On The Price Of Gold

Tyler Durden's picture

On a day where gold surged generously on the same thesis with which it managed a five-fold increase in the last decade or so - that of paper money debasement - we thought it appropriate to get some context as to the yellow metal's history, current implications, and potential future. In a mere 111 seconds, we are treated to a history of sound money (from Croesus to The Bank of England to The Great Depression), the growing division between some of the world's most-famous smartest investors with regards to Gold's price (Buffett vs Paulson/Bass), Governments and Central Banks Spending and Printing 'experiments', and a discussion of the endgame of "Where Will All The Money Go?" - all with the help of a magical cartoon hand. As it seems the profligate control of the electronic press is now all that matters to an increasingly correlated and blind-leading-the-ignorant markets, perhaps it pays to consider how markets have changed reactions to the threat promise of the extreme easing upon which the equity market's heart beats so strongly. Once anxious of bond vigilantes (taken care of via LTRO reacharounds and direct Fed monetization), FX markets remain intervention-prone (just ask Azumi how many times he looks at JGBs or JPY risk-reversals every day), and finally to the stock (and vol) markets as 'Bernanke's trailing-strike Put' ensures 'the wealth effect' buoys us all the chosen few to greater and greater spending disconnects between value and price and potentially larger and larger mal-allocations of capital. With Corporate cash stockpiles so huge - the "Where Is John Galt?" line can't help but appear in many minds as reinvestment in a dilapidated, aging, increasingly less cash flow generating asset base remains to be seen.

UPDATE: Added link to Matthew Bishop's ebook 'In Gold We Trust'

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Triple A's picture

it's so perrrty, now if it wasn't so manipulated.

ClipperBASIC's picture

Agreed! It is a very attractive metal.  As to the manipulation; pure politics.

Pinto Currency's picture


Clever video but disinforms:

1) In 1913 the Fed started with their "elastic money", financed WWI and blew a bubble in the 20s that collapsed the economy in 1929.

2) The most recent bubble came when rigging of interest rates and gold accelerated in 1993 and juicing of the money supply accelerated in 1995 followed by the NASDAQ bubble, then the 2000s housing bubble and the derivatives bubble, and then the recent horrific government deficits of Obama Administration all because of the US economy collapsing starting in 2007/2008. 

At the root of these two bubbles and crashes of the US economy is the Federal Reserve and the removal of strict gold money both starting in 1913.

Michael's picture

If I were typical people, I would be stuffing my mattress with as many $20ies as I could get my hands on.

StychoKiller's picture

Because the Ignorati believe that "Cash4Gold.com" is a good deal -- need I explain further?

Michael's picture

It's only a temporary fix in the beginning of the collapse, might help you make it a little further.

My next prediction is $20ies will become in short supply.

LuKOsro's picture

Why, will toilet paper be in short supply ?

Michael's picture

I want Dr Ron to be my next President.

Have you seen him in tonight's appearance on Piers Morgan? It was epic and you can see it on Youtube; 





economics9698's picture

The motivation for going off gold and onto fiat is simple.  Governments can finance whatever project s they want, usually war machines.  Corporations can borrow and pay back in “soft” chap devalued money.  Corporations can raise prices faster than wages increase.

Inflation cause by fiat is nothing more than the elites ripping off the rest of society.

Watauga's picture

9698--You are right that fiat allows govt to finance anything it wants, but war is a drop in the bucket when compared with the ever-expanding welfare state that secures power more effectively than any war ever did.  Those in power spend fiat to secure their power, period.  And the best way to do that is to buy off the voters with handouts, to buy off big money with even bigger handouts, and to get in bed with the corporate money paid to the political whores who run the carnival.

GetZeeGold's picture



Long tungsten and gold spray paint.


Pretend and extend to infinity.


Pinto Currency's picture


Fiat currency also provides a tool to keep society in repeated cycles of chaos as the medium of exchange is disrupted and savings are wiped out.

You don't want the sheep lining up on the gridiron with cigars hanging out of their mouths with an evil look in their eyes.

