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What Does Gold Know That Stocks Don't?

Tyler Durden's picture


A quick glance at today's cross asset class market moves shows a clear standout. The massive outperformance of Gold (relative to USD strength, Stock weakness, and Treasury yields tumbling). However, focusing on a slightly longer-term context shows that it appears you can't keep a good gold market down as it has merely recovered from its over-zealous selling pressure of earlier in the week - to resync with FX, stocks, and bonds. Most importantly, as we pointed out yesterday, it is now clear once again that 'sexy, smart' stocks knew nothing then (for the fourth time this week) - but keep on believing, as we will focus on 'other' asset classes as a signal.


Today - across asset classes...looks like Gold is onto something...


but on a longer-term context, things have come back into line...

but more importantly note the green ovals where 'sexy, smart' stocks (blue) tried and failed to push higher again and again and again...seems gold was onto something.

Charts: Bloomberg


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Wed, 05/30/2012 - 13:48 | 2476457 Uchtdorf
Uchtdorf's picture


Wed, 05/30/2012 - 13:50 | 2476472 Pladizow
Pladizow's picture

Gold is the messanger!

Wed, 05/30/2012 - 14:00 | 2476522 ITrustMyGut
ITrustMyGut's picture

so is Okie_oil_man! he says its all going down now baby!  LOL


Wed, 05/30/2012 - 14:17 | 2476588 nope-1004
nope-1004's picture

What Does Gold Know That Stocks Don't?

Counterparty risk.

Wed, 05/30/2012 - 14:31 | 2476668 Clint Liquor
Clint Liquor's picture

Ding! Ding! Ding! We have a winner!

Wed, 05/30/2012 - 14:38 | 2476711 Leopold B. Scotch
Leopold B. Scotch's picture

What does AAPL know, then?

Wed, 05/30/2012 - 14:44 | 2476738 GetZeeGold
GetZeeGold's picture

What does AAPL know, then?


No competition from FB.


Reflate Bubble : ON


Wed, 05/30/2012 - 15:50 | 2477062 strannick
strannick's picture

same that zh knows that cnbc doesnt. same that einhorn knows that munger doesnt. same that vienna jews know that civilized buffteers dont

Wed, 05/30/2012 - 16:26 | 2477214 Xkwisetly Paneful
Xkwisetly Paneful's picture

can't keep a good gold market down

exactly what is taking place unless one is off their anti psychotics.

if could step out of the bubble and see how ludicrous this piece is from outside the bubble,

even you would be staggered.

no bubble or mania here, gold is special.

the world is going to end.


Wed, 05/30/2012 - 18:13 | 2477539 Poor Grogman
Poor Grogman's picture

I love your well balanced and informative posts, you obviously have much expertise to share.


Wed, 05/30/2012 - 14:32 | 2476675 Thomas
Thomas's picture

Gold got one look at the Snorgtee Girl.

Wed, 05/30/2012 - 14:43 | 2476734 tmosley
tmosley's picture

The COMEX gold contract has counterparty risk.  That is what everyone thinks of for some inexplicable reason when you say "the price of gold".

Madness.  From top to bottom, from left to right, from statist to anarchist, everyone in this world is fucking nuts.

Wed, 05/30/2012 - 15:00 | 2476823 nope-1004
nope-1004's picture

Agreed.  I was referring to physical only - that I unfortunately lost - in that tragic boating accident - 9 miles off the coast of NC.

Wed, 05/30/2012 - 15:58 | 2477116 ZeroAvatar
ZeroAvatar's picture

You, too?   I had my gold forged into an anchor.  With gold's specific weight, I thought, "Wow, it'll make a great anchor"!  I shoulda spent a little more on the rope, though. 

Wed, 05/30/2012 - 16:27 | 2477221 TonyCoitus
TonyCoitus's picture

Me too!  I lost my gold in a tragic boating accident in Lake Michigan, near the Mackinac Bridge.  Fortunately, no barbarians were lost in the melee!

