It's "pure paper", using paper to mean valueless scrip.
Your sentence is much cleaner than my ramblings.
This debt issuance is why Dent is wrong about the eventual outcome. Boomers retire and get gov. bennies paid for with more debt issuance. Gold's price is a direct reflection of this outstanding debt/money. So gold can soar in price while overall price levels are subdued or falling. That's whats happened since 1999. Debt's up 3.25X's. Gold's up 4X's. Go back to 1971 and gold's 'on sale' below $1600. FedGov has been monetizing debt for several years now. The crack up boom can happen anytime in the next 10yrs. Boomer retirements guarantee it.
It's hilarious that the Economist misses the most important factor for gold's value, and that is as a source of wealth. As the saying goes, if you have 1 million oz of gold you are wealthy, and always will be wealthy. The same cannot be said for stocks and bonds.
They are stuck inside their economic mindset and can't see what is happening. If the bond market ever breaks down ANYWHERE in the world in a big way, then stocks and bonds across the planet will lose their value. Conversely, gold will be the natural benefactor.
How can you call gold a worthless relic not worth owning, when at the same time economies and bond markets are completely manipulated? We have zero to extremely low interest rates in a world that cannot afford higher interest rates. At some point, those interest rates have to rise because of a lack of wealth creation. And when they do, the bond markets are going to falter.
Gold is a natural safe haven for a number of reasons, the first being that it has no counter-party risk. It is essentially a risk-less asset. What is funny is that economists are taught in school that short-term US Treasuries are essentially a risk-less asset. How funny is that? When the bond markets begin to falter, gold will rise as money flows from stocks and bonds to gold. Thus, buying gold now when it is cheap is probably not the stupid decision the Economists implies. It is the ultimate asset insurance and maintainer of wealth.
While I am a believer in gold I respectfully disagree with this comment: "As the saying goes, if you have 1 million oz of gold you are wealthy, and always will be wealthy. The same cannot be said for stocks and bonds."
I'm pretty sure that if you own a broad index fund that properly rebalances worth the same as 1 million ounces of gold you will probably always be wealthy. That's $1.2 billion. If you can't live off the dividends and continue to add wealth you've done something very wrong.
The Econ is probably the most disgusting establishment printed rag out there. I take great pride in getting all their free issues and then cancelling the never started subscription, for many years... my small contribution to their slow dissappearing into media irrelevance.
Nothing does better buried, or under the sea, or in a lake than gold, bitchez.
"We enjoy picking on the Economist of course, but our main motive for dissecting its editorial on gold was to show that the gold market remains widely misunderstood."
Bullshit. Gold is well understood by The Economist which is why they attack it.
Gold is a wealth reserve asset, like a fine painting, except that gold is divisible which means that Joe Sixpack can afford it. Last I checked there were no $300 million dollar paintings as a part of my portfolio. A gold coin is in essence a piece of fine art, i.e., a piece of wealth.
Fireproof, too.
The magazine is aptly named. No one in modern times comes off quite as stupid as economists.
No common sense at all.
"The only function of economic forecasting is to make astrology look respectable."
Germany asked for their gold back not cash. Wonder why??
After 5000 years people still think they can change. It was never about the object, its about vanity and credibility. Both are represented in gold. The econo-moist best pray human nature changes quick, or their children will sacrifice blood and soul to obtain it. Nature is not about what is considerd best only about what works. Gold works, because it is at the very heart of vanity.
+100 - Sums up fallen human nature quite well.
"The Economist" is the propaganda mouthpiece of Rothschild, Inc. and should be given exactly zero credibility.
dont be naive they are all paid pimped by banksters who are on opposite side of trade. feel sorry for idiots who read msm bullshit
I'm just glad I was young and had 30 years of work ahead of me when I went "all in" with gold at $1600 average cost per ounce (also have silver at $30 or so). There's probably literally 1 million old folks that went "all in" that will be trying to barter their Buffalo rounds for food before they finally keel over and their kids loot "grandpa's coin collection" and sell it at a yard sale for pennies on the dollar of whatever value it has left by then.
