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John Hathaway: "This Is The Bottom For Gold"

Tyler Durden's picture




 

Submitted by Casey Research

In an interview with Louis James, John Hathaway discusses the US's economic outlook and why he's delighted by the current bearish sentiment toward gold.

 

Louis James: Ladies and gentleman, thanks for tuning in. We're at the Casey Research Recovery Reality Check Summit. We're talking with John Hathaway, one of the more successful fund investors – institutional investors – in our precious metals field near and dear to my heart. John, can you give us a quick version of what you talked about here, for those who didn't make it to the conference?

John Hathaway: Sure, yes. I think we're at the end of a correction that resulted from the peak last summer. It was overcooked, kind of hyperventilated hysteria over the debt-ceiling talks, the rating downgrade of the US sovereign debt, and I think basically the stocks and the metal had been working off that boiled down to what we now have is a simmer. I think we are at a position where there's not a lot of downside, and I would not be surprised by revisiting the previous highs of $1,900 and maybe even new highs over $2,000 this year.

What will do that is basically – so much of the narrative has been quantitative easing. When Bernanke announced on the 29th of February that they were done with quantitative easing (and if you believe that I've got a bridge to sell you, but for the time being let's assume that there won't be any), I was very impressed that gold did not go to a new low. It printed somewhere below $1,600 at the end of the year, made a couple-of-day swoon, but it didn't go to a new low. And then when the Fed minutes came out it also did not go to a new low, it kind of reiterated what Bernanke said. So the narrative may be changing. I'm not ruling out quantitative easing as a possibility, but there are things out there that gold might be looking at that the CNBC mentality hasn't figured out.

Remember that gold rose for many years before we even heard of quantitative easing; it was in a steady uptrend. So what could those things be? What would take gold – what would be the new headlines that might take gold to higher highs? To me, the biggest thing is that the Federal Reserve has purchased something like 61% of all new Treasury debt in the last year; and if they aren't going to continue that, then what's going to happen to rates?

Louis: Right.

John: The Chinese – who had been big supporters because they were rigging their currency – have not been generating foreign exchange to anything like the extent they were, so their participation rate in Treasury auctions has gone way down. If you look up the TIC numbers, foreign buying of Treasuries has dropped precipitously, so you have the two biggest pillars of support for keeping rates low in question here, and let's see what happens on June 30th. If you don't have a political buyer, either the Chinese and foreign buyers who are manipulating currency, and the Fed because they said they aren't going to do it, what are rates going to do?

If you are going to get a risk-free return inflation-adjusted today that's not politically motivated, it's got to be somewhere around 4-5% on the short end of the curve. Every hundred basis points adds a huge amount to the budget deficit, so to me we're in a real trap here, where it's going to be a game of chicken as to whether the Fed can really live up to what Bernanke said on the 29th.

Louis: Isn't that really the bottom line? They can't allow that interest rate to rise with the debt outstanding –

John: It seems very difficult. The recovery, the alleged recovery that we had, is very… I'll grant that things are better than they were a year ago or two years ago, but you'd have to call it feeble at best and maybe not sustainable. That's one thing that I think could affect the gold market.

The second thing, and I think it's very important too, is that inflation is rising. Even though the economy is soft, the number I look at – and I know we're going to have John Williams speak at lunch, and we know he has a very good take on it – is the MIT Inflation Index, because that's real-time pricing of billions of products. You can get to that website just by googling "MIT Inflation Project"; and that does not include services. Most of the services I take are inflating at more than 5%; they are closer to 10%. But goods that could be measured in real time are rising at 5%, so that's also going to be a factor. That means if rates stay where they are, the Feds are just going to be that much more behind the curve.

So those are two things; and the third thing is that there's $1.5 trillion of liquidity in the system that should the recovery – and I'm not a macro forecaster, but let's say the recovery does sustain itself – you've got $1.5 trillion of free reserves that could just turn into money supply. Then you really would have a potentially hyperinflationary scenario, and the Fed would be completely powerless to do anything about it. So I think that's bullish for gold – gold is not backward looking, it basically looks forward. I can go on and on. You've got the European unresolved sovereign debt crisis in Europe.

Louis: Let me jump in with a question about this, then. You've stood out really from the crowd in that most people agree on the general prognosis for gold. Most people are sort of near-term bearish, you know, the ones –

John: It makes me so happy.

Louis: [Laughs] But, you know, once a bear sentiment sets in, it seems to almost have its own momentum.

John: Yes.

Louis: You're the only who's saying "I think we're near the bottom." Most people are saying, "Sell in May and go away" –

John: Yes, I heard a couple of things from this session that just made me want to jump up and buy –

Louis: I understand the contrarian reason for that, but can you tell our audience a couple of reasons why you think we might be near the bottom or why you're ready to buy now and not waiting to see how this summer turns out?

John: Sure. Well, first of all, I'm not a trader. I mean, I'm long, and last summer I thought, "Gee, this is really a little spooky, we're not at a sustainable level," but there wasn't a whole lot I could do about it. And here we are and we have some cash, we have some inflows, so we are able to put money to work. And what is it that makes me think we're there? Sentiment numbers are extremely negative, historically, when they've gotten to these levels. By the way, I put out a quarterly newsletter now that has a lot of this data, which can be found on our website.