SubjectivObject's picture

I agree, because for a useful, transient duration, paper money may be more valuable than, metered, electronic money; more of that old wives tale about bank asses maturing, and such.  Certainly, there will be a time to unload the Jacksons (may bliss be upon his soul) hanoverfist (cue the music .... STEARRRRRRNS ....).

MiddletonRobert3's picture

my roomate's sister makes $85 hourly on the computer. She has been fired from work for 6 months but last month her paycheck was $16158 just working on the computer for a few hours. Read more here .....  http://lazyCash9.com

ACP's picture

He forgot to say, "And now for something completely different!"

vast-dom's picture

yeah and Asia is fucking soaring on Bernank hot hopium bs! i'd laugh if it weren't so deadly serious (and this after article on 40% yen correction as noted by some sinkhole china report).....

Al Gorerhythm's picture

it's so perrrty, now if it wasn't so manipulated.

Gold bides its time.

Chaffinch's picture

Off topic (but only slightly!)
Yesterday BBC Radio 4 broadcast an excellent programme called "Analysis" in which they explore the conjuring trick by which the Bank of England calls money into existence by the 'magic' of QE - comparisons to Weimar Republic etc. - AT LAST the mainstream media are starting to wake up!

I hope this link works - there is about a minute of junk at the start - sorry!


Tyler you might want to flag this up - there is a great bit where someone says the money is created by elves (well, it might as well be...!)

_underscore's picture

I can't tihnk who would want to down arrow your post here (perhaps one of those with the MTV/goldfish level of focus - hey, it was nearly 30 mins long after all..) - anyway, yes, a good (for MSM anyway) walk-through broadcast. What strikes me, as always, is the almost naieve and/or incredulous tone of the (obviously) intelligent journalist making the piece - almost idiot/savant level in fact. It reminds me of the Cash4gold sellers & their mid-set: do they not think there's a reason all those shops want their gold for kock-down prices? Don't they ever just wonder (even slightly) why some fool is willing to pay 'sky high prices!!!' for their gold. Well, no it seems not - not with them, nor most of their brighter compatriots either.

 In my daily life the same lack of connection seems to be made with the people I meet (and even I have some fiarly intelligent friends/acquaintances etc.) & talk to. People invariably just see the 'oh more rising prices..oh heck.. terribly expensive these days..' side & not the more fundamental 'why is money debasing?'  aspect. Apart from genuine shortage, of either/both raw materlal & productive output, there's no real reason for rising prices - other than a transfer of wealth from The primary productive units (the common man/woman) to the parasite manipulators & dealers in fiat currency -William Cobbett's 'stock jobbers & tax eaters' of the Great Wen.

  To borrow a phrase from Labour's Peter Mandelson (when referring to big finance/business & obscene profit making from money manipulation) - I'm intensely relaxed about the value & (current fiat) price of gold & know my exposure to the fiat manipulators & their machinations are now very limited.


Chaffinch's picture

Thanks for the support Underscore! I too was wondering who would junk me for putting this link on ZH - maybe a troll trying to undermine...

Glad you enjoyed it too - I agree with your comments about the intelligent reporter 'dumbing down' - (all that silliness about getting 5 ten pound notes then queuing to change them for a fifty) - but maybe her naive style enabled her to get away with some confrontational stuff (e.g. Confronting the BoE governor about the 'lie' of promising to pay the bearer on the face of the notes - and flagging up the BoE's failure to uphold the value of the note - since QE is deliberately doing the opposite.)

I loved the comparison to Peter Pan - clap your hands if you believe in fairies - paper money works so long as we all believe in it but once we all stop...?

Grimbert's picture

I heard this last night too, expecting the usual drivel/lies about how the BoE keeps inflation down etc. but it was quite excellent.

It didn't tell me much I didn't already know from being on this site for the last 2 years, but I was amazed it was broadcast, being so honest about the nature of QE and the fundamental value of gold. 

