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Guest Post: Gold's Critical Metric

Tyler Durden's picture


Submitted by Jeff Clarke of Casey Research

Gold's Critical Metric

There are many reasons why gold is still our favorite investment – from inflation fears and sovereign debt concerns to deeper, systemic economic problems. But let's be honest: It's been rising for over 11 years now, and only the imprudent would fail to think about when the run might end.

Is it time to start eyeing the exit? In a word, no. Here's why.

There's one indicator that clearly signals we're still in the bull market – and further, that we can expect prices to continue to rise. That indicator is negative real interest rates.

The real interest rate is simply the nominal rate minus inflation. For example, if you earn 4% on an interest-bearing investment and inflation is 2%, your real return is +2%. Conversely, if your investment earns 1% but inflation is 3%, your real rate is -2%.

This calculation is the same regardless of how high either rate may be: a 15% interest rate and 13% inflation still nets you 2%. This is why high interest rates are not necessarily negative for gold; it's the real rate that impacts what gold will ultimately do.

What History Tells Us

The chart below calculates the real interest rate by extracting annualized inflation from the 10-year Treasury nominal rate. Gray highlighted areas are the periods when the real interest rate was below zero, and as you can see, this is when gold has performed well.

(Click on image to enlarge)

Gold climbs when real interest rates are low or falling, while high or rising real rates negatively impact it. This pattern was true in the 1970s and it's true today.

A closer study of this chart tells us there's actually a critical number for real rates that seem to have the most impact on gold. Take a look at how gold performs when real rates are at 2% or below.

(Click on image to enlarge)

The reason for this phenomenon is straightforward. When real interest rates are at or below zero, cash or debt instruments (like bonds) cease being effective because the return is lower than inflation. In these cases, the investment is actually losing purchasing power – regardless of what the investment pays. An investor's interest thus shifts to assets that offer returns above inflation… or at least a vehicle where money doesn't lose value. Gold is one of the most reliable and proven tools in this scenario.

Politicians in the US, EU, and a range of other countries are keeping interest rates low, which, in spite of a low CPI, pushes real rates below zero. This makes cash and Treasuries guaranteed losers right now. Not only are investors maintaining purchasing power with gold, they're outpacing most interest-bearing investments due to the rising price of the metal.

Here's another way to verify this trend. As the following chart shows, from January 1970 through January 1980 gold returned a total of 1,832.6%. This is much higher than inflation during that decade, which totaled 105.8%.

(Click on image to enlarge)

In the current bull market, gold has gained 556.3% since 2001, while inflation has thus far totaled 30%.

(Click on image to enlarge)

Further supporting this thesis is the fact that when real rates are positive, gold has not performed well. You can see this in the following chart of when real interest rates were higher than inflation.

(Click on image to enlarge)

The gold price fluctuated between $300 and $500 for the twenty-year period when rates were positive. This is a strong reminder that bull markets don't last forever – even golden ones – and that at some point we'll need to sell to lock in a profit.

So if history demonstrates that gold does well during a negative-rate environment and poorly during positive periods, the natural question becomes…

How Much Longer Will Negative Real Rates Last?

US Federal Reserve Chairman Ben Bernanke stated in January that he expects to keep short-term interest rates close to zero "at least through late 2014." This low-rate, loose-money policy is intended to "support a stronger economic recovery and reduce unemployment." While his strategy is debatable, this implies that almost any inflation at all will continue to keep the real rate negative and thus gold will stay in a bull market.

What if the economy improves? After all, there are economic data showing the economy may be finding its footing, making some believe interest rates could be raised earlier, as soon as next year. Based on the data above, the answer to the question is, "What does inflation do?" In other words, interest-rate fluctuations alone aren't important; it's how the rate interacts with the inflation rate. If inflation simultaneously rises and keeps the real rate negative, we should expect gold to remain in a bull market.

With the obscene amount of money that's already been printed, high inflation seems almost certain at some point, even if there isn't any more money creation. This is why we think the end to the gold bull market is not yet in sight.

One more point. You'll notice in the above charts that this trend doesn't reverse on a dime. It takes anywhere from months to years for investors to shift from interest-bearing investments to metals – and vice versa. And the longer the trend, the slower the change. Real rates have been negative for a decade now, and with broad institutional investment in gold largely still in absentia, it seems reasonable to expect that the trend in gold won't shift anytime soon.

Implications for Investors

Armed with these data, there are definite steps you can take with your investments at this point, as well as reasonable expectations you can have going forward:

  1. You can buy gold today. As long as real interest rates are negative, gold will remain in a bull market. If you already own some gold, you can and should ask yourself if it's enough at a time when money in the bank is a losing proposition.
  2. Don't get flummoxed when you hear talk about rising rates. Watch the real rate instead.
  3. In our opinion, real rates will be negative for some time for the simple reason that we think inflation will be rising for some time. Ask yourself: Will the Fed and other central banks raise rates aggressively enough to catch up to inflation? Someday, sure… but not anytime soon.
  4. When real rates turn positive, especially above 2%, it may be time to sell. We'll have to see what's going on in the world at that time; if there's financial chaos, the fear factor could cause gold to depart from this historic pattern. But even if not, keep in mind that while the price of gold fluctuates every day, the shift out of gold-based investments won't occur overnight. There should be time to gain clarity.

There are a lot of reasons to own gold today, and there will likely be more before it's time to say goodbye. In the meantime, we take comfort in the fact that the strongest historical indicator of all tells us the gold bull market is alive and well and has years to play out.


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Tue, 04/03/2012 - 21:56 | 2315222 slewie the pi-rat
slewie the pi-rat's picture

how much longer will anything last?  L0L!

Tue, 04/03/2012 - 21:59 | 2315229 SilverIsKing
SilverIsKing's picture

When the US Dollar becomes a long term buy, that's when to consider selling some gold.  That would be........never.

Tue, 04/03/2012 - 22:01 | 2315233 Chief KnocAHoma
Chief KnocAHoma's picture

I fart in your general direction!

Tue, 04/03/2012 - 22:54 | 2315329 flacon
flacon's picture

Here's good half hour video for you to think about:


Simplicity: Part 1


Simplicity: Part 2

Tue, 04/03/2012 - 23:19 | 2315362 CrazyCooter
CrazyCooter's picture

JFC ... "Gold's Critical Metric" ... seriously?

I got gold's metric right here ... let me spell it for you in cheerleader speak Z .. E .. R .. O.

That is where fiat is going. Divide by that, and you got a pro-tip on the future of gold prices.

Unfortunately, there isn't much else to know. The elite/1%/etc will incarcerate/jail/abuse/torture/nuke/etc the truth (i.e. people) in the process of trying to save themselves, but in the immortal words of Richard Feynman ...

"For a successful technology, reality must take precedence over public relations, for nature cannot be fooled."

Guy was a fucking genius. I reccomend his book "Surely You're Joking, Mr. Feynman!". It is ideal for young teen males who like pranks, thinking, and generally being obstinate; ideal qualities of a free thinking contributors to WEALTH.

I need to stop ranting, I had a few beers ... fsck, I burned my salmon ...



Wed, 04/04/2012 - 02:26 | 2315546 AldousHuxley
AldousHuxley's picture

no matter how powerful corrupt banksters, politicians, central banksters are in pushing fiat money, natural fiat kryptonite of gold will be there to keep it in check.


Wed, 04/04/2012 - 08:08 | 2315808 Pinto Currency
Pinto Currency's picture



This Casey Research piece is interesting - too bad it is disconnected from reality.

When you have the reporting of consumer goods price inflation (CPI) fraudulently understated by 8% ( don't like that number? choose another.  Okay let's call it 6%) then this type of analysis, uncorrected, is meaningless and even deceptive.

In reality, the real interest rate is in the neighborhood of -5% indicating how broken the economy is after decades of distructive intervention by the central planners in the Fed, Treasury, and the bullion banks and the gold price that we are given every day is a play number for retail investors. 

CrazyCooter is right on point.

Wed, 04/04/2012 - 09:45 | 2316098 bernorange
bernorange's picture

Your comment implies that using John Williams' numbers invalidate the thesis.  But using a higher inflation number only shifts the Y axis on the graph.  The central premise remains. 

Wed, 04/04/2012 - 12:06 | 2316546 Pinto Currency
Pinto Currency's picture


It is well known that gold increases in price when the real rate of interest becomes negative. 