Wed, 05/30/2012 - 18:05 | 2477520 Likstane
Likstane's picture

Mine is in the surf next to the Edmunds ferry stop with the remains of my Coleman.  Still hoping to recover a few ounces.

Wed, 05/30/2012 - 15:33 | 2476975 Spirit Of Truth
Spirit Of Truth's picture

"everyone in this world is fucking nuts."

Bingo....and now a Puetz eclipse crash window has opened:

Everyone is focused on the Eurozone, but few recognize how deep the mass psychosis goes.  The potential for war is also a concern, and this might explain the spike in gold.  Syria bears watching in particularly IMHO.  Trouble there could lead to a chemical SCUD missile attack on Israel like I 'foresaw' in my 1991 apocalypstic vision:

Wed, 05/30/2012 - 15:36 | 2476981 Nobody For President
Nobody For President's picture

Tmos sez: everyone in this world is fucking nuts.


Except me.

Wed, 05/30/2012 - 14:02 | 2476530 DoChenRollingBearing
DoChenRollingBearing's picture

If you do not own physical gold, then it is the BEST single diversification out there is to buy some!  Gold is its own unique vector.  Everyone should try to reach 10% in gold (physical only), even the mainstream financial planners say it's OK to have 5% - 10% in gold.

Wed, 05/30/2012 - 14:04 | 2476542 Clint Liquor
Clint Liquor's picture

10% of your wealth in Gold(and Silver) protects 10% of your wealth.

Wed, 05/30/2012 - 14:07 | 2476553 DoChenRollingBearing
DoChenRollingBearing's picture

There is a leverage effect.  That 10% will protect a lot more as gold goes up in value.  Besides, only 1% - 3% of Americans own non-jewelry gold.  When more people start wanting to buy, meeting reluctant sellers..., then it's FOFOA like numbers.

Wed, 05/30/2012 - 14:30 | 2476663 Temporalist
Temporalist's picture

DCRB I don't think it's near 3%.  It has not gone up 100% or more since they were reporting under 1% globally in the past years.

Wed, 05/30/2012 - 15:00 | 2476808 mayhem_korner
mayhem_korner's picture




I disagree.  If gold "goes up" in value, what is really happening is that everything else is going down in value.  That is the rest of your wealth eroding.  CL is right, your protection is limited to that which you store in things that retain value, chief among them gold. 

Wed, 05/30/2012 - 17:03 | 2477356 Ghordius
Ghordius's picture

In strict material terms, I agree. In social terms, it's more. Funnily for many the socialeconomic side is much more important. Otherwise there would be no "keeping up with the Joneses" conspicuos consumption.

Wed, 05/30/2012 - 14:09 | 2476562 Nothing To See Here
Nothing To See Here's picture

Damn, you just made me realize that I'm only 75% protected. Trying to figure out when to protect the rest, the barbarian way.

Wed, 05/30/2012 - 14:16 | 2476593 UP Forester
UP Forester's picture

Just wait a week.  By that time, the 75% should be up in percentage, as everything else will have fallen.

I mean, shit, yesterday I bought a pound of bacon, WITH A COUPON, for $3.48.  Things are fucked up.

Wed, 05/30/2012 - 15:04 | 2476825 Ratscam
Ratscam's picture

Anybody thinking of platinum which is more rare and at a discount to gold of at least USD 160?

I mentioned this pair trade earlier in the year. It went back to 0. Now it appears again, this is the best trade I can think of. Long PLz12 vs. Short GCz12.

Or buy it physically, it looks shiny as well.