Chaffinch's picture

Yes Grimbert - it was remarkably honest - linking all the right stuff together - QE / inflation / faith in fiat currency / gold / the clearly political role of the BoE - obviously a little bit of MSM bias (e.g. slagged off gold for being so volatile without questioning why that might be happening!) but nothing like as bad as normal.

I was also slightly annoyed at the suggestion that if we went back to a gold standard we would all have to carry really heavy bags of metal around with us ; then at the gold machine she was disappointed at how small the one gram piece of gold looked - and that was what she had been thinking of buying with her £50 note!!

Thomas Jefferson's picture

Its mobile and can easily be lost if need be.

mess nonster's picture

Losing one's gold would have to be the smartest, er, most depressing thing that could ever happen to someone. I HOPE I never lose my gold!

Badabing's picture

My physical gold just vaporized!!!!!!

Catfish's picture

Really stupid of me to take all my gold with me white-water rafting and damn if the thing didn't tip over!

What a loss....

Deo vindice's picture

I am convinced that gold/silver bugs are some of the dumbest folk around.

Almost everyone I talk to took their valuable purchases on fishing trips and against all odds, 100% of them had some sort of boating accident or other mishap.

One would think by now that they would have learned the lesson.

If you want to have a safe and successful fishing trip, leave your gold/silver at home.

Deo vindice's picture

Red arrow?

Anyone who doesn't understand sarcasm without it being labelled 'sarc' shouldn't be allowed to click a mouse without supervision.

Acet's picture

Have you considered that those giving you the red arrows are being sarcastic too ....

GetZeeGold's picture



Damn your sarcasm to hell and beyond.


You do know I'm just kidding about that......right?


tabasco71's picture

Wow, I never thought about this.  Of course the water stains the gold and makes it look ugly - yuck!

I have a protest march coming up next month.  We will not be near water.  Can I take my gold along?

Thanks for your help.

monopoly's picture

That was well done. Simple and to the point. Good for the sheeples that think gold is a barbaric relic. Might enlighten a few.

experimentals's picture

weak! for zerohedge standards

Dan The Man's picture

...strongly agree.  calling this an overview would be an insult to overviews.

Al Gorerhythm's picture

Here's abetter explanation of money.


In essence, gold measures the value of what people use as money. Gold can be money and when it is used as such it values items but when its not, it values what is used as money. It is one of the numeraires that individuals use to measure value. Right now I use gold to measure paper money because I judge that the political creation of money outmeasures the capicity of workers to create enough wealth that it measures. Its being over-produced in comparison to goods.

I hold the bulk of my savings in precious metals. The politicians can't create them for expiditious purposes (to conveniently hide their spending as they can by printing) and as long as there is a independent Fed, free to create credit, I'll continue to use it. One day there will come a time to use another measure but for me, not right now.

DavidPierre's picture



The world is a complicated and dangerous place and it seems that more than precious metals will be needed to survive intact in the years ahead. Mental preparedness will also be needed.

1.  In the event of a world wide inflationary or deflationary collapse, this event could be used as the reason for the creation of a new world wide currency, partially ... 40% ?... based on gold.

2.  To insure that there is sufficient gold, its value have to exceed $10,000. Government will want gradually higher prices from here on.

3.  This new gold backed currency would be only used as payment between countries.

4.  Personal gold ownership would be banned.

5.  Purchase and sale of gold between individuals would be banned, in all countries. There would be a problem in countries like India.

6.  Those who do not sell their gold to the government during the initial call-in, would later have to use criminal channels to sell their gold for fiat currencies that will still be used, along with ration cards, for daily transactions.  In war time Germany, without a ration card or a home garden, a person could have starved, even with a pocket full of money.

7.  The sale of call-in gold to the government will have gold owners with their backs to the wall, with confiscation windfall taxes imposed ... 80-90%?... and with the final settlement made in a fiat currency. The former gold owner would be lucky if he is paid in cash.  If he is unlucky he will be paid in treasury bonds that will mature in a few years.  By then, with hyper inflation a good possibility, the former gold owner could be destitute.