Louis: Go ahead and give us the website.

John: It's the Tocqueville Asset Management website, and it should be fairly easy to find. So sentiment is at levels that have been associated with big rallies. Traders' commitments, net longs, net spec longs are way, way down there. I look at that a lot just as a way to see where the market is positioned. The guys who can create some volatility are not there, and so if gold starts moving, they won't want to miss it, and so they'll come in. And then, we've looked at some technical stuff. I'm not a technician but most of what I see from a technical perspective is extremely constructive. So I put those things together.

Sentiment is rock bottom. COMEX traders' commitments are very, very constructive, and technical things that we look at are very constructive. So I would say all of those things, plus hearing these guys say that they are not going to step in – that's more anecdotal, but that to me is just very, very positive. So I – frankly I don't stake my reputation the way that Dennis Gartman does on making trading calls, but just as an experienced observer of this market for some number of years now, I think we're ready to make a move higher.

Louis: Okay, well, thank you very much. Word to the wise.

John: Thank you.

 

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Fri, 05/18/2012 - 18:02 | 2442070 Hangfire
Hangfire's picture

Send in the Barbarians!   

Fri, 05/18/2012 - 18:04 | 2442075 mayhem_korner
mayhem_korner's picture

 

 

John Hathaway's alias is Conan.

Fri, 05/18/2012 - 18:24 | 2442131 The Alarmist
The Alarmist's picture

Christ, time to rethink being long gold.

Fri, 05/18/2012 - 19:54 | 2442355 boogerbently
boogerbently's picture

Being, basically, a contrarian, I'd have to agree.

I switched my ENTIRE 401 to gold in late 2008, and KEPT it there since, thinking EVENTUALLY it will return to the status of "safe haven" as opposed to the "commodity" it has been traded like.

But EVERYONE is calling for gold to run again......scary!

I think the world, in an effort to show some fiscal responsibility, will return to some form of the "gold standard". Gold prices will be run up to give worthless fiat some measure of validity.

I'm holding.

Fri, 05/18/2012 - 20:07 | 2442399 disabledvet
Fri, 05/18/2012 - 21:46 | 2442597 markmotive
markmotive's picture

Hathaway said this on May 9th when gold was about $1640/oz.

 

 

Sat, 05/19/2012 - 09:07 | 2443045 Think for yourself
Think for yourself's picture

You know, I wish I could be gold bearish longterm. I wish I knew that my small investment in gold would do nothing for me but lose money.

It might have meant that something were fixed.

Unfortunately, as far as I can see, there is only room for it to appreciate. I damn every dollar of profit I make on it, knowing fully that the price is paid in corruption, suffering, inefficiency and wasted opportunities.

I love my gold and I hate it. As long as I am aware of this contradiction, I feel secure that I won't turn greedy like those I distance myself from. That means I can keep stacking!

Sun, 05/20/2012 - 09:52 | 2444944 ATM
ATM's picture

It is like paying for insurance.

Fri, 05/18/2012 - 21:43 | 2442583 CH1
CH1's picture

I switched my ENTIRE 401 to gold...

Umm, you do understand that the Feds have committees working on rolling all retirement accounts - forcibly - into Treasuries?

Fri, 05/18/2012 - 21:47 | 2442598 Deo vindice
Deo vindice's picture

If he switched to physical gold, that shouldn't matter. If it's in paper, that's a problem.

Sat, 05/19/2012 - 22:51 | 2444262 Ranger4564
Ranger4564's picture

It's a 401K so it's at a depository being monitored by a custodian... just like my 401K of gold and silver bullion.  You can't keep the gold / silver in your posession when it's a 401K.  It's paper right now, which is why on Monday I'm cashing out my 401K and taking delivery of the metal..

Sun, 05/20/2012 - 02:32 | 2444555 Deo vindice
Deo vindice's picture

Smart move. The best retirement fund anyone can have is one that is self-funded, self-directed and self-protected.

Fri, 05/18/2012 - 23:54 | 2442791 dbomb12
dbomb12's picture

First Deflation then Inflation, Phase One and Two

http://www.24hgold.com/english/contributor.aspx?article=3883785414G10020...

Sat, 05/19/2012 - 20:19 | 2443961 sessinpo
sessinpo's picture

I have been advocating that for a while. What this also means is a huge rally in the US dollar before it collapses. Why? Because legal contracts are denominated in US dollars - all those debts. Thus people will be scrambling to get whatever dollars they can to cover debts when the debt implosion occurs - and thus you have rally in dollars.

At that point you have several scenarios. Massive printing since there are not enough dollars to cover all the debts, and thus hyperinflation, possibly followed by total default. OR

Total default straight away.

When one looks at PMs, one should view them as the sturdy store of value. In other words, it is the fiat currencies that are actually fluxuating around the price of gold, etc. Gold hasn't gone up, it has been the dollar that has fallen and vice versa.

