Gold Over $1808 - May Be Poised for `Parabolic' Rise; People in West Not Prepared for Possible Currency Crisis

Tyler Durden's picture

From GoldCore

Gold Over $1808 - May Be Poised for `Parabolic' Rise; People in West Not Prepared for Possible Currency Crisis

All major currencies have fallen sharply against gold again today but especially the ‘commodity’ fiat currencies of the Australian, New Zealand and Canadian dollar. Swiss francs are also under pressure again today.

Gold is trading at 1,808 USD , 1,259.10 EUR , 1,096.40 GBP, 1,436.90 CHF and 138,510 JPY per ounce. 

The London AM fix was a second consecutive record nominal high in USD. Gold’s London AM fix this morning was USD 1,794.50, EUR 1,246.44, GBP 1,087.12 per ounce (from yesterday’s USD 1,792.00, EUR 1,240.39, GBP 1,089.96 per ounce).

Cross Currency Table

In my interview this morning on Bloomberg, the interviewer picked up on our recent suggestion that gold could go parabolic soon. Indeed, we said that it is likely not a question of if - but rather when.

A short interview is not conducive to informing people and therefore we wish to elaborate about a possible parabolic move.

Bull markets almost always end in a mania phase where there is a near universal belief that an asset class or security is going to rise and there is no risk involved.

This has been seen throughout history and was seen with the Nikkei, the Nasdaq and more recently with property markets in Ireland, the UK and the U.S.

It was also seen with gold in the 1970’s when gold increased 128% in 1979 alone. On January 2nd 1979 gold’s London AM Fix was $227/oz. By the 31st of December, gold’s London AM fix was $524/oz.

21 days later gold had increased another 60.9% to $843/oz.

This is parabolic.

Today’s 27% rise year to date in dollar terms is very tame in comparison.

The blind belief that an asset class, security or currency is a one way path to financial nirvana always leads to a bubble and the bursting of that bubble.

Today there is no such blind belief. Gold remains the preserve of the smart money - those who know their financial and economic history.

It is also the preserve of those who understand the importance of real diversification due to the risks posed by currency debasement and inflation.

Bloomberg: Gold Prices May Be Poised for `Parabolic' Rise

The largest buyers of gold today are institutions seeking to diversify themselves and protect themselves from currency debasement and the risks of depreciation of major currencies such as the dollar, euro and pound.

Sentiment remains muted and every single little scrap of potentially bearish news is greeted as a sign of the top or a bubble – whether it be cryptic statements from George Soros or the odd gold ATM globally.

One article from Bloomberg entitled ‘Gold Demand Falls 17%: World Gold Council’ was sent to me by a large number of clients and associates this morning alone.

Some are genuinely concerned that gold might top out at these levels. Others have been bearish and wrong in recent months and there is a large degree of confirmation bias going on here – and has been for some time.

Others simply do not own the asset class and fear they are missing the boat. Some are envious of others managing to protect themselves as unfortunately they may not be in a financial position to do so.

Other excellent Bloomberg articles this morning that are more bullish such as ‘Venezuela Gold Move Shows Foreign-Storage Discomfort, UBS Says’, ‘Gold Allocation of 10% Will Work in Any Scenario, Goldcore Says’ or ‘China Gold Investment Demand Jumps 44% on Rising Inflation’ were not forwarded.

More nuanced articles in our news section today were not forwarded.

This is a small but relevant sample of the sentiment towards gold. Many are nervous about gold at these record nominal highs and some are downright bearish (and some have been since gold reached the nominal high of $850/oz).

There is not a universal acceptance yet that the majority of people in the western world should own some gold bullion - physical coins and bars owned personally or stored in the safest way possible.

Quite the opposite – Joe and Josephine public have been selling the “family gold’ in the global phenomenon that is ‘cash for gold’.

This is in marked contrast to the Middle Eastern and Asian world where owning gold as a store of wealth is the norm due to their experience of currency debasement.

The emirate of Dubai’s launching of a 5 ounce bullion coin is another indication that demand from the Middle East is set to remain robust and may surprise to the upside.

The conditions today are more bullish than they were in the 1970’s for a whole variety of reasons which we have looked at in recent weeks.

One fundamental reason is the emergence of China and Chinese demand for gold. There was no Chinese demand for gold in the 1970’s.