Wed, 05/30/2012 - 15:24 | 2476939 Spitzer
Spitzer's picture

Platinum doesnt stand a chance buddy

For 6,000 years gold has been used to store wealth. Only a small percentage has ever been used by industry. This means that the vast majority of all the gold ever mined is still available for use. 170,000 tonnes of gold has already been mined and is still available for use. This is commonly known as the ‘stock’.Each year about 2,400 tonnes of newly mined gold arrives in the market. This is known as the ‘flow’. It is from these two amounts that the ratio is derived. When the stock is divided by the flow we arrive at 71. This means that the stock to flow ratio is 71 to 1.

Even if gold production were to be doubled, then the annual growth in the stock of gold would still be less than three percent. It is almost impossible to imagine how mine supply could be doubled. All other metals have a stock considerably less than the flow.

Because of its scarcity, platinum has been suggested by some as a new monetary metal. However, in the event that flow was to stop, then stocks of platinum would be exhausted in a matter of weeks. In those circumstances the value of platinum would skyrocket. That makes platinum far too volatile for use as money. Platinum is a precious metal; it can never be a monetary metal. Likewise if the flow of copper were to stop, easily available stock would be exhausted in a matter of weeks and the price of the copper would also skyrocket.


Wed, 05/30/2012 - 17:04 | 2477359 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Explanations like yours, Spitzer, that emphasize the flow / stock ration always get a green.

Wed, 05/30/2012 - 17:07 | 2477360 DoChenRollingBearing
DoChenRollingBearing's picture

dupe, sorry

Wed, 05/30/2012 - 21:29 | 2477916 Hulk
Hulk's picture

Why are you apologizing and just who is this dupe ???

Wed, 05/30/2012 - 21:37 | 2477936 nmewn
nmewn's picture

I got it ;-)

Wed, 05/30/2012 - 18:13 | 2477537 Ratscam
Ratscam's picture

thank you spitzer, but how low can PLT go compared to gold?
ok dowturn in economy, less cars being sold and lets not forget that PLT isnt around since 6000 years. Simply looking for a devils advocate to convince me not entering this trade that looks so profitable.
heck, how low can we go? lower than in 30 years?
similiar to nat gas, as low as 20 years ago excluding inflation.

Wed, 05/30/2012 - 18:31 | 2477577 constantine
constantine's picture

So platinum will not, like gold, ever be money because it will go up in value too fast... I'm in.  Where can i get some of this non-money?

Wed, 05/30/2012 - 15:45 | 2477032 Tirpitz
Tirpitz's picture

Shorting Gold against Platinum currently looks not that great. The daily GCQ chart is technically stronger (Slow Stochastic trends upwards after a recent crossover, recovering from the 1530 range at good volumes) than the PLN chart (which still shows lower lows on higher volumes), so likely gold will have to lead the charge towards a new leg up.

Add the industrial metal quality of PL and half the world going into depression while the prudent heads try to keep their assets safe from madly printing central banks, add the low percentage of gold bulls and the lack of interest in gold mining shares, both GDX and GDXJ, which sports a pretty solid chart as well, and I'd go with gold for now on the long side.

On the other hand, Silver's chart improved a lot over the recent days, so maybe going long in the white metal ain't such a bad idea either. GCQ needs a close over 1580 to take off, though, and SIN over 29. A weekly close under 1550 in GCQ, however, would be very bearish in my view.

Wed, 05/30/2012 - 14:07 | 2476549 VonManstein
VonManstein's picture

i think i over spent

Wed, 05/30/2012 - 15:10 | 2476872 davinci7_gis
davinci7_gis's picture

People wake up!  You need at least 33-50% of your assets in GOLD - especially right now!