While I have a portion of my money in physical PM, it is only a portion.

Fri, 05/18/2012 - 18:03 | 2442071 johngaltfla
johngaltfla's picture

I'll take the other side of that. Short term, yes. End of 2012? No.

Long term? GOLD4K is coming and fast.

I love Hathaway's takes but too much talking of the book, play it, trade it, keep accumulating physical on the dips but there's going to be some serious deflationary pain in the next 3 months.

Fri, 05/18/2012 - 23:11 | 2442726 Levadiakos
Levadiakos's picture

Where's your godhead tmosely while you're losing all you own ass face?

Sat, 05/19/2012 - 09:09 | 2443049 Think for yourself
Think for yourself's picture

You're a very good contrarian indicator. Thank you.

Fri, 05/18/2012 - 18:06 | 2442072 BlandJoe24
BlandJoe24's picture

Thanks for posting this, Tyler.  I really would appreciate your explanation for the crazy pop in EURUSD right before the close today.  Seemed way out of left field and inconsistant with everything else that was going on.

Fri, 05/18/2012 - 18:25 | 2442133 The Alarmist
The Alarmist's picture

That's easy ... Europe is saved again.

Have a nice weekend.

Fri, 05/18/2012 - 21:08 | 2442526 buckethead
buckethead's picture

100 internets to you.

Fri, 05/18/2012 - 21:44 | 2442588 Freewheelin Franklin
Freewheelin Franklin's picture

Foot ---> Can ----> Road

 

Rinse and repeat

Fri, 05/18/2012 - 18:04 | 2442074 yabyum
yabyum's picture

Hope the miners are seeing bottom....been getting murdered as of late.

Fri, 05/18/2012 - 18:35 | 2442142 Zero Govt
Zero Govt's picture

miners have been murdered for months

the market (bankers?) shills have ramped Gold-bugs into the sector with promises of big undervaluation and the insiders have shorted the shares to squeeze the money out of the Gold bugs

Jim Sinclair is an ex-stockbroker, he'll tell you the game of ramping and squeezing (fleecing)

Fri, 05/18/2012 - 18:05 | 2442076 Gunga
Gunga's picture

It's hard to believe so many people still have confidence in banks and paper assets as tools for wealth preservation.

Fri, 05/18/2012 - 19:17 | 2442268 narnia
narnia's picture

Loss in confidence in banks, which will result in a major deflationary event, will probably happen before loss of confidence in currency, which may happen as a result of central bank intervention to deal with deflation. Translated: I see a different floor for precious metals.

Fri, 05/18/2012 - 18:05 | 2442078 DarkestPhoenix
DarkestPhoenix's picture

Could someone here explain away my ignorance?

I've kind of thought that once the Greek SHTF and the markets shit the bed that a lot of these banks are going to be forced to sell the only asset they have left to try to pay losses and survive, which would be short-term negative on gold price, but I don't see anyone talking about that.... 

Fri, 05/18/2012 - 18:07 | 2442086 Caviar Emptor
Caviar Emptor's picture

Nobody believes that the Fed and CBs aren't going to ride in on a white horse and ctrl-P. Banks will never fail again. That would be barbaric

Fri, 05/18/2012 - 20:45 | 2442477 Freebird
Freebird's picture

My gut says Hathaway's right - we have a triple bum.
No surprises.
Stay long, stay hard.
Golden bullet ( copyright )

Fri, 05/18/2012 - 23:13 | 2442731 Levadiakos
Levadiakos's picture

where's tmosley fuck face? he toldya ta say that, You tell that dick weasel Levadakos is here and waiting.

Fri, 05/18/2012 - 23:36 | 2442761 oddjob
oddjob's picture

11 weeks!!!!.....why would Mosely waste his time on a total greenhorn such as yourself?

Sat, 05/19/2012 - 23:37 | 2444368 Bay of Pigs
Bay of Pigs's picture

Hard to say which OLD troll this is. There are many to choose from.

Is that you William?

Fri, 05/18/2012 - 18:20 | 2442114 RockyRacoon
RockyRacoon's picture

At this point a bank's gold holdings would be very small fingers in a huge dike with an infinite number of holes.   Why give gold the spotlight if the commonly promulgated message is that the gold standard is a barbarous relic?  The sales, if they occur publicly, would only be done to hold down the price, not raise any appreciable capital.  The only object would be to run the fraidy-cats out of the gold trade.

Fri, 05/18/2012 - 19:59 | 2442371 boogerbently
boogerbently's picture

The " commonly promulgated message is that the gold standard is a barbarous relic" is "commonly promulgated" by those who DON'T own gold, and remember it at much lower price levels, preventing them from doing what they KNOW they need to do......buy gold !

 

Fri, 05/18/2012 - 19:20 | 2442147 BlandJoe24
BlandJoe24's picture

Thank you for bringing this up.  Below is a view on gold that is a little different that you'll usually find on ZH comments:

As a deflationary collapse such that we are in progresses, everyone (institutions and individuals) must hustle to pay to service debts or to purchase necessities, and liquidity, or cash becomes king.  Cash is king in a deflation-depression, even if that means the painful/desperate decision of having to liquidate physical gold or other hard assets (like one's house, cars, jewelry, etc.). 