However, the real interest rate proxy (30 year bond - real consumer goods inflation rate) have been negative since the mid 1990s due to intervention in the bond markets while the BLS produced increasingly false CPI figures.

At this same time, there was heavy intervention in the gold market as well.  The "great moderation" was a fraud.

For a true view of what has happened with real rates and gold see Reg Howe's piece Gibson's Paradox and Rising Rates:

The Casey piece gives graphs noting that gold falters when real interest rates are higher than inflation (What!?) and gold benefits when real interest rates fall below 2%?  This is bunk and looking at rigged inflation numbers and rigged gold prices don't tell you much. 

The price of gold was increasingly heavily rigged starting in the 1990s and it remains less effectively rigged today while real rates are less than -5%.  Congrats to Mssrs. Rubin & Summers.

Wed, 04/04/2012 - 01:13 | 2315506 surfersd
surfersd's picture

I have been a long term gold bull, but what if ....... The US is able to turn around its trade deficit by becoming a net exporter or very smaller importer of oil. In the last four years net imports of crude and petroleum products has gone from 13.2 mmbd to 8.1 mmbd. 

Withthe increase in the Bakken a possible Romney win, could we see some physical discipline and a major league improvement in the trade deficit leading to a stonger dollar.

Realize that higher rates will hurt the FED's balance sheet, but is it possible for the US to be natural resource country?

Tyler any thoughts?



Wed, 04/04/2012 - 02:32 | 2315531 xtop23
xtop23's picture

I dont pretend to be Tyler(s) but I would just say this,

Fiat currencies have a life cycle of approximately 40 years. They always go to zero.

If rates rise we can't service our debt. Period.

America doesn't have the tax base to support the current spending levels regardless of what the Dems proclaim with their class warfare schtick.

Americans are levered to the hilt.

A Romney election will increase military spending which is already inordinately expensive and unsustainable without increased deficit spending.

Even the Ryan budget plan, which has zero chance of passing, uses extremely optimistic computing to "balance" the budget in 20+ years. 

America's manufacturing base is gutted.

BRIC countries as well as others around the world are actively pursuing non-dollar denominated trade.

For the US to become a net exporter the american public would have to have a drastic decrease in living standard to be competitive.


Not going to happen. At some point we'll boil over and it's game on.

Bernanke will continue to print and I think at some point overt QE will be unavoidable (regardless of what Graham Summers says :p / probably set to occur after this election cycle), and Gold / Silver are going to respond.

Wed, 04/04/2012 - 06:36 | 2315670 Gazooks
Gazooks's picture

bingo, x

Wed, 04/04/2012 - 08:14 | 2315823 Pinto Currency
Pinto Currency's picture

Gold and silver are going to respond?

Every day the clowns from the Fed/Treasury/bullion banks climb inside the reactor and turn some screws and say they've made the adjustments necessary. 

The gold price is a fiction for mass consumption and the reactor has a serious, serious wobble that is getting worse.

Wed, 04/04/2012 - 02:39 | 2315562 TDoS
TDoS's picture

This decrease in imports is primarily due to demand destruction caused by the recession.  The Bakken is shale, and these shale wells have production drop offs of 90% after two/three years of operation.  Most shale wells that are over two years old pump a paltry 80 barrels per day.

The US will not be a net exporter of oil any time soon.  Only if the country is impoverished and domestic demand is completely, fat chance. 

Tue, 04/03/2012 - 22:05 | 2315245 TeMpTeK
TeMpTeK's picture

Gold is a barbarous relic.... Silver Bitchez!


Tue, 04/03/2012 - 23:35 | 2315379 vast-dom
vast-dom's picture

" When real interest rates are at or below zero, cash or debt instruments (like bonds) cease being effective because the return is lower than inflation. " But today we find ourselves in the exact opposite alter-world as the fed defies all market convention and both institutes zirp and buys up junk usa bonds.

Wed, 04/04/2012 - 02:14 | 2315541 non_anon
non_anon's picture

WTF?! Gold has been on a tear since 2008, beginnging of the end, keep your powder dry!

Wed, 04/04/2012 - 09:37 | 2316067 MFL8240
MFL8240's picture

The bullshit will last forever!  Thats the problem, nothing is real.

Tue, 04/03/2012 - 21:55 | 2315223 dolph9
dolph9's picture

Gold is a long term buy for as far as the eye can see, people.

If the economy continues in zombie negative interest mode, you win big.

If the money collapses, you preserve your wealth.

I simply don't see how you lose in gold apart from theft or confiscation, which is very difficult for the powers that be, despite their seeming invincibility.

Tue, 04/03/2012 - 22:01 | 2315236 SHEEPFUKKER

Unless the play is to quit your job and spend all your money(including gold) before the SHTF.  But yeah, hardly seems like one could lose with AU, or AG.  

Tue, 04/03/2012 - 23:51 | 2315408 flacon
flacon's picture

I agree, suicide is always an option (quit your job and spend all your money).

Wed, 04/04/2012 - 01:08 | 2315504 Think for yourself
Think for yourself's picture

Well, in mid 2010 I decided to say fuck it all to hell, quit my job, flew to south america and spent all my money "travelling" (mostly partying). Not quite suicide but close enough.

However, after going 100% broke in mid-2011 with no one to depend on, deciding to bootstrap myself back up from scratch, I'm now back on my feet with maybe approx 2.5k net worth, currently aiming to get enough both to start my first small business and to slowly place aside something that could eventually provide for a family.

Not a bad recovery for an ex-lazy ass. Best character-building experience I could ever have afforded, hell, I'm sure that many people fork over fistfuls of gold for seminars that won't bring them 1% of what I lived in the last 2 years.

Wed, 04/04/2012 - 04:19 | 2315614 malikai
malikai's picture

You are the 1%. The 1% that has awoken to life.

Congrats mate. It is a great place to be.

Wed, 04/04/2012 - 05:15 | 2315636 Moe Howard
Moe Howard's picture

Did basically the same thing, WW, for about 5 years back in the early eighties. I would say, yeah, you are "woke up" and things will never be the same. I often wonder if it is because you [and I] removed yourself from the "culture". I personally just don't see things the same way as 98% of those around me.

Wed, 04/04/2012 - 10:56 | 2316386 Think for yourself
Think for yourself's picture

I agree that things will never be the same; however I don't believe that it's anything special (which you do not imply) but rather the fact that I was already mostly detached from the culture I grew up in that facilitated so much my dropping of it.
[For the record, I grew up in rural french canada, notoriously conservative if not protectionist of its culture, while being a geek myself and being immersed in computers (I've always had one as far as I remember) and getting internet as soon as it became available - I was 10 y/o. Hence I've always seen myself as a member of the species more than a member of a culture]

I think that I speak for many of those about a quarter-century old or younger, although they might not know to say it, that we grow up alienated to the host culture that surrounds us. Most realize (or feel, at a deep down level) that it is merely empty posturing, as we have grown up in an environment where we can more easily see cultures meaninglessly preening at each other.

I guess that most people choose to continue to identify with those cultures because it would be too scary to drop it off, after all it is often the only reference that gives meaning to their lives. That becomes much easier to do once you realize that the meaning it gives you is fundamentally empty, or even misleading, or when you just want to get out of the shitfest we've been digging ourselves in.

Wed, 04/04/2012 - 17:14 | 2317607 smiler03
smiler03's picture

I'm really glad you enjoyed yourself and I did the same. I recommend you do it at least twice more before you're forty ;O)

Having two years off by your mid twenties though is hardly unusual, well not in my circle of friends. This ZH crowd however put everything they've got into gold and who mostly say they will never sell it. I seriously wonder how many of them have ever really lived.

edit: You are splendidly eloquent :O)

edit #2: The average Australian 25 year old would consider you a weirdo if you have HAVEN'T had a lengthy period of foreign travel.

Wed, 04/04/2012 - 17:41 | 2317692 akak
akak's picture

edit #2: The average Australian 25 year old would consider you a weirdo if you have HAVEN'T had a lengthy period of foreign travel.

Definitely a mark in favor of the average Australian 25 year-old vs. his (provincial?  geographically ignorant?  arrogant?) American counterpart.

Now, if only we could teach him to speak real English .....