8.  Under the conditions given above, silver will become the precious metal of choice. Because silver is indispensable in industry, silver could not be confiscated in the same way as gold.

9.  Under the chaotic conditions of an inflationary collapse, a new currency ... black market curency... will emerge, most probably based on U.S. 90% constitutional currency... junk silver coins.  This is another reason why it may be that silver will be the precious metal of choice, when push-comes-to-shove.

10.  There will be a transitional period when a person who has all his assets in the two precious metals will try to convert their value to other hard assets such as arable land, and rental property.

11.  An Orwell type of society. With the loss of monetary freedom, personal freedom is also lost.

12.  This will not be the end of the world, but many will think it is, especially those who are caught financially unprepared. Believe in mental preparedness.  Looking at the worst possible scenario, and accepting its possibility, is one of the first steps an individual should make in preparing for a world wide financial disaster. The events of the coming years have the potential for shaking western society, whose values and institutions are now world wide, to its roots.

13.  Good luck! We will need all we can muster.


Ima anal sphincter's picture

All good points, DP.

My solution......#1 Rid ourselves of the bankers and puppets. #2 Uh.....#1 takes care of it all.

GetZeeGold's picture



Because life isn't complicated enough......that's what platinum is for.


CaptainTripps's picture

they try banning gold again its game over IMO

they will be admitting it really IS all a scam...yet again like FDR did



oldman's picture

David Pierre,

Dear sir,

The world is neither complicated or dangerous to the species at the top of the food chain provided that species does not destroy the bottom of the food chain by depletion of its balance and/or contamination of said chain.

The world is complicated and dangerous only in the human mind; it is a trick each of us plays on ourself. It is how I made a living selling socks and bombs without any interest in money, just trying to put food on the table.

Not complicated at all in the US where there are only two opposing reasons for taking action: greed and fear. The story you tell, my clients used to tell me, and I listened so as to ascertain what they really wanted to act on; greed or fear. !984 and Brave New World and Ayn Rand were their favorite reads to such an extent that these were probably the only books they had ever read. Not complicated, but more confused from reading so much of greed and fear

It certainly was not dangerous for any of these people---they lived in untouchable areas where the police escorted any 'suspicious types' of various colors and cultures out of the area in the backseat of the patrol car; all of this in Los Angeles, of all places, right? How dangerous was that?

Sorry to be so boorish, but ---the world a complicated and dangerous place? I don't think so, it seems a wonderful and generous place to me when I just live my life naturally without letting my mind run amok on constant doses of greed and fear.

Have a pleasant evening, sir                      om

tarsubil's picture

I totally agree. All you have to do is jump through the hoops, which may or may not be set on fire, and love your privileges and you will get your daily ration. Can life get any better? I mean, it has lasted, like, 60 years or something. That is a really really long time!

Renfield's picture

M'sieur Pierre

I've thought often about the "nightmare" scenario you describe. I agree that when the chips are down, the criminal counterfeiters in charge of our central banks will make a grab for whatever real money they can steal from those of us who hold it. But I keep coming to the same points in my own mind:

"Personal gold ownership would be banned."
"Purchase and sale of gold between individuals would be banned, in all countries. There would be a problem in countries like India."

1) This isn't the 1930s anymore, when the trusting sheeple lined up to hand over their money to their betters in gov. The sheep have been fleeced of their real wealth for a long time now, and have never got it back. Those of us who do hold real gold in storage tend to be a canny, distrustful lot. We have gone thru a lot to make sure that we are not left with a worthless pile of government scrip, and it will take a lot more than gov passing some unenforceable law to make us dig it up from where it is hid and hand it on over to them.

"Those who do not sell their gold to the government during the initial call-in, would later have to use criminal channels to sell their gold for fiat currencies that will still be used, along with ration cards, for daily transactions.  In war time Germany, without a ration card or a home garden, a person could have starved, even with a pocket full of money."
"The sale of call-in gold to the government will have gold owners with their backs to the wall, with confiscation windfall taxes imposed ... 80-90%?... and with the final settlement made in a fiat currency. The former gold owner would be lucky if he is paid in cash.  If he is unlucky he will be paid in treasury bonds that will mature in a few years.  By then, with hyper inflation a good possibility, the former gold owner could be destitute."