As more and more institutions and individuals are forced into selling their hard assets just to try and stay above water, the market price of gold will sink considerably due to high supply (so many trying to sell) and low demand (few with the extra cash to buy).  

After deflation takes its course (which may be years) and hyperinflation sets in, currencies become worth less and less (becoming the proverbial toilet paper), and the price of hard assets, like gold rise considerably. 

Gold maintains value over time in any case.  But if one has to sell it/buy it to survive, then the market price question becomes very relevant. 

The goal should be to build up the resources/local community connections/cash reserves, etc. to meet one's needs and so one does not  need to sell gold or other hard assets to survive.   A lot of people have the idea that they want to have some gold so that they could sell it to buy necessities if times are desperate, but if times are truly desperate then it's likely many people will be in the same position, trying to sell their gold and other hard assets, and thus prices will be much lower.

 

The folks at TheAutomaticEarth have explored this thoroughly, so you may want to read what they have to say.  Start with "The Future of Physical Gold" Parts I-V series that started in May 2011.  It's pretty heady writing, but i find it a rewarding slog-through.  Here's a link to the first one: http://theautomaticearth.blogspot.com/2011/05/may-13-2011-future-of-phys... 

They have another article from January 2012, which also addresses the pro-gold bias that is often found in the pages of ZeroHedgehttp://theautomaticearth.blogspot.com/2012/01/january-31-2012-goal-seeke...

And I highly recommend their fantastic overview of their suggestions for * practically * preparing for a deflationary collapsehttp://theautomaticearth.org/Lifeboat/how-to-build-a-lifeboat.html

Fri, 05/18/2012 - 19:22 | 2442277 GeezerGeek
GeezerGeek's picture

Where is this deflation going to show up? Is the price of bread going to collapse? Peanut butter and jelly? Clothing? Property taxes? Health care?

We've seen asset deflation, but the cost of living has not stopped rising. The things I buy frequently mostly keep rising. The things I buy rarely - real estate, computers, electronics - get cheaper.

I also seriously doubt that all that many people have PMs that will hit the market in bad times, unless you include jewelry, silverware and such.

Fri, 05/18/2012 - 20:04 | 2442338 BlandJoe24
BlandJoe24's picture

We might be referring to different definitions of "deflation".  Deflation is the contraction/collapse of the pretend money supply (which is currently enormous) into the non hypothicated or rehypothecated actual marked-to market real money supply (which is a tiny fraction). 

In other words, inflation is the build up of the ponzi house of cards (via exponential credit seemingly creating more and more money), and deflation is the collapse of the ponzi house of cards.  Because those cards aren't real money or real assets.  Because it's show me that actual assets, the actual collateral, the actual real marked-to-market value under all those cards, and low and behold, it's a tiny, tiny fraction of what's been claimed to have been there. 

And then the illusions of magic credit expansion are gone, and most everyone realizes they have much, much less actual real, spendable money than they assumed they had and cannot borrow to get more.  The pool of actual available money has shrunk tremendously.  That is deflation. 

Then most everyone must use a larger percentage of their resources for necessities.  And then, just as you said, sellers of basic necessities (like bread and pb&J) have greater leverage to name their price.   NON-necessities become priced much much lower, as there are fewer and fewer buyers who have discretionary spending available.  

People will sell whatever they have to to try and meet basic needs.  If one's family needs to eat and one has gold, or jewerly, or whatever, they that's what one will trade away.  People who have lived in war zones and other disaster areas or areas of pronounced poverty, or the Great Depression report this all the time. 

Peace.

Fri, 05/18/2012 - 20:18 | 2442424 Clint Liquor
Clint Liquor's picture

Ask anyone who lived through the Depression of the Weimar Republic if cash was king. They were burning it to stay warm.

Fri, 05/18/2012 - 20:39 | 2442453 BlandJoe24
BlandJoe24's picture

That's in the hyperinflationary phase (where cash is toilet paper), which we're not in yet.  We're in the relative beginnings of the deflationary phase, where cash becomes increasingly valuable.  HI is later.  See my post above.

Sat, 05/19/2012 - 19:21 | 2443903 Clint Liquor
Clint Liquor's picture

I read your post, the problem is..........you are wrong. There not be massive deflation until there is not any paper and ink left on the planet. The Bernank said so and I believe him.

Fri, 05/18/2012 - 21:36 | 2442476 BlandJoe24
BlandJoe24's picture

In other words: look around at the people and businesses you know/see (at least those in the 99%) in everyday life. (I'm assuming you're in the US). 

Do people have wheelbarrows and whellbarrows of dollars that can't buy anything (hyperinflation, like Weimar or Zimbabwe, very challenging to experience)? 

Or is each and every dollar becoming harder and harder to come by and more and more precious by the day (deflation, like the 1930's Great Depression, very challenging to experience)?