Tue, 04/03/2012 - 22:02 | 2315238 Gunga
Gunga's picture

Real interesting, thank you for this . It is easy to forget the basics when caught up in all of the noise

Tue, 04/03/2012 - 22:36 | 2315240 DoChenRollingBearing
DoChenRollingBearing's picture

A friend of mine is a realtor.  He has recently noted both prices and unit sales of houses going up, in an area that has been very depressed since 2007.

He thinks this is a sign of upcoming inflation...

Disclosure: my friend and I both own gold.

Tue, 04/03/2012 - 22:46 | 2315314 kridkrid
kridkrid's picture

Can I ask a question (of anyone)... how big of a difference is there when you are purchasing physical gold or silver based on where you buy?  It's all some amount around spot with some premium if what you are buying is considered a collectable of some sort or another.  Say I were in the market to buy 10oz of gold and something like 700oz of silver what would people recommend?  Not for me, of course... for my unlucky friend who always seems to lose this stuff in weird boating accidents.

Tue, 04/03/2012 - 22:53 | 2315327 Likstane
Likstane's picture

Go to APMEX or Provident metals or Bullion Direct and pick up a bunch of generic silver rounds and 40 British sovereigns or French 20 francs.  Lower vig than the U S eagles(ag or au).  Silver is silver and gold is gold; besides the old european gold coins are the coolest.  Those are the dealers I used before the accident in the surf. 

Wed, 04/04/2012 - 00:06 | 2315432 traderjoe
traderjoe's picture

Apmex is credible but expensive. And they clear through JPM.

I'd much rather buy local, so you can sell for cash if needed.

Canadian Maples or junk silver are much better for silver than generic rounds. For gold, go with Australian coins, lower premiums and nice plastic cases.

Wed, 04/04/2012 - 00:30 | 2315465 Born-Again Bankster
Born-Again Bankster's picture

I get silver eagles for $2 over spot 24/7.  You guys do better anywhere?

Wed, 04/04/2012 - 01:16 | 2315508 Missiondweller
Missiondweller's picture

I would buy local if it were not for sales tax in CA.

Wed, 04/04/2012 - 07:17 | 2315696 Fred C Dobbs
Fred C Dobbs's picture

There is no sales tax on gold in California.  Same for silver I believe.  

Tue, 04/03/2012 - 23:21 | 2315365 Diablo
Diablo's picture

for large orders it pays to check out tulving first. they usually have the best prices for big orders. 


Tue, 04/03/2012 - 23:47 | 2315403 lasvegaspersona
lasvegaspersona's picture

Tulving yes!

minimum order size 10 oz though for most coins/bullion it is 20 oz. 

My rec is gold only, I have some silver but I have become  FOFOAistic in my thinking. Of course he could be wrong but then I wind up with all PMs anyway. If he is correct my remaining silver appreciates at commodity rates only. Gold gets special treatment as the big guys incorporate it into the wealth asset.

Tue, 04/03/2012 - 23:39 | 2315387 passwordis
passwordis's picture

I discovered many years ago. In business for decades.. they are brokers. You agree to buy a set amount and they issue you a trade number and they place the order. You pay by bank transfer or money order. They have minimums.  I think they charge an additional $25 on orders less than 500 ounces of silver..


 The quotes you see at the website include shipping. Even with the small order charge they are the least expensive I've found in the last 5 years..  I'll make a friendly bet with anyone here that they can't find cheaper silver and gold.  I've also been able to get great prices from a local dealer... a big wad of cash makes the difference.   Coloradogold is cheaper and I used to buy from them but I'm willing to pay a little more locally.  It's much easier and less stressful to pay cash and walk out with some heavy metal in your pockets  compared to going to my bank and spending 20 minutes setting up a transfer.. and waiting to make sure it went through.. and getting the confirmation email and then waiting a week or more for your stuff.

If I did'nt have a great local dealer I would be buying from The price for silver right now is $34.34 delivered for 200 ounces ... current spot is $32.67.. That's 1.67 over spot delivered.. I don't think you will beat that price anywhere.. at least not from a dealer.


Wed, 04/04/2012 - 00:30 | 2315446 Vint Slugs
Vint Slugs's picture

Your points are well made, especially w/ respect to buying locally w/ cash.  A negative to consider in addition to the inconvenience of a bank wire transfer is that there's a permanent record of your transaction - plus you can bet that the bank will file a SAR about you. 

But why are you buying silver instead of gold?  No response necessary, but everyone should realize that you're not buying price you're buying ounces.  Once you realize that then there's little reason to buy silver.

Wed, 04/04/2012 - 00:45 | 2315481 passwordis
passwordis's picture

plus you can bet that the bank will file a SAR about you.


 I believe a SAR would only be required if the transaction is in cash and not a digital transaction.


But why are you buying silver instead of gold?  No response necessary, but everyone should realize that you're not buying price you're buying ounces.  Once you realize that then there's little reason to buy silver.


  It's late and perhaps it's me but I have no idea what you just said.  I stay away from Gold because I think it's more likely to come under capital controls. I like silver because, as I look back 10 years, if I bought gold instead.. I would have much less buying power today.. assuming I liquidated.

Tue, 04/03/2012 - 23:56 | 2315397 slewie the pi-rat
slewie the pi-rat's picture

@ krid_crud: 

it's hard to believe anybody could be this fuking styooopid after being here for almost two years!

"can i ask a question...?"    the answer is: you are a shitheaded moronic asswipe!

not to mention another of the "innocent tulvigTrolls"

tulvig makes me sick, BiCheZ! 

Wed, 04/04/2012 - 00:06 | 2315431 Vint Slugs
Vint Slugs's picture


What's your beef with Tulving?  Have you bot 20 oz or more gold bullion from a competitor at a better delivered time/price?  I've dealt with Kitco, for example and had them split an order w/out informing me so that I thought they had stiffed me for a key.  Also the delivery time delay was insufferable.

Wed, 04/04/2012 - 00:37 | 2315476 slewie the pi-rat
slewie the pi-rat's picture

just exactly what i said my beef was, toy-boy

read it again, since you don't understand what i already wrote about the games tulvig  plays here

>>>how tf can a guy who's been a zeroHead for almost two fuking years pen that post?

when they have zeroHeads who have been here 1-2 years and are regular readers and bloggers pretend they don't know the first thing about buying a few 'ounces of gold' and maybe a 'bunch of silver',  time and again, here,

they make me fuking PUKE!

but perhaps most people aren't blessed with being able to stay around the site as much as slewie;  they wouldn't notice;  i'm trying to tell them and you and anyone:  i notice!

this is the third time in about a month that i have clicked on one of these "innocent nooby gold and silver 'questions'" zH name to see a regular blogger of well over a year;  the other two times are already down, bro

and then i am always politely and innocently questioned and interrogated to please explain myself to these fuking asswipe tulvigTrolls!  always!

Wed, 04/04/2012 - 00:51 | 2315487 Likstane
Likstane's picture

Damn pi-rat, I didn't know I was supposed to check on said trollers length of service before I offered advice on one of the few things I am familiar with here.  Maybe I'll check with you next time...on second thought...nah...piss off bitch stain.

Wed, 04/04/2012 - 01:58 | 2315527 slewie the pi-rat
slewie the pi-rat's picture

well, maybe they'll stop now, b/c this is the third time i've taken the time and energy to call out their "let'sPretend" troll-spamming, here

they take up entire pages!

again, i have documented here, now, three times a zH with 1-2 years of pay-attention-type blogging pretending not to know a g-damned about how to buy a fuking coin!  or roll or a box

the thing is, tyler knows what i have put up here, all 3 times, and others know one or two

tyler is a publisher who owns this website

i've now made three distict cases w/ the same "innocent&polite" M0 on tyler's website

these asswipes are pretending things here to get tulvig's sales pitch and testimonials publisher here

don't blame me;  i'm only pointing out what these salespeople are doing to and on tyler's website

if you want to pretend they're not doing this, too, wtf do i care? 

i can't be any clearer than i've laid out here, 3X now

if it stops, great, if it happens again, i might notice the re-runs...

you're being set-up;  tyler and i are laughing our asses off that you think this troll actually wants your "advice" 

you're a fuking idiot! 

i checked  "said trollers length of service" b/c i know what they're doing and how

is it slewie's fault you got caught out by the tulvigTrolls? 

go back to fukFace if you're too infantile to click to see to whom you're responding

i didn't have anybody to tell me, and it took me a year to see it...

you are projecting a "stain" on me? 

why doncha tell us more about it? 