Wed, 05/30/2012 - 14:29 | 2476655 GOSPLAN HERO
GOSPLAN HERO's picture

Thomas Andrews: [perspiring and trembling] Water... fourteen feet above the keel in ten minutes. In the forepeak, in all three holds and in the boiler room six.
Ismay: When can we get underway, damnit!
Thomas Andrews: That's five compartments! She can stay afloat with the first four compartments breached, but not five!
[tersely to Smith]
Thomas Andrews: Not five. As she goes down by the head, the water will spill over the tops of the bulkheads at E deck from one to the next. Back and back. There's no stopping it.
Smith: The pumps... if we opened the doors...
Thomas Andrews: [interrupting] The pumps buy you time, but minutes only. From this moment, no matter what we do, Titanic will founder.
Ismay: [incredulously] But this ship can't sink!
Thomas Andrews: She's made of iron, sir! I assure you, she can... and she will. It is a mathematical certainty.
Smith: How much time?
Thomas Andrews: An hour... two at most.
Smith: And how many aboard, Mr. Murdoch?
1st Officer William Murdoch: 2,200 souls on board, sir.
Smith: [turning to Ismay] Well, I believe you may get your headlines, Mr. Ismay.

Wed, 05/30/2012 - 16:48 | 2477312 prole
prole's picture

Verbatim dialogue from the JPM shareholders' meeting

Wed, 05/30/2012 - 16:31 | 2477236 TheTwoJohns
TheTwoJohns's picture

XAU 4life.

Wed, 05/30/2012 - 13:51 | 2476477 fuu
fuu's picture


Wed, 05/30/2012 - 14:51 | 2476755 fuu
fuu's picture

Yes, appreciating the humor was cheerleading, moran.

Wed, 05/30/2012 - 14:58 | 2476814 5880
5880's picture

sorry your vagina got hurt

Wed, 05/30/2012 - 15:01 | 2476830 fuu
fuu's picture

I was expecting something more creative from a big brain like yourself.

Wed, 05/30/2012 - 13:51 | 2476480 slaughterer
slaughterer's picture

Gold knows the same thing as AAPL today. 

Wed, 05/30/2012 - 14:20 | 2476601 sitenine
sitenine's picture

Actually, no. Gold is, as the saying goes, "good as gold." Paper is shit. You only own what you can hold - all else is just a claim, and probably a subordinate claim at that, of some supposed wealth that only a greater fool would buy. We're running out of greater fools.

Wed, 05/30/2012 - 15:45 | 2477059 Panafrican Funk...
Panafrican Funktron Robot's picture

I tend to agree, working my investment allocations from 10% phys up to 100%.  We're in discount territory on a USD basis, as it's USD price per ounce will eventually and inevitably move towards approaching infinity.

Wed, 05/30/2012 - 22:34 | 2478121 Think for yourself
Think for yourself's picture

Invest in skills and tools for self-sustainance, in food for 6 months to 2 years (always starting small but varied and building up), in guns for those so inclined, cash to cover all expenses for 3-6 months, and THEN the rest in PMs. It doesn't make much sense to do so before the rest; otherwise you could end up needing to sell your PMs at suboptimal levels to buy some food because you didn't stockpile enough and only had cash for 2 months.

Of course this can be adapted to your specific situation: since I am a traveler with little room and no fixed residence, I only have a few all-around tools that can fit in my backpack while maintaining it light enough for mobility. Having no fixed residence also means that I cannot have a nice food inventory; when moving somewhere new I quickly build up a 1-2 months supply and simply stop buying food except fresh produce when I know I'll be moving again. But I live in agrarian rural sectors of central america with very resilient and decentralized means of production, so attaining food independance for long periods is not as vital as within a large north american cities. 

Whatever you do, don't simply apply a cookie-cutter method, but adapt to your own circumstances!

Wed, 05/30/2012 - 14:04 | 2476538 Poor Grogman
Poor Grogman's picture

big reversal out of the blue


Wed, 05/30/2012 - 16:29 | 2477229 wee-weed up
wee-weed up's picture

Somebody must have seen Ben gassing up the chopper.

Wed, 05/30/2012 - 14:11 | 2476573 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I'm excited too, but isnt this just reclaiming yestardays losses?


Turd had an interesting theory about why "happy" Tuesday has been "sad" Tuesday for the last little while.  Seems as reasonable as any explanation I've heard.