 

Sat, 05/19/2012 - 05:52 | 2442937 hamurobby
hamurobby's picture

The velocity of money is slowing down in the economy. There is not enough currency in circulation (due to the contraction of credit) to pay debts which are already owed. That is deflationary in real terms. This will continue until Ben fires up the choppers in some form.

I had a 3% across the board increase in prices from my supplier(s) at the begining of the year. My accounts receivable are geting slower and slower to pay, or worse have quit buying. Most of my customers are deleveraging, They are not happy people.

Fri, 05/18/2012 - 22:04 | 2442637 cynicalskeptic
cynicalskeptic's picture

Read elsewhere that we are already seeing deflation in  the price of THINGS WE DO NOT 'NEED' (things that are not absoluteely necessary to own- think houses, cars and other expensive items) and inflation  in the price of THINGS WE NEED ( things you absloutely NEED to live - food, fuel and such).

This makes sense to me - and presages severe inflation and currency devaluation later.  People are NOT spending money they do not have on things they do not need - while they are spending more and more on food and basic necessities.   If you look at current conditions producing both deflation in some sectors and inflation in other, the seeming irrationality of it all does make sense.   

I suspect that the current situation is being used to suction up gold and silver from the masses who are already stretched thin - all those 'We Buy Gold' placws have done good business.  BUT as one Pawn Shop chain noted - gold intake (and the high profits that brings) is slowing - people who NEED to raise cash have sold their gold and are now pawning and selling 'stuff'.   If gold and silver are real stores of value - most people won't have any left if/when things get real bad.    The US hasn't had any real bad times in societal memory - I'm talking wartime desolation bad, money worth nothing, necessities hard to find bad.  My father was on occupation duty in Germany post WWII - and even 5 years after war's end the place was a mess with cigarettes and alcohol being used as money.   Talk to anyone who was in Yugoslavia during the breakup - or Russia during their collapse... Americans have no idea of how quickly the veneer of civilization and all we take for granted can evaporate.

Fri, 05/18/2012 - 20:50 | 2442486 FeralSerf
FeralSerf's picture

From your lifeboat link:  "1) The reason that getting rid of debt is priority #1 is that during deflation, real interest rates will be punishingly high even if nominal rates are low."

Can you tell us how the US Treasury can, in any way possible, pay the interest on the national debt if real interest rates go through the roof?  It's fucking impossible.  And if it's impossible, it won't happen.

The Treasury owes so much now that it cannot allow interest rates to rise.   If fact, it appears that the Fed is trying, with some success, to decrease real rates right now.

Fri, 05/18/2012 - 21:35 | 2442556 BlandJoe24
BlandJoe24's picture

they are decreasing the nominal rates (the actual number is decreasing), but even these low (nominal) numbers will - in the real economy of value, when each dollar is more precious - be/feel very high, so the "real" or "effective" rate - will be much higher.  

(in normal times) A two dollar (nominal=2) loaf of bread may be cheap when you've got lots of dollars (nominal higher number, real value low)

(in a deflationary depression) A fifty cent (nominal= .5) loaf of bread will be very expensive when you have hardly any dollars. (nominal number lower, real value high)

Regarding importance of decreasing debt going into a deflationary period:  Owing $10,000 may seem "no big deal" and managable if you've got money or can borrow more, or assets are worth a lot and you can sell to cover.  Owing $10,000 may be a huge and limiting burden if you don't have cash, can't borrow any, and asset prices have plunged, so what you owned that used to be valuable isn't much anymore.

I gotta run, but will try and adress the Fed part of your question tomorrow.

Sat, 05/19/2012 - 13:12 | 2443361 DosZap
DosZap's picture

FeralSerf

 during deflation, real interest rates will be punishingly high even if nominal rates are low."(what you PAY)

We are already in Deflation, and interest rates ON CONSUMER necessities are thru the roof.

( Been to you local grocery store lately, try taking the prices your paying for food,and all BASIC LIFE needs and start from 3yrs back till now( as I have).

REAL rates on what it takes to live are over 11%+, as an average(food way more than11% in 3yrs).Try buying a chicken, whole($5.00/$6.00 now),2-3yrs ago, they were under $3.00 easily.

One apple a $1.00........................used to sell by the weight, now each.

The Fed has their rates set  at what?, a 1/4 basis point?.

There is a difference in the Gov rates, your rates, that you are paying out the ass for NOW.

And its going to get  much worse.

FOR US, not them.

This is the POINT he has made.

Fri, 05/18/2012 - 22:54 | 2442711 jimmyjames
jimmyjames's picture

After deflation takes its course (which may be years) and hyperinflation sets in, currencies become worth less and less (becoming the proverbial toilet paper), and the price of hard assets, like gold rise considerable

**************

The AE are deflationists-

I am a deflationist and they are wrong about gold in deflation and I've challenged Ilargi/Stoneleigh and Ashvand to debate me on this and they will not-

I can prove to them and you--that you're all wrong-

Fri, 05/18/2012 - 23:55 | 2442793 dbomb12
dbomb12's picture

First Deflation then Inflation, Phase One and Two

http://www.24hgold.com/english/contributor.aspx?article=3883785414G10020...

