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Gold: "The More Ridiculous The System Gets, The More Valuable It Becomes"
Submitted by Simon Black via SovereignMan.com,
Nearly four months ago on June 2nd, something very unusual happened in Edmonton, Alberta, Canada.
The price of propane actually became negative, hitting an unbelievable -0.625 cents per gallon.
It’s hard to believe that the price of a productive commodity could become so beat down by the market that producers would practically have to pay you to take it off their hands.
Now that’s cheap. And completely nuts.
This actually happens from time to time with certain commodities. And there are a number of reasons for it.
A negative price might imply a dramatic oversupply where the cost of storing the commodity exceeds the benefit from owning it.
Sometimes even something like real estate can have a negative value—perhaps when a building is in such decrepit condition that the cost of tearing down the structure exceeds the land value.
But sometimes a negative price simply means that markets are completely broken.
The primary function of a marketplace is what’s called ‘price discovery’. This is an incredibly important role where buyers and sellers collectively determine the true value of a product, service, or asset.
Think of it like an auction: if you really want to know what that old baseball card is worth, put it on eBay and let the market tell you.
The problem is that, these days, markets are so heavily manipulated that the price discovery mechanism has been broken.
Consider that the most important ‘price’ in the world is the price of money, i.e. interest rates.
The price of money dictates, or at least heavily influences, the price of so many other major assets and commodities. Stocks. Bonds. Oil. Home prices.
And yet, rather than leave this all-important price to be set by the market, the price of money is established by an unelected committee of central bankers.
So by setting the price of money, they are effectively influencing the price of just about EVERYTHING. Including propane in Alberta.
Then of course there’s the more nefarious price manipulation, much of which is coming to light now.
There was the appalling LIBOR scandal back in 2012 when multiple banks confessed to criminal charges of conspiring to fix interest rates.
Investors in the United States have filed a number of lawsuits alleging that banks and brokers have rigged the market for US Treasury bonds.
The US Federal Energy Regulatory Commission has recently accused French oil company Total and British firm BP of manipulating natural gas prices.
And both the US Department of Justice and the Swiss Competition Commission are investigating several banks for colluding to manipulate gold and silver prices.
So in addition to markets being broken, there’s also an extraordinary amount of manipulation going on… which means that, quite often, prices mean absolutely nothing.
Consider gold and silver, two obvious long-term stores of value whose prices have been in decline.
Bear in mind these are paper prices, i.e. prices set in broken commodities markets, heavily influenced by central banks, and criminally manipulated by investment banks.
So is this price really a valid indicator of their worth? Not by a long shot.
Think about the ever-widening gulf between the ‘paper’ price of silver and the ‘physical’ price of silver… evidenced by the massive shortage in real, physical silver right now.
The paper prices of gold and silver are set (and manipulated) in financial markets through commodities exchanges.
It’s not like traders are huddled around bags of coins bidding on which one of them will haul it away.
Instead they’re dealing with contracts… pieces of paper (or electrons) passed around by traders and bankers.
In fact, the gold and silver contracts traded in commodities exchanges are designed especially for people who have no intention of ever taking physical possession of the metal.
Case in point: the paper price for silver traded in Chicago is based on a contract that is supposed to end with physical silver being delivered to the buyer.
But the contract specifications set by the exchange allow up to 10% FEWER ounces of silver to be delivered than what was specified in the contract.
And in London, the London Bullion Market Association’s “Good Delivery” rules allow silver bars to be up to 25% less than what was specified in the contract.
Amazing.
And it certainly raises the question– who would possibly purchase 1,000 ounces of silver if the exchange was only required to deliver 750?
Anyone who actually wants to own real gold and silver would rather buy from a local coin dealer.
Futures contracts are for bankers and traders. Paper prices are for economists and reporters.
The current shortage of silver, particularly in North America, is a much better reflection of its value than heavily manipulated commodities markets.
All these contracts and prices truly reflect is how broken the financial system really is… which is actually precisely why you would want to own more gold and silver.
Seriously, how messed up is our financial system when asset prices across the world can be so easily rigged by the very institutions that demand our trust?
* * *
This system is pure insanity, as are its prices.
As such, I don’t let their prices guide my life. It wouldn’t bother me if the price of gold went negative, just like propane in Alberta.