Wed, 05/30/2012 - 14:53 | 2476787 eclectic syncretist
eclectic syncretist's picture

It can't vaporize like cyber dollars

Wed, 05/30/2012 - 13:49 | 2476461 SHEEPFUKKER

Fiat selling. Physical buying. Wash, rinse, repeat. 

Wed, 05/30/2012 - 13:52 | 2476486 Beam Me Up Scotty
Beam Me Up Scotty's picture

Ugh!!  Its a SECRET!!  I like cheap gold!!  Stop telling people!!

What is the 10 year telling us?  Market craps out?  Then QE3?  Gold Ramp?  Gold will go down if the market tanks hard I assume, one last BTFD?

Wed, 05/30/2012 - 14:00 | 2476518 NotApplicable
NotApplicable's picture

I like cheap gold, and I cannot lie.

You other Mungers can't deny.

That when gold comes in with an itty bitty price

And a round coin in your face

You get sprung!

Wanna pull out your Benja-muns.

Wed, 05/30/2012 - 14:23 | 2476616 ParkAveFlasher
ParkAveFlasher's picture

Even the brothers on the street know the only safe place for your wealth is in your gums, around your neck, or on your knuckles. 

Wed, 05/30/2012 - 15:05 | 2476847 ParkAveFlasher
ParkAveFlasher's picture

Agreed.  I'm not trolling, just saying, I lost my last shred of respect for hip hop when flashing gold went "out" and showing stacks of fiat (from uptown hustlers stacking in smoky rooms to Jay Z and his Euros) came "in". 

Wed, 05/30/2012 - 13:50 | 2476465 GubbermintWorker
GubbermintWorker's picture

Gold, real money since the beginning of mankind.

Wed, 05/30/2012 - 17:08 | 2477368 Ghordius
Ghordius's picture

Together with the more valuable meteoitic iron, for a while.

Wed, 05/30/2012 - 13:50 | 2476467 Dick Darlington
Dick Darlington's picture

Gold is the only real thing.

Wed, 05/30/2012 - 14:23 | 2476613 UP Forester
UP Forester's picture

So true.  I'm gonna rip apart all my old electronics and hammer out a bunch of gold foil, and turn it into a hat.

Much better than tin foil for protecting against harmful UV A, B, and C waves, and those pesky mind-control beams...., it won't tarnish!

Wed, 05/30/2012 - 14:58 | 2476816 mayhem_korner
mayhem_korner's picture



I thought Coca-cola was the real thing...

Wed, 05/30/2012 - 16:01 | 2477125 A Nanny Moose
A Nanny Moose's picture

Only until the removed the coke from the Cola

Wed, 05/30/2012 - 17:09 | 2477374 Ghordius
Ghordius's picture

I must be a barbarian, I thought sex...

Wed, 05/30/2012 - 13:50 | 2476469 Dr. Engali
Dr. Engali's picture

It's a barbaric relic that is incapable of "knowing" anything. Buy stocks..they are smart and sexy.

Wed, 05/30/2012 - 14:01 | 2476526 Winston Churchill
Winston Churchill's picture

Buy Spam,the other barbarous relic.

Wed, 05/30/2012 - 14:08 | 2476557 Dr. Engali
Dr. Engali's picture

Spam ,eggs,sausage .and spam...

Wed, 05/30/2012 - 13:50 | 2476470 VonManstein
VonManstein's picture

gold leads the way.... down?

Wed, 05/30/2012 - 13:50 | 2476473 gjp
gjp's picture

Sexy smart stocks are trying the old US decoupling theory again as we speak, for the 400th time.  When will BTFDers wind up holding the flash crash bag?  I can't wait ...

Wed, 05/30/2012 - 13:54 | 2476497 slaughterer
slaughterer's picture

Now that everything is back in line we can have perfectly synchronized asset class movements  eliminating all possibility of hedging for the rest of the summer. 