Sat, 05/19/2012 - 21:14 | 2444011 CPL
CPL's picture

If looking at it from 2006, it's nearly an x12 for even the worst stock picker in the architects of the grand plan.

 

Got gold?

Sat, 05/19/2012 - 02:00 | 2442851 SHRAGS
SHRAGS's picture

Martin Armstrong makes the point that inflation is like ice cream - it comes in a thousand different flavours, see:

www.martinarmstrong.org/files/The-Money-5-4-10.pdf


 

Sat, 05/19/2012 - 13:05 | 2443379 dbomb12
dbomb12's picture

That may be true, but hyperinflation only comes in one and that is where the govt is heading

Sat, 05/19/2012 - 13:13 | 2443393 DosZap
DosZap's picture

That may be true, but hyperinflation only comes in one and that is where the govt is heading

I agree 100%......................

Sat, 05/19/2012 - 05:13 | 2442927 Elmer Fudd
Elmer Fudd's picture

Believing that tripe at AE can make you stupid and dependant on govt entitlements.  See first you need cash to pay your bills so you sell off all your hard assets, then later you use that same cash to pay much much more for the hard asset you sold off when you needed the cash back when you didnt have it but now you must have a govt job whose paycheck is guaranteed to a real inflation index or something. 

Kind of like the inflation bashing that they like to do over at AE, where is that great deflation?  Its certainly not in the price of my diesel.

 

Sat, 05/19/2012 - 18:52 | 2443810 BlandJoe24
BlandJoe24's picture

The definition of deflation is not whether nominal prices rise or fall.  Deflation is the contraction of the real (not ponzi) money supply.  As the ponzi (and all the layers and layers of fake, only- electronic, borrowed on borrowed on borrowed) "money" collapses, and credit contraction cuts off all borrowing, all that's left is real money.  And there's much much much less of that to go around than all the fake only-on-the-books money. 

It's more acurate to look at "affordability" instead of the (nomimal) price.  If you're part of the 99%, deisel is less affordable now, becuase there is less cash in people's and businesses' hands to pay for it.  That is a deflationary sign.  If people and businesses had an overabundance of cash which increased in quantity (decreased in value) faster than the price of diesel, that would be a hyperinflationary sign.  But if you look around, nobody is taking wheelbarros of cash to the gas station and being turned away.  Another way of saying it, $100,000 can buy you a lot more property/businesses/labor than it could four years ago.   If deflation continues, $100,000 will buy many times more than it can now. Except perhaps essentials, which will be held hostage, since everyone needs food, water, etc.

There are some key things missing in your first paragraph describing the sequence AE recommends over the next years.  One main thing you left out is the cash you have from selling your NON essentials and avoiding debt payments can buy you much much more once deflation has fully set in.  The $2,000 rare guitar you sold before full deflation will buy you five of those guitars once deflation sets in becuase more people will be trying to sell their stuff just to get cash to make ends meet.  AKA during the Great Depression $10,000 bought you a much much bigger farm than it could right before the Depression. 

Yes, Wiemar and Zimbabwe hyperinflationary depressions happened.  But so did the deflationary Great Depression of the 1930's.  Is it not possible that something like it is happening again?

 

 

Fri, 05/18/2012 - 18:05 | 2442079 FlyingDutchman
FlyingDutchman's picture

Yesterday Marc Faber called the bottom for gold miners and gold.

Fri, 05/18/2012 - 18:31 | 2442149 Zero Govt
Zero Govt's picture

someone said that last week!

gotta link?

Fri, 05/18/2012 - 20:01 | 2442379 boogerbently
boogerbently's picture

Someone calls "THIS" the top or bottom of gold EVERYDAY !

Fri, 05/18/2012 - 18:10 | 2442092 Caviar Emptor
Fri, 05/18/2012 - 18:16 | 2442105 swissaustrian
swissaustrian's picture

This interview is ten days old, so he didn't call the bottom perfectly. However, I don't disagree with his general take. There's more upside than downside risk.

During the last 2 1/2 days gold and silver bounced up from their long-term supports at 1526 / 26.6. They basicly retested their December 2011 lows with the precision of an assassin (thanks to algorithmic trading) on wednesday. Then the FED released their FOMC minutes and the QE rumor trading began. PMs were oversold anyway. A short squeeze started and took us to intraday highs of 1598 / 29.06 today. The miners experienced an even bigger short squeeze, closed at session lows, though. Since about 11 am ET today, pm markets have recoupled with other asset classes and some have been taking profits on their pm positions. The short squeeze could already be over. The question now is: what's next?
The dollar had a massive rally and might sell off for a few days. After that the dollar strength might continue for a while, putting pressure on pms in dollar terms. The other side of the coin is that speculators might return to pm markets, driving pms up on the renewed QE rumors. Phyical demand is also very strong, as demonstrated by the return of backwardation. This is the big joker and and the impact of that on spot prices is very difficult to quantify. My guess is that pms will stay relatively flat, maybe appreciate a bit (with significant volatility) in USD terms until mid-june (FOMC meeting), but will thereby outperform stocks and other commodities as the USD continues to appreciate against other fiats.
If the FOMC does enact some QE in june (or gives a clear hint), pms will rally and the USD will weaken somewhat, if not we might get another selloff.
Technically, it would be important to reach and hold 1600 / 30 in the medium term (2 weeks), ideally even reach 1630 / 31.5.