After all, I’m not trading paper currency for gold, just to trade it back for more paper currency if the ‘price’ goes up.
The idea behind buying gold is to swap paper money for something real.
Banks can rig its price all they want; gold’s true value comes from its function as a long-term form of savings and a hedge against a broken financial system.
And the more ridiculous the system gets, the more valuable it becomes.
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Whatever. Don't even read Simon anymore.
Who is Simon?
Not sure, but when Simon says, people listen.
Talks cheap, gold....not so much.
The older I get, the more it seems I need patience...
Gold's time will come, Simon is right about that. But the monkeying around by TPTB is so overwhelming that it has taken MUCH longer than I expected for things to hit the fan.
Don't buy TOO MUCH gold, that is, don't be forced into having to sell it to meet unexpected expenses... Keep a fistful of CA$H ($100s, say) around.
We definitely live in bizarre times. IMO we've brought soooooo much consumption and capacity forward with ZIRP/NIRP that propane can actually go negative.
Until the financial system breaks, I don't think Gold/Silver will increase in price.
One day the system will break (i.e credit system will go back to historical/above historical interest rate norms), and prices will go up, and I'm sure the current standard of living in the West will cost a lot more to maintain than we currently pay in NIRP environment.
You listen to the gold bugs, and they say the Western countries will have a breakdown of society when this happens -- but I don't think that will occur. Costs will go up, and as a result people will tighten their belts and life will go on.
Places that will get really bad are developing countries that are over populated and cannot feed their population.
My theory is that food production has increased as a result of ZIRP/NIRP, and when the actual costs of production for agriculture catches up -- over populated countries will have the breakdown in society when they start starving and as a result we will have a mass migrations of people trying to get to the West. i.e Syria "immigrant crisis" x1000.
Hopefully I'm wrong, but it looks like we will kick that can down the road until we can't do it any more.
As far as your idea about food production goes, we are actually producing a lot less food than we should be in the US. Our brilliant government and their owners decided we should start diluting our gasoline with corn likker and incentivized corn production for this reason. This means vast amounts of productive farmland is being wasted in this boondoggle. This also serves to drive the price of everything up. Since the government incentivized corn growth, not only are other crops not being grown instead, but the animal feed used to grow our animals for food becomes more expensive. Ending ethanol altogether(or just getting the govt out of it) would likely increase food production and bring prices down.
If the dollar falls then American will be outbid for the food they produce and mass starvation will result. Look at Africa. Look at Pakistan. They produce more food than they consume but they export lots of it and many starve.
That is usually when a nation like Argentina's Kirchner puts caps on food exports, then places price ceilings on those same foods.
Gold's time will come
Bought it at $273....it's been here for me for a decade plus.
Best thing I ever did. Even made some money on miners....gotta be quick to do that though. Get in and get out....speed is your friend.
Obama already has full authority to take control of food stocks during a declared emergency, which depends on what the meaning of "is" is.
The system will break, but I think immediately replaced by a new global digital currency to 'fix the problem'. Will gold and silver even have a place? I think this is well planned out, no matter how out of control we might think the CB appear to be.
The buy/sell spread would murder you if you were to keep everything in gold. Even bitgold charges a 1% spread. If only there was a service that did this... oh wait, Zerohedge did a story on it like two weeks ago.
http://www.zerohedge.com/news/2015-09-20/going-back-what-works-gold-mone...
They just updated their site. Only company in the world offering a 0% spread on gold and they allow you to use it for almost anything. Federal Reserve Notes are now obsolete.
Good point !!
If the world went to a single electronic currency the value of gold would be...$10,000, maybe $100,000 an ounce. Black markets, drugs, yea lol. Think of a black market farmer in the USSR how valuable his commodity was.
I, for one, wouldn't mind a negative price for hookers and blow.
People talk about price deflation like its a bad thing. If only people realized that price stability is bad and volatility is fine in an actually-free market...
What he said. ^^^^^^^^^
The %0.01 hate deflation, it slowly eats away their fortunes and takes longer to get richer. So they setup the system to slowly eat away what little everyone else has via inflation. Now everything they own goes up in "price" and they get richer faster!
Double plus good.
<<< I, for one, wouldn't mind a negative price for hookers and blow >>>
You will not be able to make any money then!