Wed, 04/04/2012 - 17:26 | 2317666 smiler03
smiler03's picture

+1 I love a good rant!

Tue, 04/03/2012 - 23:55 | 2315411 Vint Slugs
Vint Slugs's picture


Before we get to answering your question, answer this:  why would your "friend" buy 1.35 times more silver than gold?  Unless his ultimate scenario is a complete economic collapse that results in barter transactions, it's hard to justify overweighting with silver.

Now, when your friend buys precious metals, those are considered capital assets that are defined by the IRS as "collectibles" (regardless if he buys bullion or bullion coins - not numismatic coins).  Therefore, if he sells those holdings (assuming that the totalitarian state has not confiscated them), instead of bartering them, he will incur an initial 28% tax penalty (loss on the appreciation).  Plus, of course, there are ancillary losses such as the purchase premium and the sale discount; also the cost of storage (in a private vault and not in a commerical bank "safety deposit" box; and also the likelihood that he could not move them in his possession via public transport without risking their confiscation.

As regards PM dealers, as others here have noted Tulving is a reputable dealer whose buy/sell spreads are tight.  He will buy as well as sell and he covers shipping/insurance costs on product shipped to him.  He delivers overnight which larger dealers such as Kitco cannot come close to doing.

Wed, 04/04/2012 - 00:20 | 2315435 akak
akak's picture

That 28% capital gains penalty on precious metals is NOT absolute --- it only pertains to those who are already in or above the 28% general income tax rate bracket.  For those below that level, gains on gold and/or silver are currently only taxed at that individual's prevailing income tax rate.

This bit of misinformation about US capital gains taxes on PMs ALWAYS being at 28% is widely repeated and almost ubiquitously believed, but I assure you it is incorrect.
I suspect it is the inadvertent result of advice and information regarding gold and silver usually being written by fairly wealthy individuals who do not stop to consider that not all of their readers as are wealthy as they are, or perhaps not wealthy at all.

Wed, 04/04/2012 - 00:24 | 2315456 Vint Slugs
Vint Slugs's picture

Thanks for that clarification.  Maybe to the benefit of all here you could link us to that part of the US Tax Code that specifies "already in or above the 28% gen'l income tax rate bracket".

Wed, 04/04/2012 - 00:35 | 2315474 Likstane
Likstane's picture

Why would anyone pay any tax on any gold or silver coins or bars?

Wed, 04/04/2012 - 00:45 | 2315478 akak
akak's picture

Maybe to the benefit of all here you could link us to that part of the US Tax Code that specifies "already in or above the 28% gen'l income tax rate bracket".

I would be happy to do that, but having spent hours wading through the quagmire of IRS forms and documents verifying that information the first time around, without having saved the appropriate documents and references in a readily accessible form, I must admit I am disinclined to repeat the exercise. 

I don't expect anyone to take my word for it, but rest assured what I stated above IS the correct information --- each of you will, of course, have to do your own DD.

Wed, 04/04/2012 - 00:47 | 2315483 Au Shucks
Au Shucks's picture

Hahaha!  You made me spit tea all over my shirt.  Capital gains.. taxes.. on precious metals... hahaha.  What kind of twit would pay taxes on the spending of money? If I hadn't taken an arrow to the knee last year and lost my little PM stack over the side of my row boat in a quickly moving and deep river, I would tell you that any person with 2 brain cells to rub together will never declare the purchase, holding or disposition of any PM holdings.  Have you completed your IRS disclosure form already? 


In my best AI voice:  Taxes?  Taxes?  We're talking about PMs, man... Taxes?  Taxes? Really?  Taxes? 

Wed, 04/04/2012 - 00:57 | 2315491 akak
akak's picture

If we end up in an Orwellian cashless society, then such matters as capital gains taxes are going to be unavoidable.

Believe me, it's not the world that I want to live in --- the thought of where we as a society are heading already fills me with despair today --- but things do seem to be moving in that direction.

Wed, 04/04/2012 - 01:23 | 2315511 Think for yourself
Think for yourself's picture

Then don't become part of it, and don't support it with your aquiescence. Paying taxes is investing in the entity that seeks to enslave you, your family and your children's children.

Out of your individual sovereignty necessarily flows the freedom of association, and hence the social contract - the right to choose the society you want to partake in.

Don't partake in the society that you wish to see wither. 

Wed, 04/04/2012 - 05:22 | 2315640 Moe Howard
Moe Howard's picture

I will not be a part of a "cashless society".

I will not take "the mark of the beast".

I am not a bible thumper.

Wed, 04/04/2012 - 01:04 | 2315501 slewie the pi-rat
slewie the pi-rat's picture

@v_slugs:  you gays are really good at what you do, too!

how can a 'guy' who has been here 1yr 46wks and has 47 pages of posts not know a damned thing and need a tulvig ad to "help" him? 


as i said the last time this happened which was the second time i "noticed" this:  there is no need to do business with the people if you don't like this game they play here, while pretending not to be playing it;  i wouldn't personally;  why would i want to give my personal info to a sales force that pretends anything, anywhere

there are too many honest coin dealers to be found locally;  yes, kridkrid, coin dealers sell gold and silver coins and if you can keep the 40K $$$ in the neighborhood, well, maybe that will get you one heluva interested dealer

kridkrid    << just hit this link, then "open user's comments" and paste/type kridkrid in and hit "apply";  see?  47 pages!

again, this is the third time in a relatively short time that i have said anything

if you have any more innocent questions about what i got against tulvig, thank you in advance for sticking them up your OWN ass, ok, tulvig toy-boy?

Wed, 04/04/2012 - 01:25 | 2315514 Likstane
Likstane's picture

OK rat, You are correct in assuming kridkid does know how to buy PM.  I'm glad I gave him 3 dealers to buy from that weren't Tulving.  As far as my recommendation to piss off...after further review, I will re-direct the PISS OFF to the aforementioned Kridkid.  My piss-off to you is rescinded. 

Thanks for the impetus to use high-lighted first time!

Wed, 04/04/2012 - 02:11 | 2315537 slewie the pi-rat
slewie the pi-rat's picture

ok, well, thxz, i was going on about it, above

i shall coitainley axept said piss-off

people do the most amazing shit to spam here, L

they flatter tyler shamelessly wanting to spam here and he graciously drinks every round they buy, too...

Wed, 04/04/2012 - 06:49 | 2315675 Its_the_economy...
Its_the_economy_stupid's picture

Best 2 sites on the net when ready to stack.

Wed, 04/04/2012 - 06:59 | 2315676 Its_the_economy...
Its_the_economy_stupid's picture

deleted comment

Wed, 04/04/2012 - 07:24 | 2315714 Fred C Dobbs
Fred C Dobbs's picture

When I was leaving the US last summer with gold I had to declare it with US Customs.  Their first question they asked was it bullion or numismatic.  I had both.  Since I got back I am only buying non graded pre 1933 twenty dollar gold coins from my local coin dealer at $55 over spot.  



Wed, 04/04/2012 - 17:36 | 2317682 smiler03
smiler03's picture

Useful info as far as it goes but why exactly did you decide against bullion?

Wed, 04/04/2012 - 08:29 | 2315862 Straying from t...
Straying from the flock's picture

10 ounces of gold could be purchased as coins or bars, they are total wealth preservation and storage is key.  I suggest smaller bars and one ounce coins until this tungsten thing washes over.  As far as the silver goes, I suggest 90% constitutional silver.  That is dimes, quarters, and half dollars prior to 1965.  You will not find a lower premium on silver unless someone is running a special.  I use Provident Metals for my online purchases, and they have 90% for $.19 over spot.  Best deal anywhere and the minimum is one dollar face value.  no crazy minimums.  My best suggestion is to find a local coin shop and talk to the owner, let them know what you are interested in and they will take care of you.  My LCS owner gives me 90% at $.50 over spot.  With no shipping fees as you have online, it cannot be beat.  Physical metals are the only store of wealth left, but they alone will not save you from the paper ponzi scheme that is approaching.  You need the metals, don't get me wrong, but you also need a hearty home garden and a solid local network.  If you would like to talk about this in more detail, send me a message, or click on my name and follow me at Strayingfromtheflock-dot-org.

Stack Faster.