Fri, 05/18/2012 - 18:31 | 2442150 hedgehog9999
hedgehog9999's picture

You are absolutely right!!! He'd got it generally , the bottom was three days ago 10% below his call......(for the miiners).....

Sat, 05/19/2012 - 08:02 | 2443004 Ted Baker
Ted Baker's picture

IT IS OFFICIAL US ECONOMY TO ENTER A DOUBLE DIP RECESSION ON THE 15TH JUNE 2012 AND THE ASSET CLASS THAT WILL BENEFIT THE MOST FROM THIS IS GOLD PERIOD.

Fri, 05/18/2012 - 18:20 | 2442121 Chartist
Chartist's picture

With the Euro probably going to lose another 25%, I think gold is vulnerable....I like gold at $1300.

Fri, 05/18/2012 - 18:29 | 2442145 I am a Man I am...
I am a Man I am Forty's picture

As long as people own it, and it's traded, nobody knows where the bottom is, but thanks for guessing.

Fri, 05/18/2012 - 19:40 | 2442280 peekcrackers
peekcrackers's picture

bottom is when JPM cant manipulate the  silver price anymore !

 

Fri, 05/18/2012 - 23:16 | 2442736 Levadiakos
Levadiakos's picture

Been doing this long? LOL

Sat, 05/19/2012 - 09:57 | 2443089 oddjob
oddjob's picture

wanker.

Fri, 05/18/2012 - 18:34 | 2442157 HungrySeagull
HungrySeagull's picture

I called bottom for silver a few days ago.

I aint calling bottom for gold yet. Too damn many gold dealers sprouting like weeds.

Fri, 05/18/2012 - 22:57 | 2442714 Libertarian777
Libertarian777's picture

not sure why people are saying gold is in a bubble because there are many gold dealers.

I haven't seen a single sign at any of these dealers that says "gold FOR SALE"... they ALL say "WE BUY GOLD".

I even went to one of these places that hold "we buy gold and silver" at a hotel every month, and asked if they sold any gold/silver. The guy laughed at me and said... no dude we only buy the stuff.

Sat, 05/19/2012 - 16:36 | 2443701 BooMushroom
BooMushroom's picture

That's because you aren't reading the right words! The sign doesn't say "gold for sale," it says "jeweler."

Fri, 05/18/2012 - 18:35 | 2442161 americanspirit
americanspirit's picture

For an excellent data-based discussion of these issues you may want to check out what Mr. J. S. Kim has written

http://www.theundergroundinvestor.com/2012/05/fear-panic-are-the-banking-cartels-weapons-v-the-gold-silver-bull-patience-and-logic-are-the-best-defense/

 

Fri, 05/18/2012 - 18:44 | 2442182 dragoneyes74
dragoneyes74's picture

Not the bottom for gold or silver.  Oversold bounce.  

The Dow should bottom at the 200 day next week and form a base, then retrace 50%-60% over the next month.

No QE3 in June crushes everything again.

QE3 comes in July or more likely August.  

 

 

Fri, 05/18/2012 - 21:50 | 2442605 Deo vindice
Deo vindice's picture

@dragoneyes - I ... cautiously ... tend to agree. I think there may be a bit more down, but not a lot.

Fri, 05/18/2012 - 19:21 | 2442278 dolph9
dolph9's picture

I don't buy mutual funds, but if I did, the Tocqueville Gold Fund is the only one I would ever buy.

Sun, 05/20/2012 - 01:45 | 2444510 Ranger4564
Ranger4564's picture

USAGX is the one i own.  been hurting for the past 6 months.

Fri, 05/18/2012 - 19:54 | 2442279 RiverRoad
RiverRoad's picture

At or near a bottom for sure.  Central bankers are using the Euro mess to drive the price down now so they can load up for the Crash coming in '13, that lucky year when the check comes due for virtually all past administrations, of the past forty years, fun and games.

Fri, 05/18/2012 - 19:46 | 2442334 RoadKill
RoadKill's picture

You are all idiots.

Of this goes into.default and deflation mode PMS ARE FUCKED. Get your shit straight only an all out defense of the Euro via printing is bullish Gold and Silver. And sticks and plat will go up more!!!!!!!

Dumb asses! I make more on my TZA everyday then you...

Fri, 05/18/2012 - 20:57 | 2442498 FeralSerf
FeralSerf's picture

Gold is a cash equivalent.  That's the reason central banks use gold as reserves.  They don't use silver or peso or ammo.  They use gold.  Central banks have always used gold as reserves.   They also still use US dollars since the 1920s.  I  suspect that may change.