The unrealized, important fact that the people of China were banned from owning gold bullion from 1950 (by Chairman Mao) to 2003, means that the per capita consumption of over 1.3 billion people is rising from a tiny base.

Many market participants and non gold and silver experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” major change in the fundamental supply and demand situation in the gold and silver bullion markets – particularly due to investment and central bank demand from China and the rest of an increasingly wealthy Asia.
 
Another factor today that was not present in the 1970’s is a global debt crisis that is threatening the global financial, economic and monetary system.

The vast majority of people in much of the western world are not prepared for the real possibility of continuing global currency debasement.

Owning gold is like owning car or health insurance. You do not stop buying insurance because the premium goes up. You shop around and get the best insurance at the best price.

The price may fall or rise (although given current conditions it is unlikely to fall in the medium and long term) but one needs to own it in order to protect oneself and one’s families financial future.

With all the focus on the nominal price of gold, the value of gold is still not understood by the majority in the western world today.

It will be soon.

For the latest news and commentary on gold and financial markets please follow us on Twitter.

NEWS

(Bloomberg) -- Gold Rises Above $1,800 as Slowdown Concern Boosts Demand
http://www.businessweek.com/news/2011-08-18/gold-rises-above-1-800-as-slowdown-concern-boosts-demand.html

(Wall Street Journal) -- WGC: India, China Standout Markets For Gold Demand
http://online.wsj.com/article/BT-CO-20110818-700436.html

(Bloomberg) -- Venezuela also wants gold back from Morgan, Barclays, Standard Chartered, and Scotia
http://www.bloomberg.com/news/2011-08-17/chavez-preparing-government-takeover-of-venezuela-s-gold-mining-industry.html

(Reuters) -- Gold edges down on firm dollar; growth worry supports
http://www.reuters.com/article/2011/08/18/markets-precious-idUSL3E7JI03D20110818

(Reuters) -- S.Africa mines minister worried about mine "carnage"
http://www.reuters.com/article/2011/08/18/safrica-mining-idUSL5E7JI0FR20110818

(Emirates) -- Dubai Unveils 5 Ounce Gold Bullion Coin
http://www.emirates247.com/markets/gold/dubai-unveils-gold-bullion-coin-2011-08-17-1.413820

COMMENTARY

(Financial Times) -- Bullion Bulls Talk of $5,000 Gold
http://www.ft.com/intl/cms/s/0/843c6ae6-c96f-11e0-9eb8-00144feabdc0.html#axzz1VMvCxReZ

(Gold Anti-Trust Action Committee) --  Gold has become 'substitute currency,' Jean-Marie Eveillard tells King World News
http://gata.org/node/10284

(Greshams-Law) -- 40 Years of Fiat Currency – Is Gold as ‘Cheap’ as it was in 1971?
http://greshams-law.com/2011/08/17/40-years-of-fiat-currency-is-gold-as-cheap-as-it-was-in-1971/

(CNBC) -- Gold Council: Demand Still Strong—But Changing
http://www.cnbc.com/id/44181373

(Zero Hedge) -- As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting?
http://www.zerohedge.com/news/chavez-pulls-venezuelas-gold-jp-morgan-great-scramble-physical-starting 

(Bloomberg) -- Bloomberg Video - GoldCore: Gold Prices May Be Poised for `Parabolic' Rise
http://www.bloomberg.com/video/74110956/

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Snidley Whipsnae's picture

We don't want no freakin parabolic rise!

Slow but steady is the way to permanent high level...

Pladizow's picture

From '70' to '80' when gold did 2,400%, some of the junior miners did tens of thousands of % - penies to hundreds of $'s/sahre.

This is where fortunes will be made again.

bigdumbnugly's picture

we don't need no par -a - bola....

we don't need no price con - trol...

and i hope so pladdy.  but these miners ('specially silver) have been getting shorted to hell.  waitin' for the dogs to be let out.

hunglow's picture

I thought Pladdy Boy did let the puppies out.

We buy Au/Ag.   Idiots welcome.

eri's picture

No, fortunes will not be made again on miners.

Nobody trusts paper anymore.

It's all about physical now.