Tue, 04/03/2012 - 22:07 | 2315242 ekm
ekm's picture

What drives me nuts, is when people say Bernanke has no credibility but they quote Bernanke when he talks about dates like....ZIRP until 2014.

He's got 3 boses:

- Big Banks

- White House

- Congress

The clash of the 3 above will conclude each time what the Fed does. Please do not start to tell me that Fed is independent.

Conclusion: Noboby fucking knows how long zirp will continue. It may stop tomorrow if the congress tells him so. Now I got to go and take a leak.

Tue, 04/03/2012 - 22:36 | 2315296 SHEEPFUKKER

How can they TRY not let ZIRP go forever?  If rates rise, then the phony economy is toast.  Why try to prop it up for 12 years only to let it fall now? Eventually, the market will decide when rates go up, not the Bernanke. 

Tue, 04/03/2012 - 22:45 | 2315299 ekm
ekm's picture

Agree if you still think that there is a normal demand for US$. If nobody wants to exchange real goods and services with electronic dollars, than why hold US$? The rates becomes as important as Cuba's interest rate.

The value of the US$ is its exchangeability with real goods.

If people stop using it for big trade, than rates will have to go up to create investment demand or do another war. See my reply to outlooking a little bit above.

Tue, 04/03/2012 - 23:51 | 2315409 lasvegaspersona
lasvegaspersona's picture

ditto sheeploverguy

If the B ditches ZIRP he brings down the USA. It all has to keep on going until it cannot.

Wed, 04/04/2012 - 05:26 | 2315641 Moe Howard
Moe Howard's picture

If the rates go up, the budget explodes.

Income via taxes won't even meet the interest payments.

100% plus of the expenditures will have to be monetized.

Game over.

Tue, 04/03/2012 - 22:38 | 2315297 Rampage
Rampage's picture

Bernanke has the only opinion that matters.  The FOMC minutes are being talked about on the other side of the world right now. Say whatever you want about the Fed, but trade accordingly.

Tue, 04/03/2012 - 22:44 | 2315308 ekm
ekm's picture

I think we are living in a different world it's been since 9-11. National Security in USA has taken over and rules everything, even the Fed. I interpret the most recent Obama's executive order as an explicit executive order that the Fed executes orders from White House and Congress. It was an executive order that talked only about the economy.

Wed, 04/04/2012 - 10:04 | 2316171 oddjob
oddjob's picture

Bernanke has the only opinion that matters.

As long as enough stooges believe that, it will continue to be the case.

Tue, 04/03/2012 - 23:57 | 2315419 Vint Slugs
Vint Slugs's picture


Correcting:  he's got 2 bosses.

The Fed may facilitate the election process but the WH doesn't own the Fed; just the opposite.

Wed, 04/04/2012 - 00:15 | 2315444 ekm
ekm's picture

You may be right, but the way I see what's happening in USA, is that the Military Industry is by far the most influencial and over-rules anybody and everybody, including the banks. So IMO, Military Industry is the boss of WH, and via the WH the boss of Fed.

To clarify, I am not judging whether that's right or wrong, since I do not have enough facts to analyze it.

Wed, 04/04/2012 - 06:53 | 2315678 Gunga
Gunga's picture

Re, "i am not judging whether that is right or wrong." How bad do things have to get before you can judge right from wrong friend ?

Tue, 04/03/2012 - 22:08 | 2315246 Firing Pin
Firing Pin's picture

I believe this used to be a reliable indicator of gold's general direction. However, I believe in our current economic scenario that US interest rates moving aggressively higher might actually signal a loss of faith in our Treasuries (bills/notes). Rates shooting up to 18% won't bring in buyers if the ponzi system is failing...because rates might go full-Greek!

Tue, 04/03/2012 - 22:15 | 2315259 ekm
ekm's picture

Belief is a religious feeling.

Tue, 04/03/2012 - 22:23 | 2315274 OutLookingIn
OutLookingIn's picture

Rates going up? No way. ZIRP IS HERE TO STAY!


2.2% is the average rate on Treasury debt.

$454 billion interest expense on publicly held debt in fiscal 2011 as of September 30.

62.8 months is the average length of Treasuries to maturity.

$5.9 trillion Treasury debt coming due in the next 60 months. Thats 5 years!

Can you imagine what the consequences of even a 1% rise in rates would do? Interest on the debt last year is approaching a half trillion dollars! Even a small increase in rates would push this whole rotten mess over the edge of the cliff, that is already very close.

Tue, 04/03/2012 - 22:35 | 2315294 ekm
ekm's picture

Ok. Than what happens when a couple of nations do not want to exchange real stuff with electronic dollars?

- Natural reaction: Increase in interest rates in order to create demand for dollars so actually nations with natural resources will accept to exchange real goods with dollars

- Unnatural reaction: War (not much appetite right now, unless it's just air war when no soldiers would die)

Tue, 04/03/2012 - 22:42 | 2315304 OutLookingIn
OutLookingIn's picture

When goods are prevented from crossing borders, armies often do.

Tue, 04/03/2012 - 22:46 | 2315315 ekm
ekm's picture

Now I agree. No choice but to use US$ in that case.

Tue, 04/03/2012 - 23:03 | 2315343 Firing Pin
Firing Pin's picture

Don't forget, if the market starts to overwhelm the Bernanke, he will have to print more to buy more Treasuries (and he'll have to print even more and more amounts to just stay even to service the debt load)...and more money printing means a lower dollar which means higher yields which means more money printing. Lather, rinse, repeat.

Tue, 04/03/2012 - 22:10 | 2315249 fonzannoon
fonzannoon's picture

great point FP

Tue, 04/03/2012 - 22:13 | 2315256 downrodeo
downrodeo's picture

i don't care for the assumption that central banks will be around forever as a fact of life. all we need to do to make a better world is imagine it.

Tue, 04/03/2012 - 22:13 | 2315257 downrodeo
downrodeo's picture

good info though :)

Tue, 04/03/2012 - 22:18 | 2315264 ekm
ekm's picture

Could everyone please NOT use the word "believe" want talking about money and finance?

Tue, 04/03/2012 - 22:25 | 2315276 Paul Atreides
Paul Atreides's picture

"According to my calculations...." <-- Use this, spock would be proud.

Tue, 04/03/2012 - 23:48 | 2315404 Firing Pin
Firing Pin's picture

LOL. How about "It is a rock-certain fact..."

Wed, 04/04/2012 - 00:12 | 2315440 ekm
ekm's picture

I like this one.

Tue, 04/03/2012 - 23:50 | 2315407 Firing Pin
Firing Pin's picture

The word police...seriously?

Tue, 04/03/2012 - 23:57 | 2315418 lasvegaspersona
lasvegaspersona's picture

I believe that Bernacke and his actions or threat of actions are all that matter in the current economic 'situation'...and I believe I'm right. I don't believe that anything other than that belief matter much. Rational behavior based on solid information deployed with tested theory are notions of another long ago world.

Wed, 04/04/2012 - 00:17 | 2315450 ekm
ekm's picture

I am commenting the same way I commeted to Vingt below.

You may be right, but the way I see what's happening in USA, is that the Military Industry is by far the most influencial and over-rules anybody and everybody, including the banks. So IMO, Military Industry is the boss of WH, and via the WH the boss of Fed.

To clarify, I am not judging whether that's right or wrong, since I do not have enough facts to analyze it.

Wed, 04/04/2012 - 17:51 | 2317717 smiler03
smiler03's picture

"Military Industry is by far the most influencial and over-rules anybody and everybody .."


I have a slight disagreement, I don't think the US "over-rules" Iraq or Afghanistan.

Tue, 04/03/2012 - 22:19 | 2315268 geewhiz190
geewhiz190's picture

short term gold looks to be headed toward the 1300-1350 area. the US dollar is setting up for an advance ,on the short term, to the 85 area as measured by the DXY.the catalyst could be another scary event like a Detroit bankruptcy filing or some such credit related event that scares the muni and junk markets which   look to be in some kind of bubble-like phase. gold may go to new highs later , but it seems wise to hedge at this point. really like a race to the bottom- euro, pound, aussie, real, yen- all look like they want to sell off-each one for a different reason. we'll see what happens

Tue, 04/03/2012 - 22:26 | 2315269 DavidPierre
DavidPierre's picture


A Plan

As the intensity of the intervention in the metals has increased it is reasonable to assume that many long term precious metals bulls have become discouraged and sold out of this sector.  The decline in open interest certainly supports that notion.