So, it all goes in the HOLE?
Yeah, bad, I know.
Fuck me! The End Times are upon us - Simon Black is sort of making sense!
I was just glad to read a SB article that didn't tell me how I need to buy a farm in Argentina or put all my gold in Singapore. He actually managed to write an entire article without either of those things.
And id love me some negative priced propane. I grill a lot, and keep 4 tanks(just never know when you might need to be able to cook a while without power) and id much rather get it for free than pay the 15$ I paid for an exchange a couple weeks ago.
How much is gold worth in a world with a single global electronic currency?
How much is gold worth in a world with no electronics?
How much is gold worth in a world that awakens to the value of gold?
Depends on what you have that I want.
What is a credit rating worth in a world of zero interest rates?
My estimate is somewhere around 0%
Barbarous pet rock... going to zero... serves no useful purpose... has no yield... dig it out of the ground just to put it back in... did I miss any?
You missed one very important part: Who controls that hole that contains the gold.
Oh yeah... A miner is a liar standing next to a hole in the ground. Thanks.
Three years twenty weeks and you come out of the shadows to bash gold. So it's going to zero, eh? Anything you say pal, anything you say.
I'm not bashing anything. Just repeating the meme's that have been trotted out over the last 100 years. I am a staunch supporter of hard currency. Not sure why so many here take my poking fun at the mainstream meme's as a bash.
I thought your point was immediately apparent...a bit too nuanced for some perhaps?
I was looking for the Bitcoin plug. Haha you got me
Bitcoin, bitchez! Better?
Much. The thread is now complete.
Yeah, all that raw material shit we dig up is useless. Especially the most conductive materials in existence.
Silver? Copper? Graphene?
Graphene film isnt easy to build in industrial scales. It still has to come of age.
Both Copper and Silver are markedly more electrically conductive when compared to that of Gold.
The REASON why Gold is used in the Electronics Industry is that it is extremely resistant to corrosion whereas Copper, Silver, Nickel and Tin are readily susceptable to CORROSION.
I'll take all your pet rocks
> did I miss any?
you can't eat it.
ARGG! How did I not see that one? Thanks!
you're quite welcome.
you can't eat it.
But you can drink it.
http://sake-talk.com/sake-with-gold-flakes/
Goldschläger
It only costs $5.00 to get it out of the ground.
Someone long ago here at ZH was very insistent on that. Guess he must have been right, we never see him anymore. Made his case perfectly.
/s
What an idiot that guy must be. It costs them damn near the spot price.
Well, I have seen lots of gold miners recently valued at $5 an ounce in the ground but I think the cheapest large mine has a cost of probably around $400 and the average is now around $900-$1000 (miners have made great strides in the last year at cost reduction).
I think that was MethMan...
we have had some awesome trollz die off around here over the years
You can drink colloidal gold by the drop. http://www.sourcenaturals.com/products/GP1082/
Whore:
Some people on ZH tonight are totally lacking any type of a sense of humor.... Must have been a tough Tuesday on some.
Lack of alcohol.
September 29, 2012.
Three years!
... and still drunk!
Gold is actually used in very high ended electrical contacts, like warheads. Very difficult to oxidize, one of the few elements found in pure form in nature.
And it's money.
Actually its used all over the electrical and electronic industry. About 400 tons a year and most of that will never be seen again. But Bloomberg won't state that as a reason to sell gold so its not worth repeating here.
Jes. It's used for bonding wires. Many chips still stitch gold wires from their little stacked die down to their laminate substrates. But I digress.
I recover Gold and Palladium from obsolete electronics as a hobbyist.
But there is an entire industry devoted to that as yields are more than three times better than current Gold Mine Yields.
https://www.youtube.com/watch?v=_bU-NwowzVE
Very interesting, Tall Tom.
+ 1
EDIT:
But yields of PMs in electronic waste are going down, no?
Sounds just like the fiat in your bank without the counter party tho...
Barbarism is coming back in style
When barbarism is back in style, barbarous relics trade all the while
<<< Barbarous pet rock... going to zero... serves no useful purpose... has no yield... dig it out of the ground just to put it back in... did I miss any?>>>
Yes you missed stories like my great grandma that had a stash of gold sovereigns during WWII in Europe, where the rest were holding paper money which became worthless overnight. That's why I am here to tell the story.