 

Shocker's picture

Exactly, you need to have something else to protect your wealth in todays crazy times

 

 

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youngman's picture

The Venezuelan miners just got the shaft.....and I see this happening all over the world...countries will take controll of the miners...at least in the third world countries

Pladizow's picture

Meaning those that are left in politically stable countries will be worth that much more.

youngman's picture

True...but we do not allow mining here...to enviro bad bad bad...

trav7777's picture

we already pretty much mined out this country.

Flakmeister's picture

Don't confuse them with details Trav... much easier to blame the tree huggers...

Frog-And-Toad's picture

Spoken at a whisper "Who is John Galt?"

Flakmeister's picture

A figment of the collective imaginations of the Randians...

faustian bargain's picture

Oh, is that why businesses are leaving California? I thought they were just all sick of the sunny beaches and long growing seasons.

Flakmeister's picture

Yeh, they headed to Texas where the budget situation is comparable....

Thomas's picture

One can't help but wonder what the strong buying season will bring. I, BTW, totally concur with the notion that gold is by no means over owned. I, like many of you, am now the resident go-to guy on all things financial in my little peasant hamlet having been the town crier for over a dozen years (despite the bouts of scorn). The questions I get are, at some level, emblematic of what the populace is waking up to. People know about gold but I see no evidence whatsoever that they own any. What I can see, however, is growing anger. Get long guillotines. 

Snidley Whipsnae's picture

I see the same thing happening...

But I do see a bubble in the 'awareness of PMs'... Which I take to mean that some are becoming aware of PMs but either cannot or will not make purchases. Hey, maybe they are waiting for confirmation? :)

I have one friend who recently bought some gold for the first time... and in spite of what I suggested he bought numismatic gold coins that are way over priced, imo.

This is the same guy that I advised to purchase gold at ~$350...

trav7777's picture

people know how much gold is worth because they are dumping all that jewelry and getting plasma TVs they couldn't otherwise afford or a nice downpayment on a shiny new car.  Or maybe it's the "best christmas ever" for the family as they parted with more of their wealth than ever in exchange for pricey consumer merchandise.

Gold has been steadily climbing, having some mini crashes which are good because they firm the conviction of the wallflowers that they were smart to dump the jewelry and smart not to buy into this bubble.  If there is a stampede off the sidelines, gold will double or triple from here in short order.  There simply aren't enough paper instruments to handle the volume of dollar slosh

Oh regional Indian's picture

Agree Pladizow. In the great mining boom in California, Levi's and Shovel sellers made most of the money. And such is how it's always been. It's the tool sellers that make the fortunes. Look no further than the world of software.

ORI

http://aadivaahan.wordpress.com/2011/08/16/pre-cursor-2-and-currents/

LongBalls's picture

The enviornment is about to take gold out of the reach of most people in the west. Next up...... silver. When gold goes over $2,000 oz. the cat will be out of the bag. People will be thrusting too and fro. Silver is becoming the best value at this point. The sheeple will awake. and when they do hold onto your shorts boys!!!

baby_BLYTHE's picture

Backing up the truck on some silver bars myself

CH1's picture

"Parabolic" and "falling demand" are two sides of the same coin. Establishment types need to define this as something unsustainable - hence their choice of such words.

If Joe Average ever realizes that gold and silver are the only money that endures, they are out of business.

Bicycle Repairman's picture

Joe Average gets paid in FRNs and pays his taxes with FRNs.  He will have to take a ride with FRNs wherever they go.  This isn't about Joe Average except when Joe gets something to barter.

Bicycle Repairman's picture

Yes.  A parabolic rise would garner all kinds of unwanted attention from the usual suspects.  A steady 10% per year for 20 years should do it.  Surely the FED can manage that?

passwordis's picture

A 10% return would'nt even cover your inflation loses.  Real inflation over 8% according to the people who make it thier business to  combate offical Government propganda. Poised to double over the next two years.

Bicycle Repairman's picture

Yes.  As aprt of FED "management" the inflation rate would have to be tamed.

Mike2756's picture

It already is, it's about 3X it's monthly 200ma, about the same as oil when it pulled back. Silver went 5X but, you have to figure in the g/s ratio. 

Hulk's picture

"Slow but steady is the way to permanent high level..."  Not in the case of major, structural, worldwide crisis. For the life of me, I don't understand why people don't get this by now...

Cash_is_Trash's picture

Don't. Go. Exponential.

Have. Most. Of. Working. Life. Ahead. Bitchez.