Fri, 05/18/2012 - 22:04 | 2442638 CURWAR2012
CURWAR2012's picture

The math can't lie. You are speaking to the value of the dollar, and the dollar is fucked. The Chinese are blackmailing us and getting into the US banking business so that they can collect interest another way other than treasuries. The US dollar is so worthless but it is hard to a contrarian at this point.

Fri, 05/18/2012 - 22:01 | 2442631 CURWAR2012
CURWAR2012's picture

Your brain went dead when you called yourself roadkill. The metals have not even come close to pricing in the deflation-inflation I expect. There will be a time to sell and there is certainly "play" and profit in the paper markets. However, physical will be necessary. The down side in stocks and bonds are so high, PMS are not fucked by any means.

 

Sat, 05/19/2012 - 00:12 | 2442804 Bansters-in-my-...
Bansters-in-my- feces's picture

Just a suggestion,but why don't you fuck off and die.

Sat, 05/19/2012 - 06:09 | 2442940 Nachdenken
Nachdenken's picture

right into a gold coffin. Sounds good to me.

Fri, 05/18/2012 - 20:19 | 2442428 disabledvet
disabledvet's picture

Would you all like another Facebook IPO with soaring gold price? How mean..."does anyone have any money anymore"? I say "cash is all gone...cash is therefore King." And here come "Queen debt" to join her liege...

Fri, 05/18/2012 - 21:29 | 2442558 Alexandros
Alexandros's picture

The end of the world is near.
The ten plagues of Pharaoh “have been brought upon” the USA.

http://eamb-ydrohoos.blogspot.com/2010/02/ten-plagues-of-pharaoh.html

.

It is the absolute tragedy for the USA. The former illegal immigrants had become the masters of their land; the ultimate masters. The people who wanted to collaborate with the Jews to become “Pharaohs” had the same bad luck. The greedy “locust” of the Asiatic desert swapped the USA and left absolutely nothing standing. The formerly rich people of the New World have been drained of their money to such a degree that they have passed the point of poverty and are headed towards starvation. The Americans now experience desperation and trust in God. Poor and hungry people gather around the fire to warm and cast their eyes up to heaven as their last hope. These are the former planet leaders.

Authored by PANAGIOTIS TRAIANOU

Fri, 05/18/2012 - 22:21 | 2442669 BlackholeDivestment
BlackholeDivestment's picture

BTFID 

Fri, 05/18/2012 - 23:08 | 2442723 Levadiakos
Levadiakos's picture

I would wipe my ass with gold but it's not absorbent and doesn't flush well

Sat, 05/19/2012 - 00:13 | 2442805 ljag
ljag's picture

And if it was absorbent and flushed well, would you hit the handle? If so, you are an idiot who likes to shout

Sat, 05/19/2012 - 01:58 | 2442856 Sandoz
Sandoz's picture

It takes years, not weeks, to settle into a bottoming pattern, and when it does few will even care to notice. When gold bottoms you can rest assurd that nobody here will be talking about it because at that point gold's heyday will likely be a very distant memory. 

Sat, 05/19/2012 - 04:33 | 2442915 prole
prole's picture

I wonder if there were idiots like you a hundred years ago?
I wonder if there were jackasses like your new bf Leva 1000 years ago calling for an end to gold?

Gold's heyday, is every day.

Sat, 05/19/2012 - 04:26 | 2442913 TWSceptic
TWSceptic's picture

He did not call the dip exactly and my guess is we have not seen the bottom either

Sat, 05/19/2012 - 05:16 | 2442928 Elmer Fudd
Elmer Fudd's picture

Please no bottom yet, I am still working...

Sat, 05/19/2012 - 06:06 | 2442939 Nachdenken
Nachdenken's picture

Steady reference JSMineSet.  Jim Sinclair has called and held gold targets since 2002.  If you have a better serious proven  forecast let us know.

Sat, 05/19/2012 - 08:31 | 2443020 orangegeek
orangegeek's picture

In the world of deflation where access to credit and desire for credit decline and where stock and commodity markets decline too, it's hard to fathom how gold, and perhaps silver, will be the lone investment elements that are appreciated.

 

The elliott wave count for gold remains bearish, in spite of the last few days.

 

http://bullandbearmash.com/index/gold/monthly/

Sat, 05/19/2012 - 10:24 | 2443111 Plata is money
Plata is money's picture

We are definitely witnessing both the deflation or real estate values and wage deflation and have been for several years now. There is lots and lots of over-leveraged funny money created by the big players that is beginning to implode. There is no money to back or counter this. I suspect that all that has been achieved by all the printing done by the Fed these past few years is to keep this massive deflation wave at bay in some areas...like commodities and food prices.

Sat, 05/19/2012 - 15:32 | 2443591 Elmer Fudd
Elmer Fudd's picture

You could call it deflation, or you could call it mean reversion. If you got suckered by the bankster's decades-long inflation ponzi, sorry.  But debt has never been money, its slavery.

Sat, 05/19/2012 - 12:58 | 2443367 Cycle
Cycle's picture

I'll be interested to follow this prediction because my cycle model for gold shows a contrary view of prices for the next couple of years. http://econocasts.blogspot.com/

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