Hole segregation is everything.
"And the more ridiculous the system gets, the more valuable it becomes." The other day, Bloomberg called it "preverted." And that's the turf people bet their life savings???
Rick Rule from Sprott resources said in a recent interview that there is no shortage of wholesale silver bars. Retail coin products are in a shortage though due to manufacturing limitations.
I have read similar in a few places. The shortage is of blanks, which the Mint then stamps into coins. I have heard fewer of these problems re gold coins though.
Is there a shortage of 90% silver US coins (or their Canadian counterparts)? If not, why are premiums through the roof? Because of the limitations in getting .999 in small lots?
My *guess* is that the 90% silver coins (aka "junk silver", pre-1965 dimes & quarters) are now in strong hands, people who never sell them.
Junk silver is well-recognized here in the USA. It is very rare to get a silver dime or quarter in your change. Also, dimes and quarters are very small in size, there are people who like that.
Id like to see a source for that, I just listened to a few interviews and he is pretty bullish on silver and cited one reason as demand from low prices? Im curious where he said that?
"The idea behind buying gold is to swap paper money for something real." -EXACTLY-
You can see it, I can see it and Stevie Wonder can see it.
I will have no sympathy for the people I've tried to explain this to, WTSHTF. _JOHNLGALT. Who is John Galt?
Yeah, sure, fine.
BUT - can Ray Charles see it ?
When this thing blows who knows how high gold will go?
You'd have to be betting that the biggest collapse in the history of man kind will be orderly and not total anarchy for gold to go up.
TPTB are trying to manage an orderly dieoff of the useless eaters.
Good a reason as I have seen all day to sell naked short more paper gold contracts.
I call bullshit on this. If the price is really too cheap someone would have ass raped the comex to mars and back
You're overlooking the nailgun in the background.
They tried. The banks take months to deliver on their CRIMEX contracts.
TPTB have been slamming Silver & Gold in very early morning raids, forever it seems.
Why would anyone expect this to stop, and what type of event(s) will limit their ability to conduct such raids?
I am sure ZH folks have some answers, and I am very eager to hear them.
The reason gold crashed is simple. Opportunity cost. Supply and Demand dictates that every single thing you read about Gold on line is bull shit. The market is in equilibrium (definitely within reason) Period, point blank, and end of story. People just can't admit it's not a good bet when ALL commodities are carshing. At 1500-2000 most people decided there is better things to do with that kind of money right now. Its that simple
Rising demand == rising price.
Falling supply == rising price.
-----
Except in the gold and silver market, where massively rising demand (to the point of numerous shortages, delivery delays and "unavailable") plus falling supply combined exists at the same time as falling price!
Yeah, that makes lots of sense.
Uh, huh. On what planet?
Don't know what to tell you. If you have the money, you can get gold at this price. There is no shortage. You can argue that it is cartel manipulated, sure, but its in price equilibrium nonetheless.
There's plenty of gold, at least for now. Both at the LCS's and places like providentmetals.com (recommended). Just checked Provident, they even have 1 kg gold bars in stock now.
Silver Eagles are hard to get because the US Mint can't get "blanks" fast enough. LOTS of 1000 oz Ag bars available I read.
There's no shortage of gold or silver in the world. There's only a supply constraint of RETAIL coins.
There's 2,500 tonnes of new gold mined and sold into the market every year. Yet only 12% is used industrially. There are vast stockpiles of gold all over the world, doing nothing but sitting in vaults. Silver only 50% is used industrially, and there are also vast stockpiles.
BS MF. If Gold & Silver were not in a shortage, then it would still be used as a daily currency.
I carry a Morgan Silver dollar dated 1888 to educate the high school check out clerks on what real money looks like. What amazed me, is many of them know the difference between fiat and real money.
i carry a silver coin all the time as well (today a 1943 Walking Half). Intrigues people of all walks of life.
I too am amazed at the young peoples knowledge of fiat system. Got into an interesting discussion with a 16 yr old just the other day on the topic. I am hopeful that his generation will simply say 'fuck you' to the whole thing. He has been sold into debt bondage ...and knows it. On the one hand, it is tough getting them to look up from their iCrap. On the other hand, i think/hope they read, research, & question more than the folks a little older than them. Perhaps the 4th turning will hinge on them to repair what we have squandered?