DonutBoy's picture

It's inevitable - it's the way markets work.  You'll see it double in a couple of months or similar.  If you are using any leverage you have to take your best guess and move some of your savings ouf of gold, and standby for the pullback.  If it's all physical you can not worry about it and enjoy your life.

BeerGoggles's picture

This is just another Buy the dip moment. All fib levels holding.

snowball777's picture

Crack open another tallboy, Cramer.

KnightsofNee's picture

205, 206, 207, 208, 209, 210 ounces, mmbawahhahahahahahahah, 211, 212, what? Who's that. Go away. I'm busy. 213, 214, 215 ounces, mmbawahahahahahahaha! Shhh! Did you hear that?

Dr. Richard Head's picture

I close the blinds around my house whilst counting me ounces. Don't want any of those paper bugs to know about me stash.

Sofa King's picture

"With all the focus on the nominal price of gold, the value of gold is still not understood by the majority in the western world today.  It will be soon."

It's not understood because we here in the west have a hard time with religion.

 

DosZap's picture

It's not understood because we here in the west have a hard time with religion.

It has noting to do with religion,( if you think it does explain) and all to do w/being te Reserve currency of the world for 60+ years,WE,in the west have never known REAL serious  currency debasement,change of currency, or had to concern ourseves with a new government, and Constitution,and Dictators ever.

That's why we are called SHEEPLE,if you never had to worry about wolves eating the flock, you do not fear them,out turn is coming,very soon.

 

 

Snidley Whipsnae's picture

Bring on some margin hikes to calm gold down... and blow out the specs...

25% per yr is more than enough... beyond that lie dragons

DrunkHarryReid's picture

I'll bet some of those short the Dec 12 5000 Call are not sleeping as easy as they had hoped.

Here is to hoping JPM tries to offer Chavez SI since they don't have enough GC in storage.

Silver Bitchez!

Snidley Whipsnae's picture

If everyone continues to accumulate PMs in a slow but steady fashion we will blow up the paper games, the fucking bankers, and the damed Fed...

Then we can get on with restoration of a real currency and financial system...

DosZap's picture

Snidely Whipsnae, @8:28

I am really getting ILL on all this DRAMA, about GOLD GOING PARBOLIC, GOLD GOING APESHIT.....................

Look at Pla, and Silver, and Plat....................they have done at least as well, and a couple better.

Fear Mongeing bitcheszz,,,,,,,,,,,,,,,,,

This has been a ORDERLY run up IMHO, esp considering the state of our union, and the rest of  planet earth.

To be honest if the market had been FREE to run, it would /should already be at $5,000.

deezy's picture

unleash the beast

The Swedish Chef's picture

You can´t eat barbarous relics. Only buy what you can eat: paper, debt and hopium.

Sathington Willougby's picture

If you don't know why gold could go parabolic, have a smoke.  You just got fucked.

fiftybagger's picture

Don't worry, they'll just crater stocks to stop it.  And when that stops working, oh snap.....

Silver For The People

http://www.youtube.com/watch?v=T6h9bl1N9Lc

LongBalls's picture

Stocks are cratering. And where are the people going? Gold. Gold is now the world reserve currency and safe haven asset.

antidisestablishmentarianismishness's picture

Gotta love it when the main reason to own an asset class is that it hasn't gone parabolic yet.

Quintus's picture

I don't recall anyone ever suggesting that that's the main reason to own gold.  There are many reasons to own it, but that's not one that I've ever heard.

DosZap's picture

They did not print it but y/oy , India's purchases are UP 161% to date. And, they are just entering their traditional Holiday season.

This time IT really is different, and anyone who says Gold is in a mania, and is due for a Blow Off...................is either an idiot, has none, or is a drone for the establishment.(that has a PILE,and act like they do not).

Soro's never really was serious when he said a year or so ago it was in a bubble...............he was simple posturing ,hoping his blathering would cause a drop, so he could buy more.

fiftybagger's picture

If you go back and listen carefully, Soros did not say gold was in a bubble.  What he said was "gold is the last bubble" subtlely implying that it has barely begun yet.

Pladizow's picture

Soro's stated it would be the "Ultimate" bubble, ultimate being synonimos with "Last".

He didnt neccisarily say it is currently in a bubble but that some day it inevitably will be.

And he could well be correct - after the curriencies and soverign debt collapse.