The mainstream media has presented several extremely bearish articles about gold lately as well, which in itself is nothing new, but the message is clearly intended to weigh on sentiment at a time when the metals are already under pressure.  In contrast, recall that as the banking sector went in the toilet a couple of years ago, there was a flood of commentary in the mainstream media that pounded the table with bullish extreme that these stocks were a buy... with the precious metals, not so much.

Now we know that relentless media commentary, combined with a strong trend in a market sector, will draw in speculators that become convinced such trends can continue on indefinitely.  The stupid money is sure to pile on at the late stages of any big move.

The premise here is perhaps there is a method to the madness this time around as we bounce along the lows of a prolonged correction.  Has the frequent and severe intervention in the metals become so obvious by design?  If the longs are giving up on this market, and the net short interest in gold and silver held by the Cartel players is quietly being covered with a large chunk closed in the last few weeks, then who is left?

The stupid retail money has been convinced to get on board with the Cartel and go short.  There is a real chance that the Cartel is covering their shorts and getting ready to go long. 

Guess who is left holding the bag?

You can only squeeze so much juice out of any lemon.  After years of Cartel tricks in line with Lucy pulling the football away from Charlie Brown, perhaps the funds have figured out the paper metals market is a scam and they are not in a hurry to come back on board.  Perhaps the retail schmucks have been seduced to the dark side to make 'easy money' shorting the metals, now that the manipulation appears to be so open.  One would need the IQ of a baked potato to miss the daily interventions in the trade. 

Could that be the plan?

Never assumed that the Cartel players were stupid.  One would have to be stupid to ignore the fundamental reality of the metals trade and stay short to the point where things go off like a hand grenade.   It is more likely there has been some easy money to make by gaming the sector with paper metal, all while knowing that no serious regulatory enforcement would be employed to curtail the scam.  That phase of easy money is drawing to a close, and perhaps this hard sell to convince the dumb specs to go short is the last act before the real upside move that lies ahead.

Is there is a grand plan?  

Do not write off the concept.  Keep an open mind and consider all possible outcomes.  By the time a large number of market participants have  figured out a clear trend, that trend is about to change. I cannot recall a similar episode of extreme bearish sentiment for the entire precious metals sector that we have at the present time, even going back to 2008, and the lows of 2002.

In addition, one thing almost every spec player KNOWS, and KNOWS for SURE, is that it is time to sell in May and go away. What better time to strike?  If you have a plan - and I think these people are very smart and they do have a plan - then it makes sense to build a long position in the metals and then go long the mining stocks, just as other players are discouraged and selling out.

I will be around to find out... no plans to sell any holdings and will stay dug in whatever goes down this spring.

Tue, 04/03/2012 - 22:43 | 2315307 DoChenRollingBearing
DoChenRollingBearing's picture

@ DavidPierre

+ 1

We do not always agree on this or that, but I am with you re holding PMs with strong hands.  Yes, I too see gold having violent ups and downs, whether due to just markets acting normally (unlikely IMO -- the value of my opinion is not very high nor informed) or due to manipulation as well.

Buy and hold PMs as you get money coming in.  I do not advocate staying at the All Inn, but 10% puts you WAY ahead of almost everyone.  WAY AHEAD.

Tue, 04/03/2012 - 23:14 | 2315357 DavidPierre
DavidPierre's picture


Sell your Gold?

Recently CNBC had talking bonehead Jim Paulsen on the idiot box telling people they should sell their Gold.  He reasoned that Gold prices are near record highs in relation to the stock market, housing, wages etc..  He talked about where it was valued in relation to other assets back in the year 2000 and said that it has gotten just too expensive now.  

A question for Mr. Paulsen.  Where were you back then?  Were you RECOMMENDING Gold?  No! ... in fact you were part of the chorus actually laughing at US for even speaking about much less purchasing Gold.  So, here we are 12+ years later and even though he never recommend to buy Gold in the first place, CNBC put this asshat authority on telling the sheeple to sell.

Right for over 12 years... for all the right reasons doesn't mean that we are correct now unless something fundamentally has changed. 

Well, something did change along the way.  Back in 1999-2000, it would have been very very difficult to "right the ship".  It could have been done, but would have been painful.  No, the Fed put the pedal to the metal in 2001 and crashed interest rates and again in 2007 onward.  The U.S. Treasury began to go hog wild fiscally in 2008 and then has run $ Trillion+ deficits ever since. 

We could have taken the pain 12 years ago. Today all the pain would be pretty much over.  We could have fiscally and monetarily tightened and been prudent, we did not and instead made the problem bigger.  So avoid the pain for a "few years".  A "few years" is now up and the biggest "fundamental change" is that the U.S. Treasury has bankrupted itself.  The Fed is buying over 60% of all debt that is issued. This is a giant circle jerk Ponzi scheme that absolutely 100% guarantees that any boneheads that suggest that you sell your Gold...will be and ARE wrong.

The actions by the Fed and Treasury are bringing to a head what this is all about... MONEY! 

Eventually of course it had to be, but the current conditions say that it is now.  What we are witnessing is a massive DEFLATION.  Yes, we are experiencing a deflation of epic proportions in terms of Gold while being masked by an inflation in nominal terms of Dollars. 

This is what any and all Gold bears are missing.  They are missing the fact that Dollars are no longer "sound money" and not a reliable yardstick to measure anything.

Deflation in Gold terms with simultaneous inflation in Dollar terms.

Even in pure Dollar terms inflation in the things we need while experiencing deflation in the things we already have.  This is the battle that the Fed is fighting, they cannot allow deflation of asset prices in Dollar terms. 

The policy response to asset deflation in Dollar terms will undo and destroy their own product, the Dollar.

Wed, 04/04/2012 - 07:21 | 2315704 Overflow-admin
Overflow-admin's picture

In Switzerland, streets are often plastered with ads telling you to SELL YOUR GOLD. Never to buy. IMHO, don't ever trust a swiss ad provided that Switzerland is (IMHO, again) the core center of the gold screwing cartel (ask the jews and the Federal Reserve of New York /sarcasm).




I'm still laughing about my dissident actions from last year, graffiting their street ads with gold price updates, underscoring the SELL MESSAGE and adding some sarcasm tags. I cant wait for the next leg up to continue... Street trolling is also fun!

Tue, 04/03/2012 - 22:24 | 2315272 Gringo Viejo
Gringo Viejo's picture

"There are no markets anymore. Only interventions."

Chris Powell   GATA

The truth of this statement, at least to me, is the most compelling arguement for holding PMs.


Tue, 04/03/2012 - 22:30 | 2315281 skepticCarl
skepticCarl's picture

I dream of a world, with no central banks. (Wait, don't hit the green arrow yet).  It will be a world that has rediscovered bartering and hard money, and gold backs every transaction. It's a world where a few Russian Oligarchs control the production and distribution of gold supplies to the world.  There are local banks, like now, but only those banks that will pay off the Russian Mafia for gold-backed funding.  If you think it's a pain dealing with your credit card company now, just wait until you have to speak with Vladimire, to get things reconciled.

Tue, 04/03/2012 - 22:34 | 2315292 OutLookingIn
OutLookingIn's picture

Keep your eye on the ball!

Don't be swayed by Fed/MSM misinformation.

Despite gold being range bound at $1,630/oz to $1,700/oz it's ended the first quarter in 2012 with gains in ALL major currencies. Which proves debt monetization (printing) and currency debasement is leading to continuing currency devaluation.

This in turn is not good news for the consumer as devalued currency induced cost push inflation sets ever higher prices at the check out counter. How's your grocery and gasoline bill been lately?

The CB's of US, Japan, England and the EU must keep pumping in the liquidity to the system or it just stops.

Tue, 04/03/2012 - 22:48 | 2315303 akak
akak's picture


In the current bull market, gold has gained 556.3% since 2001, while inflation has thus far totaled 30%.

Bullshit, pure and simple. REAL "inflation" since 2001 has been at least double that figure, as anyone who has to buy groceries, pay utility bills, or buy just about anything else will happily inform this dullard and/or liar.

Repeating this outrageous, government-derived "low inflation" propaganda is enough in and of itself to make me question the arguments, honesty and integrity of the author.

Tue, 04/03/2012 - 23:06 | 2315344 JOYFUL
JOYFUL's picture

tru nuff dat.