The reason it should stop is because its wrong? When the prices of certain market indicators are manipulated there are no benchmarks for investors to use that are dependable. These are WARNING INDICATORS the most important kind. When these indicators are distorted we no longer have a "Free" moving market. In order to have a market that lasts you need a market that is truthful? Right now they are trying to control gold and silver prices to give the impression the market is in a "different place" than these indicators would normally indicate. Its complete B.S. All kinds of crazy distortions start happening that eventually spin out of control, especially combined with all the money printing.
Invest away if you feel comfortable the "Free" market is functioning properly? What happens if these indicators are really trying to tell us something? and they have been distorting them?
On top of the obvious fact you have a dangerous situation when you have a finite resource and unlimited money printing? Its not meant to work this way in my opinion and history would agree. Almost every economic manipulation in history ends by imploding, no mater how big or how small. Its more serious than people realize.
If everything was normal the metals would move down naturally w/o having to be smacked down. The question should be if everything is so good why do they have to smack the metals down? The answer is because they cant achieve the results we need for a strong economy. If not why would they do it? Other than to take it all at a low cost? Under 1000 gold has been predicted forever now and hasn’t been achieved, the metals are starting to shout a bit. People should listen. This is my opinion.
Gold seeks "true" value as water seeks level, it should never be distorted. When the Vix is up 6% on the same day gold is down 7% something is up. Gold can act as an alarm bell and the Fed doesn’t want anyone panicking so they take away the alarm bells? They are there for a reason. Gold and Silver are there for OUR protection. Its like trying to hold a buoy under water, sooner or later you have to let go.
Gold and Silver must remain distortion free for there to be trust. I believe.
I bypassed the Deep Analysis option, when the author switched from Price vs Purchase (Arbitrage) opportunities for Propane, to those of Gold.
The realizable benefits are far more obvious and certain for the former than the latter -- emotional and psychological attachments to the latter notwithstanding.
No shit, sherlock
I would love to have negative price on gold. I have few empty rooms in my house.
I would trade alll of my fiat TP for negative physical gold.
Gold has a few commercial uses, other than that it's only value is in people's imaginations, it's as fiat as any piece of paper, ie it's only value is it's promise of future value.
Bingo. And yet all the bugs are blinded by that simple fact.
When there was a major stresser of the financial system in 2008, what happened to the price of gold? It DROPPED, a lot. If it was so value as a hedge as the bugs believe, shouldn't it have gone up?
Reality is that it's a rich man's play toy, something to spend discretionary income on, when times are good. But when times are bad, it becomes a BUYERS market, and gold is a useless luxury, and priced according.
NIce trolling but look at the value gold had in post war germany or present day brazil, it works as store of value just fine, its the original store of value after food.
You miss the point. Germany, Argentina, Zimbabwe, were all LOCALIZED collapses. There was still a robust market for gold and other commodities around the world.
In a worldwide collapse, such as the collapse of the US dollar, Euro, or Yuan, there's no safe haven.
That's why gold plummeted in 2008, and why it will also plummet in a worldwide collapse (of a major currency).
Sorry, but the bugs are wrong. They are looking at local events and assuming the same applies in a global event. It doesn't work that way.
You live in Obama's utopia.
There are plenty of safe havens with Gold, Silver, beans, rice, TP, water, & brass packed with lead. And I'm sure you have none of that!
Thousands of years of history are never wrong. There will be no confidence in the dollar thus making it even more worthless than it is, due to policies and printing. Last time around people still had confidence in the system, that confidence is dwindling. When there is no trust in the system people default to gold, they have for thousands of years, for the simple reason there is no counter party risk. Its so simple and gold is money, period. Only an uneducated idiot thinks differently. The dollar is based on an empty promise, that everyone and their mother is starting to see through.
If you understand one thing, understand this: https://en.wikipedia.org/wiki/John_Exter its the truth, before all this B.S. Gold forms the base of our pyramid, always has always will. The question is how have people become so uneducated about money. The dollars promise has become B.S. pay attention people. Its getting close to the end for the dollar.