Thick as a brick.
Been buying both since 2003 and am still not "all in". Is it gold's fault that you are stupid?
You can't make this stuff up.
I once had an argument with one of The Economist's resident intelectuals.
He wanted the expression "Latin America" to be considered foreign invented and not in use in the said (sub) continent. Plus it was (supposedly) considered racist by the inhabitants of the countries considered.
I told him that as a Portuguese citizen with extensive travels in Brazil I knew that the expression was of common use, and never taken in a derogatory sense.
After being deluged with studies that proved that my reality was wrong I started to understand what difference there is between taking the train and being told what it is to take the train.
HA HA If that "intellectual" were already in Rio de Janeiro, he would not have to try to figure out what train to take to get there. (And then to tell everyone else what train they should take before he even tries it himself... :-)
You can't eat Gold, but you can't eat binary digits either.
One is tangible and immutable, the other an intangible in the ether.
You can't eat Gold, but you could make a cinnamon flavored schnapps- into which you could put shavings of gold foil.
I think it would be a big seller.
You could call it Goldschläger.
Oh wait...
And who eats dollars?
I own no gold, or silver. However, my garden is rich with them.
Well armed too.
Liberty is a demand. Tyranny is submission..
Art is rare. These people have access to infinite money. Money is a vulgar, common thing chased by low class people.
Even artificial scarity in certain digital goods is seeing big dollar sale prices (thousands of dollars). After all, you can always get more monney, but to be one of the only ones with some "rare" digital item in some video game, now that's worth bragging about!
:^) Because, what's the point of being super-rich if you can't go all around bragging all the time, in the hope that it might make someone LIKE you. :0)
'Art is rare'?
Like a Rothko
.
I'd also vote for The Economist as a contrarian indicator. Based on this particular gold price cycle model, I only wish it made on the front cover!
The gold market is greatly misunderstood. Yes. If 99% of all traded gold is paper gold, claims on some gold that does not exist, and when of the remaining 1% probably another 80% of "owners" of physical gold are similarly holders of paper gold (think unallocated gold), then talking about any sort of fair market is a farce by itself. The fiat price of gold is a joke. And don't get me going on silver. Get some of both while you still can. Tick tock tick tock...
Long but worthy read. Read all links. Then show others. It's all there. Hidden in plain sight.
http://gata.org/node/14839
The Economist has always been consistent in its leftwing or progressive attitude, so do you expect it to do other than support government power?
Standby for it attack on the evils of cash.
It's owned by a Rotschild trust.
Left. Right. "We control all sides".
None of the world's major country's regimes will EVER allow gold to be legal currency or backing for their fiat currencies because it would be impossible for them to maintain their power, control the resulting economic and financial market upheaval, etc. The era of precious metals as currencies and backing for fiat is over and never coming back, unless there is a science-fiction-style apocalypse and the Mad-Max style survivors resort to it.
The only practical purpose that gold offers to investors is that in times of crisis, enough people will buy it as a reflex, safe-haven, etc that the price will go up, and if you sell while it is still up, then you can make a short-term gain. But treasuries will also benefit from the safe-haven reflex. Otherwise, investing is gold is the same as buying shiny lead.
I'll take the gold please.
"Laurence Fink, the chairman of BlackRock, the world’s biggest asset-management firm, said in March that gold had “lost its lustre”, thanks to the wider availability of property and even contemporary art."
Fink should well understand the three things that the uber wealthy own to preserve inter generational wealth. Fink's statement above got two of the three (land and fine art).
The third?
Gold
At least he's true to his name.
Fink. What an awful name.
With apologies to the "Wizard of Id" the Money King Is A Fink!
For something that is supposedly buried, it still seems to freak out central bankers. That's good enough for me.