Wed, 05/30/2012 - 13:58 | 2476517 Village Smithy
Village Smithy's picture

Probably soon, I think Blankfein has unloaded all his positions onto the muppets (both retail and professional). He's ready to buy quality assets at post crash levels. Again.

Wed, 05/30/2012 - 13:51 | 2476479 Oh regional Indian
Oh regional Indian's picture

What does Silver know that gold doesn't?

I like how the GSR is headed back to more sensible levels again. (55 ish as I type)

It's that cross that is going to leave people flummoxed when it happens. 

Silver is like Garlic. Good for you, bad for them.



Wed, 05/30/2012 - 13:57 | 2476511 fiddler_on_the_roof
fiddler_on_the_roof's picture

possible GSR goes to 70 ? and then later much above.

Wed, 05/30/2012 - 14:15 | 2476589 NotApplicable
NotApplicable's picture

Next arbitrage opportunity. Even if it goes higher, silver is volatile enough that it will likely make significant dips regardless of what I perceive to be a Freegold outlook.

Wed, 05/30/2012 - 14:20 | 2476604 Doña K
Doña K's picture

Garlic is to Italians what curry is to Indians. Can I then deduct that silver and gold are like garlic and curry?

Wed, 05/30/2012 - 14:31 | 2476666 Oh regional Indian
Oh regional Indian's picture

Dona, funny that the colours match too, eh? ;-)


Wed, 05/30/2012 - 13:56 | 2476481 Paul Atreides
Paul Atreides's picture

TPTB only have so much Fedbreze to cover up their shit...

Wed, 05/30/2012 - 13:52 | 2476482 Vince Clortho
Vince Clortho's picture

Is it ppt time yet?

And, oh yeah ... has anyone seen Jon Corzine lately?

Wed, 05/30/2012 - 14:12 | 2476578 Pladizow
Pladizow's picture

Look in Obamas anus!

Wed, 05/30/2012 - 14:50 | 2476773 Dapper Dan
Dapper Dan's picture

Can't find him, he left the building and did not tell anyone were he was going. reportedly did not take his Iphone or the "football", something is up! and it ain't Facebook.

RT @DonovanSlack: President Obama headed out of White House but no one knows yet to where. No events on his schedule this afternoon.

ShawnaNBCNews tweeted:

According to WH pool, POTUS/FLOTUS rolling to somewhere unknown where we've been told no news will happen & we won't be allowed to cover it.
Wed, 05/30/2012 - 15:32 | 2476969 Paul Atreides
Paul Atreides's picture

Bilderberg 2012 Bichez!

Wed, 05/30/2012 - 13:52 | 2476484 death_to_fed_tyranny
death_to_fed_tyranny's picture

I'm busily sewing it into my clothes!

Wed, 05/30/2012 - 14:03 | 2476536 NotApplicable
NotApplicable's picture

I like the idea of platinum hangers that someone mentioned here once.

Well, at least until closet cleaning day.

"Honey... what did you do with my wire hangers?"

Wed, 05/30/2012 - 14:07 | 2476551 GubbermintWorker
GubbermintWorker's picture


Wed, 05/30/2012 - 18:24 | 2477563 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Does anyone know how to bend gold into shape?

Wed, 05/30/2012 - 13:53 | 2476485 Cognitive Dissonance
Cognitive Dissonance's picture

Ya can't keep a good thing down forever.

As I said before, it's not so much that I believe in Gold and Silver. Rather I believe in the insanity of the central bank fiat pushers and their one (and only one) solution. 

I will sell my Miners and PMs when the (fiat) world returns to some form of (honest fiscal) sanity. Go on ahead. I'll wait.

{crickets chirping in the distance}

Wed, 05/30/2012 - 14:05 | 2476545 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, I too am waiting down in my bunker.  The only way my gold leaves me is when I give it away...