Tue, 04/03/2012 - 23:15 | 2315358 jimmyjames
jimmyjames's picture

In the current bull market, gold has gained 556.3% since 2001, while inflation has thus far totaled 30%.

Bullshit, pure and simple. REAL "inflation" since 2001 has been at least double that figure,


You do pretty good until you start confusing prices with "real" Inflation-

Here's real Inflation since 2001 and I agree with you-30% is bullshit-lets try 100% in the credit supply alone-

And then we can move to the currency supply which has increased 300% but does not involve such huge sums as does credit supply-

We need to include the rising house prices through those years as well-because they increased the owners personal money supply-until they didn't anymore and the rising stock markets-which both eventually vaporized peoples balance sheets when they both imploded-

Wed, 04/04/2012 - 00:27 | 2315461 akak
akak's picture

Correct, I was in fact referring to the general price level, which is why I put the word "inflation" inside quotation marks.  I was referring to the effects of inflation, rising prices, which most people commonly, if erroneously, think of as "inflation" itself.

Wed, 04/04/2012 - 01:02 | 2315499 jimmyjames
jimmyjames's picture

Ok gotcha-

Tue, 04/03/2012 - 22:45 | 2315312 Rampage
Rampage's picture

No way interest rates can be allowed to increase given the gargantuan level od=f debt. 

No way the juice can be weaned from the stock market since we are in a "recovery" y'know. Oh, and an election year.


Tue, 04/03/2012 - 22:48 | 2315317 ekm
ekm's picture

It's obvious you believe too much in central state powers to allow or not allow things. I have lived in communism and I can tell you, it's way, way overrated.

Wed, 04/04/2012 - 00:18 | 2315451 slewie the pi-rat
slewie the pi-rat's picture

i hear that

but ZIRP didn't come from the toothFairy, imo

Wed, 04/04/2012 - 00:25 | 2315457 ekm
ekm's picture

First, thx for advising me to take time off from MSM few weeks ago. I took the advise for 1 full week and it was of tremendeous help.

Second, the gov can manage things until it can't. When it can't it becomes a Niagara Falls style fall, much like 2008.

That's why a 2008 * 4 could be happening soon since big banks are not over leveraged now, but hyper-leveraged.

Wed, 04/04/2012 - 01:14 | 2315507 slewie the pi-rat
slewie the pi-rat's picture

isn't armegeddon always just logical as hell, tho?

the people who brought us 2008 have now fixed everything andR ready to send the econom over theFalls in a bbl;  again

anticipation is makin me chafed

Tue, 04/03/2012 - 22:51 | 2315322 Gringo Viejo
Gringo Viejo's picture

Caution: Troll On Board.

Tue, 04/03/2012 - 22:51 | 2315324 devo
devo's picture

Gold will be much higher in 5 years.

Wed, 04/04/2012 - 05:31 | 2315643 Moe Howard
Moe Howard's picture

R we not men?

Tue, 04/03/2012 - 22:55 | 2315331 tradewithdave
tradewithdave's picture

Consider this.  What if rates were rising in such a manner that indicated the Fed's inability to rein them in?  What could lead to such a scenario?  How about another downgrade of the U.S. Government for starters? 

Is it fair to say that gold's value increases in a negative real rate environment as outlined in this post and also in an environment of rising rates as denominated in the world's reserve currency when such a rise is based on declining confidence courtesy of S & P and Moody's. 

According to Fekete, there is an upper limit to contango yet no lower limit to backwardation. According to Victor the Cleaner it is credit that suppresses the gold price.  According to the Treasurer of South Carolina it's naked shorting by the TBTF banks. 

So which is it, Gresham's law or the reversability of Gresham via near frictionless systems such as mobile glyph  alternative currencies or Larry Summer's new favorite Bitcoin?  How friction-reducing exactly is your Iphone?  Is it slick enough for the "money is a technology" meme to get traction and for the good money to drive out the bad money for a change.


Tue, 04/03/2012 - 22:56 | 2315333 CryingBear
CryingBear's picture

i think everyone should sell their gold and short it from today.

Tue, 04/03/2012 - 23:04 | 2315341 AU5K
AU5K's picture

I think you should just go ahead and do that.

Wed, 04/04/2012 - 00:21 | 2315453 Hangfire
Hangfire's picture

Let us know how that works for ya!  

Wed, 04/04/2012 - 18:20 | 2317782 smiler03
smiler03's picture

Well I am posting this at 18:13 EST on Wednesday April 4th. He would have got about $60/ounce LESS today than if he had sold it yesterday.

Facts: always a bitch if they aren't on your side!

PS Don't forget to downvote this post.

Tue, 04/03/2012 - 23:39 | 2315347 ekm
ekm's picture

People with a lot of intelligence waste their time and money to study charts like interest rates up or interest rates down and finally use the word "believe" in their reports.

What we ought to be looking for is a law or something that always happens, something natural, a natural law like Gravity, or Supply/Demand.

I'm thinking that the only law that has governed Gold gold all over the history of humanity is the "unit of account law".

For distance it's in metres (or feet), for time is in Hours. Every where in the world the hour and the meter or feet is the same but nobody can mess up with Time or Distance. It's what it is. 

Hence, when people mess up with money, Gold and Silver become UNIT OF ACCOUNT everywhere in the world for Money, much like the Hour is for Time or Meter is for Distance. That's why Gold does well in strong deflation and inflation. Since these events cannot be measured with $ or Euros, Gold is used as a UNIT OF ACCOUNT.

Any challenges? I welcome all.

Wed, 04/04/2012 - 08:10 | 2315814 machineh
machineh's picture

This could have been a MUCH stronger article if Jeff Clarke had actually bestirred himself to derive some elementary statistics from the data.

For instance: what was gold's compounded annual return when the real interest rate was above 2%, versus below 2%?

Trying to spot visual correlations in charts is amateur-hour stuff. Moreover, in some cases, the visual correlation shows that gold started to sink right after the real interest rate bottomed -- even when it was still negative. 

I'd like to read this article again, when the math is added to actually prove the author's proposition. Meanwhile, I'm gonna do it myself.

Wed, 04/04/2012 - 08:11 | 2315816 tradewithdave
tradewithdave's picture

Here's your challenge.  Why do you think Soros calls his fund "Quantum Fund?"  Whether you're talking about Schroedinger's cat, Heisenberg's uncertainty, Berlin's two concepts of liberty, or Sartre's existentialism, you're talking about the same thing.  Karl Marx knew it and so does Soros. 

If you can shift accountability away from self, to the observer (or in the case of Marx the government, or Soros' open society) then you're off the hook for your own actions in the matter.  Who needs Christ's forgiveness if Fannie Mae is an open house and Citizen's United says corporations are people and our revolutionary strategies devolve into simple "occupation" of space due to an inability to understand what's going on around us.

Soros' entire idea behind reflexivity and his study of Karl Popper and falsifiability over reason was to game your belief that time and distance aren't relative any more than human consciousness is relative.  I'm not saying it will work in the end, I'm just saying it's working well for him so far if you measure "well" by a belief that there is no accountability in the end. 

We'll see just who is able to block out the cognitive dissonance while they ride the mechanical gold bull like John Travolta at Gilley's in that movie Urban Cowboy.

Dave Harrison

Tue, 04/03/2012 - 23:21 | 2315366 Sandoz
Sandoz's picture

Yes, I completely agree. Gold is a buy until it's not, at which point you'll be holding the bag. That seems to be the conclusion here on ZH. It's the good ole buy high, sell low strategy favored by retail investors the world over. 

Seriously though, How can you look at the price action during the late 70's and early 80's in the top chart and conclude that it's time to buy? Doesn't that chart clearly indicate that it's time to sell?

Tue, 04/03/2012 - 23:31 | 2315377 devo
devo's picture

Then sell. And see how you do with that in 5 years. Nobody is stopping you from selling.

Tue, 04/03/2012 - 23:36 | 2315385 Sandoz
Sandoz's picture

And nobody is stopping you from buying. So what?

Tue, 04/03/2012 - 23:37 | 2315388 devo
devo's picture

So sell me your gold and take these federal reserve notes off my hands.

Tue, 04/03/2012 - 23:42 | 2315396 Sandoz
Sandoz's picture

At least you got half the equation right. Selling treasuries high is a good strategy. You're quick learner.  