The only thing that worries me about physical gold is the opening up of Greenland. Land buried for ages is now coming to the surface and places impossible to prospect are now open to men on foot. The long and the short of it is, I suspect Greenland is the source of massive gold deposits. How big? Well, you gotta prospect to know, but this is virgin land with untold mineralization zones. Gold is being found now, and the search is just begun. One mine may be followed by more and more. Demand and supply. If mining is profitable at 1,000 dollars then they will mine like mad. I just see the possibility of lots of supply of physical coming on the market. This may be false, only time will tell. But my gut tells me physical might find massive new sources at profitable production. In Alaska and Yukon, they move tons of earth to get at a few ounces. In Greenland they can chip gold right off in some places, and the place has yet to be seriously even looked at.
Jack, I gave you a plus 1 here. I think it is a reasonable concern although I doubt that this really the issue with the price of gold. All the same, it is interesting that you brought it up at all because I have not researched Greenland much. I knew that it was part of Denmark to some degree and that the U.S. had/has a military installation there. What I did not know was that the U.S. offered to buy the whole place in 1946. It is interesting just to read the Wiki on the place. I sort of want to go visit but I get the impression that the locals might not take kindly to interlopers asking questions though I do see they have their own airline. It might be just that one plane? Thanks for bringing the topic up for discussion.
https://en.wikipedia.org/wiki/Greenland
Don't know about gold, but there is quite a bit of base mineral exploration activity going on in Greenland, given it's virgin status and everything.
As for any potential supply, the easiest way to look is to check out au priced in major producer nation currencies, so Australian dollar, SA rand, Chilean peso, and so on.
If producer price in their home currencies is going up and staying up, as a rule thumb you can bet they will be increasing production and there will be more supply coming.
The 2013 book by Matthew Hart, 'Gold' is disparaging of gold in a similar way. Anyone read it?
So what do you think? Does the Economist:
A) Love gold, and is trashing it in the near term to keep the price suppressed?
B) Hate gold, because they'd rather see a future with digital currency, not specie?
Ironically, the Economist has long treated mining and its fruits favorably. Notice this article in which they mocked Romania for not fast-tracking a gold mine:
http://www.economist.com/node/6780836
Does Dennis Gartman write for The Economist?
Prober, I do not think the era of PM's is over. If the economy ever devolves to the point that underground black markets crop up, PM's can act as a store of value in a barter system. If you have a refrigerator and need a washer, you would not have to wait to find a guy with a washer to trade. You could exchange the refrigerator for an agreeable amount of PM and, since PM's are portable, you can trade them for a washer at a later time when you find one available for sale/trade. As an official, sanctioned currency, you may be right.
The establishment cocksuckers can hate gold all they want.
It has 5000+ years of history. How much does the current form of fiat rubbish have in comparison again...?
Hahaha, I love it when a libertarian poster starts frothing at the mouth against Maggie Thatcher's and consorts PRIME media support since 35 years.
The conservative ship of invisible hand market is tearing apart (the hand is hardly invisible today and its very heavy handed to Oligarchy's interest).
The Economist is Thatcherism personified and represents conservative thinking aligned with Milton Friedman's views on what the new monetary system would be when Nixon launched his BW revoke.Thats now history as he won and Keynes lost.
Friedman is the Shaman of this age and in HIS book --along with Keynes's-- gold has ALWAYS been a monetary relic. So the von Mises resurgence in name of Austrian orthodoxy now splits the austerians from the monetarists who both believed in Chicago school logic in those halcyon days when Keynes was rejected.
Its got nothing to do with Keynes today but it does have to do with neo-keynesians who are now all aligned with anti-austerity to allow CBs to try reign in the casino. (Too little too late IMHO but that is another story as the bubble-o-nomics horse has already bolted from stable).
Gold is not dead and buried but it won't be the monetary marker of the future; just a safe haven if the depression arrives big time and if the CBs have not confiscated gold from public during the reset!
Art is not rare. There is wonderful art everywhere in the world, and new wonderful art being created constantly. What is rare is art pieces by dead artists adopted by the super-rich as trading tokens. Like rare stamps. Or like vintage Ferraris or Rolls-Royces.
Goid has invented economists, to make weather forecasters look good !