Basically your saying people with money see gold as money, but we shouldn’t. Gold would go down naturally if the economy was legitimately getting better, then ask yourself why do they have to smack it down? are they trying to hide something? Duhhhhh YESSSS. My guess is they manipulated it down in 2008 too, how can anyone trust any recent data? With these manipulators we have running the show? Its a joke and it will end soon enough. It always has, it never goes forever. Like the quote above just check Brazil out, or the price of gold in reals. Gold is about to come back in to style and not be such a relic very soon.
Is there really anyone left who trusts UNCLE SHAM anymore? Remember Uncle Sham and the FEDs best thinking got us here. Why would anyone not want real money during a collapse whether it be local or worldwide?
with the advent of fiat, gold is the enemy of cbanks ..it will be attacked all the more as economies become stagnant, and cb policy fails to stimulate. the fiat banks will always attack gold, and money can be made off this trade.
Wrong answer Illuminati! Gold was sold off to cover other worse investments, because it has real demand value. Gold is under value today and maniuplated by your boys the illuminati, and fiat paper ie the U.S. Dollar has the same value and the paper used for Barry Soetoro's BC.
Gold is over valued today. As soon as interest rates rise, you will see gold prices/value plummet.
I laugh at the constant references to the paper market as not being the "real" market or price of gold. That's nonsense. It's that market which determines the price. And the paper mark is tiny compared to world gold stocks.
If holders of the masses stocks of physical start putting that gold on the market, the price/value of gold will plummet.
We don't live in the middle ages. Gold isn't "money" anymore, just like seashells, beads or tally sticks, are no longer money. Gold is just another commodity with very limited industrial uses.
Price is determined by DESIRE and not NEED. That's why the price of gold swings so much and why when SHTF, it's not NEEDED. Because it's not needed, it's price/value will drop substantially.
Owning "paper" Gold defeats the purpose of owning gold in the first place because there is third party risk? The only thing paper gold is good for is liquidity or trading. They may raise rates but with all the lending it wont be much and people are already starting to realize. Wait until people panic and realize there is no way in hell they can trade their paper for the real thing. Paper gold is a false sense of security, you dont own it unless its in your hand period. Everything else is B.S. You will have a ton of money that was in paper trying to get into physical. Its called a log jamb. The NEED will come when everyone realizes there is not successful way for the powers that be to manipulate us into Utopia? Plato says Man has no use for paper money and we dont.
Perhaps, but for some reason it appears to be the same 'imaginations' of millions of folks for thousands of years.
Men worship vaginas. The vagina control panels worship bling. Therefore, bling will always be in demand, very high demand.
I have recently stopped buying PMs as I have around 50% of all assets in physical already. Now I am buying tins of spam or corned beef. Right now I can buy about 7 cans of either here in NZ for about the price of an ounce of silver. I just need to start building more storeage space!
The corn beef & spam will kill you from high blood pressure and heart disease. There is way to much salt in both products. To much salt will slowly kill you. You are better off stacking cans of pinto beans, rice, tomatoes and fruit.
GLTU!
Also, not enough salt will kill you too....
Is gold forming a triangle?
http://goldenopportunitytrading.blogspot.co.uk/2015/09/is-gold-forming-t...
Every year I take my fiat tax return money, and I buy physical Gold & Silver and I take delivery and stack it next to brass packed with lead.
Why in the world are you giving .gov an interest free use of your hard earned capital?
Simply by changing your W4, you can control your deductions and use YOUR money all throughout the year.
Just Wondering...
DaddyO
I'm glad someone is finally explaining the paper/physical G&S trade and manipulation system. You don't explain how the parties settle 100% in cash on the Comex.
You're stating that the exchange rules demand minimum 90% or 75% physical delivery.
Also isn't there a cost to the manipulators to drive down the price $10/oz.
Wish someone would make this all clear with examples. You're at least making a good start.
I traded in all of my silver for physical gold at my local coin dealer....
No central banks hoarde silver...
JPM has bought millions of oz lately. I believe they do? Must be worthless? All the hoarders must be stupid like JPM? You sound like just another minion trying to get everyone to dump. More QE in our future? Is it working yet? Are we there yet? If the powers that be win the gold war, freedom is dead. Gold/Silver is what made this country free. Any PM will hold and gain value post FED. Up 200 the sky is the limit.