2) If gold is used as money by gov anywhere, then it will be seen as money everywhere. I don't think trying to manage two separate currency systems (one for gov, one for sheep) will work for long, if it ever works at all. There is no way people are going to believe gold isn't money, if the gov is using it to make payments to international creditors. Fiat works, first of all, only if people BELIEVE in it. The gov may try to legislate such confidence but when it comes to that, they've already lost that confidence and all the laws in the world won't make it come back. At the point where fiat and gold meet, where one is measured in terms of the other (even if it's only to mediate between the gov and the serfs), at that point is where the relative value of each is plain to all.

3) Who holds gold today? The Rothschilds, Rockefellers, et al. - who are not going to hand it over to some dying government. In fact, gov will be lucky if those families allow sovereigns and central banks to hold much of it themselves. Who else? A few mistrustful citizens, most of whom would choose flight or "bankruptcy" over lining up to be fleeced. Who else? Other central banks. There are a few "weak hands" (e.g., Greece, Canada) who can be tricked/coerced/promised/persuaded into handing over what they do have, but for the most part this process is well underway, and soon the "small fry" govs will be purged of their wealth. That will leave: i) major gold-holding sovereigns/central banks, ii) wealthy aristocrats, iii) a handful of serfs who are probably not worth the trouble of chasing down.

In other words, it will be the same as it ever was. (I don't believe a "strong middle class" is a part of most of human history. Maybe this era is a sort of "reversion to mean", in social terms.) What I think we're mourning here is the loss of our middle class, the engine of productivity that made the 20th century the unique time that it was, and the socially-mobile dream that went with it. As for us gold holders, yes I think we have a few tough years ahead of us. That's nothing new and I don't see it lasting long. "Consent of the governed" isn't an ideal; but is the reason why gov fiat works or doesn't.

That said, I have every expectation that gov will attempt what you are talking about. They will inevitably fail. I also agree with you re: the monetary value of silver. In the same way, silver, the "poor man's gold", has always been currency and for the reasons you describe, I believe it will take its usual place. Bottom line: gov will attempt what you suggest, and all us gold holders have to do is wait for awhile until it inevitably fails, which won't be long. We will need to have enough supplies stocked up to last thru that time, of course. I hope that's part of the plan of every gold holder who reads here.

The Navigator's picture

I favor silver for the reasons you mention, although for 'grab and run' purposes, gold is a better bet - 1-2 pelican boxes @ 50lbs each will get you a long way from here.

I have both, but mainly silver - I don't recall any gov't action to confiscate silver in recent history. Whatever your holdings, diverify with some collector coins, bars, junk coins, etc so you have some argument to keep some of your PMs and not get Corzined of all your physicals, IMHO.

e-nergy's picture

"...not get Corzined ..."



GetZeeGold's picture



"...not get Corzined ..."


Ummm.....I think it's a little late for that. All we can do now is pray for some clawbacks.


SubjectivObject's picture

Yeah but the meaning of Corzined sticks [it to them].

graspAU's picture

Silver was confiscated from private hands after gold. FDR used extremely high seniorage charges to take the metal for years. I think it started here:

EO 6814......
August 9, 1934
By virtue of the authority vested in me by the Silver Purchase Act of 1934 and of all other authority vested in me, I, Franklin D. Roosevelt, President of the United States of America, do hereby require the delivery of all silver situated in the continental United States on the effective date hereof, by any and all persons owning, possessing, or controlling any such silver...

PMakoi's picture

re: #10 land and rental properties...

Plan for higher property taxes.  Consider carefully, if you're doing this as "investment".  If you're doing it as personal escape, pick a no property tax State (doesn't mean that won't change). 

Taxation will be the greatest threat to one's wealth and property.