Wed, 04/04/2012 - 00:31 | 2315467 akak
akak's picture

Welcome back Sandoz!  It was getting boring here without at least one committed anti-gold troll.

Wed, 04/04/2012 - 00:33 | 2315471 Sandoz
Sandoz's picture

Thanks. It feels good to be back. 

Wed, 04/04/2012 - 05:33 | 2315644 Moe Howard
Moe Howard's picture

Take the bag off your head and stay awhile.

Wed, 04/04/2012 - 18:32 | 2317816 smiler03
smiler03's picture

Sandoz you naughty naughty man.

You spoke against gold, tut tut.

Just like I have recently pointing out that gold took 27 years to regain the same price when bought at the 1980 peak, which nobody will ever acknowledge on ZH. They get onto the price of bread, gasoline, cars etc, none of which would have been cheaper 27 years later.

There is no dissing of gold allowed on ZH.

Gold knows no wrongs.

Facts: unpleasant things if you were one of the losers. Unpleasant to even contemplate that it might happen again.




oops, nearly forgot, if you hadn't junked me by sentence number three then you really should smarten up.

Tue, 04/03/2012 - 23:46 | 2315399 jimmyjames
jimmyjames's picture

Seriously though, How can you look at the price action during the late 70's and early 80's in the top chart and conclude that it's time to buy? Doesn't that chart clearly indicate that it's time to sell?


Yes that chart indicates it was time to sell-

There is one big difference between today and back then-

Back then-the public was in with both feet-

Today-they don't even know what gold is and until the public is in-gold should remain strong-it sure isn't as good a bargain as it was 10 years ago-but i wouldn't be a seller yet-


Tue, 04/03/2012 - 23:59 | 2315422 Freebird
Freebird's picture

Somthing about knowledge lost from previous generations to current springs to mind...

Wed, 04/04/2012 - 00:16 | 2315448 Sandoz
Sandoz's picture

Now THAT is a great strategy. Just completely ignore history and go with your own personal theory. I like a person who sticks to their convictions. Sure your theory is entirely irrelevant, but it's the conviction that matters. You'll make a good analyst some day. 

Wed, 04/04/2012 - 00:25 | 2315458 jimmyjames
jimmyjames's picture

Now THAT is a great strategy. Just completely ignore history and go with your own personal theory. I like a person who sticks to their convictions. Sure your theory is entirely irrelevant, but it's the conviction that matters. You'll make a good analyst some day.


Obviously the data chart is above your level of comprehension-so if you like-i can break it down to your level and explain it to you-

Wed, 04/04/2012 - 00:28 | 2315463 Sandoz
Sandoz's picture

I'm always in the mood for some amateur hour comedy. 

Wed, 04/04/2012 - 18:34 | 2317825 smiler03
smiler03's picture

Sandoz, will you marry me?

Tue, 04/03/2012 - 23:21 | 2315367 BrokeDayTrader
BrokeDayTrader's picture

Both bonds and gold pounded today.

Stocks are next

Bring it, I'm ready to make some short coin!

Tue, 04/03/2012 - 23:28 | 2315372 Yardfarmer
Yardfarmer's picture

one would be inclined to believe that the federal reserve and its open market committee are now (at least temporarily) in total control of the comex spot gold paper contract.

in just the past month the price of gold has suffered serious declines after the testimony of BS Bernanke in congress and two subsequent releases of the minutes of the FOMC implying that there will be no immediately impending infusions of liquidity into the monetary system via the ledgerdemain know as quantitive easing.

the assumption is that these massive trillion dollar coounterfeiting operations known as fiscal stimulus amounting to a present $3 trillion from the US Treasury and ECB and BOJ have accomplished their stated objectives of reinflating a severe and alarming deflationary contraction.

with a potential shortfall of $15 trillion in US mortgage backed securites alone, the spectre of unfunded liablitlies and pensions to the tune of several more tens of trillions of dollars, and the elephant in the bathtub and 800 pound gorilla in the parlour in the additional and estimated $600 to $1200 trillion in OTC notional derivatives counter party contracts, only the complete collapse of the global financial system and/or the suspension of legal contractural obligations could provide even the remotest possibilty of bringing any apparent resolution to this impossible and unprecedented impasse. 

the looming spectre of capital destruction and the ongoing gutting of the housing and banking sectors will therefore proceed inevitably to the expected denouément of social and economic collapse fueled by the collapse of world currency exchange upon the heels of imminent US$ devaluation,international military conflagration and of course the requisite draconian and militarydomestic political repression which we are already witnessing the initial stages of.

possession of physical Au/Ag is an absolute necessity and yet but only one of the many countermeasures any astute citizen must undertake to ensure even the bare minimal chance of survival in the coming cataclysm. 

Tue, 04/03/2012 - 23:50 | 2315406 Freebird
Freebird's picture

The man's right, traditionally up to 2% real rates the tradiional lump of wealth preserver does well. There is one solution only, the Golden Bullet ( copyright Freebird 2012), which will come about by default, excuse the intended pun. Stay long, stay hard, btfd & prepare physically, mentally, supplies & asset management.

Tue, 04/03/2012 - 23:59 | 2315420 q99x2
q99x2's picture

You got gold you got trouble. Greece had some gold. They don't now. They have something else instead. That's what you want sucka?

Wed, 04/04/2012 - 00:02 | 2315426 Freebird
Freebird's picture

Talking to me tadpole?

Wed, 04/04/2012 - 00:03 | 2315427 Bansters-in-my-...
Bansters-in-my- feces's picture

Pssstt... Gold is NOT an investment.

It IS money.

It is the enemy of the debt banker game.

Wed, 04/04/2012 - 00:27 | 2315460 Sandoz
Sandoz's picture

Psst, make a video of yourself walking to the nearest 7-11 and trying to buy something with your gold. We'll all have a laugh when the moron behind the counter refuses to accept your gold...I mean money as payment. 

Wed, 04/04/2012 - 00:37 | 2315473 akak
akak's picture

Pssst, please make a video of yourself crying when your bank account is frozen and rapidly depreciating into oblivion as a result of a national "bank holiday" and you have only $5.32 cash in your pocket during the upcoming monetary crisis and collapse of the US dollar and worldwide fiat currency system.  You can add it to the 3,895,112,385 others that could have been made in the past 100 years under similar circumstances.

Wed, 04/04/2012 - 00:43 | 2315480 Sandoz
Sandoz's picture

Yeah, I know. The world is coming to an end and fiat money will be confetti, etc... I guess I just feel compelled to be a martyr for the ZH community. When the world is burning at our feet you can point to ole Sandoz who lost everything. Maybe if this site still exists I'll come back to these forums begging for money and, because you guys will feel a little sorry for me, you'll throw me a bone or two. Just enough to feed the wife and kid for a day. 

Wed, 04/04/2012 - 00:54 | 2315484 akak
akak's picture

Most likely you will have by then committed suicide, as the current political and social paradigms upon which your self-identity almost certainly rest will have been completely shattered, leaving you psychologically, socially,  emotionally and existentially destroyed.

But if your children come scavenging or begging around my place at that time, I promise I will throw them a bone.  Maybe even two.

Wed, 04/04/2012 - 00:58 | 2315494 Sandoz
Sandoz's picture

Yeah, that's probably true. I hadn't thought about it that way. 

It's going to be tough to look at myself in the mirror when I realize that the infallible folks at Casey Research were just trying to help the little guy. Now that you got me thinking about it, I can't believe how selfless these guys are to be sharing this data with folks they don't even know and have absolutely no duty to protect. It's like I'm turning away the hand of god. 

Wed, 04/04/2012 - 03:51 | 2315604 jomama
jomama's picture

for someone who believes in an omnipotent, invisible man up in the sky, nothing is far-fetched.

Wed, 04/04/2012 - 05:37 | 2315645 Moe Howard
Moe Howard's picture

Psst, they don't take ETFs, Car Titles, Diamonds, TBs either. Most don't even take hot pussy.

Don't get your point. The magic men have pulled the real money out of your pocket in the last 100 years, and put a concept in there instead. They can counterfiet at will, shave coins or all the old tricks much easier. The game, however can only be played so long. The end is near.

Wed, 04/04/2012 - 02:08 | 2315534 Harbanger
Harbanger's picture

Money sounds cheap, I call it hard currency.

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