Wed, 05/30/2012 - 13:53 | 2476490 fonzannoon
fonzannoon's picture

Its just trading.

Wed, 05/30/2012 - 13:53 | 2476491 slackrabbit
slackrabbit's picture

Hey this thing has no counterparty risk, and look at the way it stacks.....

Wed, 05/30/2012 - 16:51 | 2477326 TrillionDollarBoner
TrillionDollarBoner's picture


Wed, 05/30/2012 - 13:54 | 2476496 junkyardjack
junkyardjack's picture

AAPL knows something too

Wed, 05/30/2012 - 13:57 | 2476509 fonzannoon
fonzannoon's picture

Aapl is just there to shadow gold so people constantly have an alternative.

Wed, 05/30/2012 - 13:57 | 2476510 fonzannoon
fonzannoon's picture

Aapl is just there to shadow gold so people constantly have an alternative.

Wed, 05/30/2012 - 13:55 | 2476498 Dr. Engali
Dr. Engali's picture

Where's Robo and his "insight" on a day like today. Did Tyler throw put him back in the time out chair again after only one post?

Wed, 05/30/2012 - 13:55 | 2476499 Beam Me Up Scotty
Beam Me Up Scotty's picture

FuckFaceBook sniffing 28....

Wed, 05/30/2012 - 13:57 | 2476512 BORT
BORT's picture

I hate smuggerberg

Wed, 05/30/2012 - 13:55 | 2476501 unclebill
unclebill's picture

No one will ever decline a gold coin regardless of any crazy ass economy.

Wed, 05/30/2012 - 14:14 | 2476586 Pladizow
Wed, 05/30/2012 - 14:24 | 2476624 NotApplicable
NotApplicable's picture

That's not a valid example, as the setup makes the whole thing look like a scam, because if something looks too good to be true, then it probably is. Even the coin shop angle, rather than providing confirmation merely makes it more scammy. Also, by starting out with the obvious cell-phone story lie, he only made it worse.

If he honestly tried to do this experiment, he would've got taken up by someone once they understood his premise. By hiding it though, he has no chance, as the whole thing is idiotic enough to properly put people on the defensive.

Wed, 05/30/2012 - 14:26 | 2476638 Pladizow
Pladizow's picture

Agreed, but would you decline?

Wed, 05/30/2012 - 15:00 | 2476822 Temporalist
Temporalist's picture

That is more the point in my eyes.  They 1) aren't knowledgeable about the general price of gold, 2) don't know what gold really is, looks like, feels like, 3) aren't even curious enough to confirm for themselves even if they have a shred of doubt, 4) are the typical general public, 5) are not skeptical about fiat but rather place their faith in worthless paper.


He made the same video at $1000/oz and that was years ago one would think more people would have SOME clue about the rising price of gold.


He should have also walked into the coin shop with them, if willing, to educate them on their ignorance and video their response.

Wed, 05/30/2012 - 13:55 | 2476502 Stimulati
Stimulati's picture

Yields are down?  So you are saying my Treasuries are going up in value again?  Fantastic.

Wed, 05/30/2012 - 13:57 | 2476508 BORT
BORT's picture

Deflation before another reflation

Wed, 05/30/2012 - 13:58 | 2476515 Beevreetr
Beevreetr's picture

All the "BTFD" done the last two weeks needs to be replenished.

Wed, 05/30/2012 - 14:01 | 2476524 RockyRacoon
RockyRacoon's picture

The big new thing in gold - capital adequacy ratios

Ross Norman looks at the implications for gold of an increased focus on the assets banks are allowed to hold as tier one capital.

Author: Ross Norman
Posted:  Tuesday , 29 May 2012
Forgive the hyperbole in the headline but we wanted to get your attention as something quite profound is happening that could propel gold to record new highs. Yes, potentially the biggest thing since the birth of the gold ETF and the liberalisation of the Chinese gold market in 2003. A decade on and we have grounds for saying that gold may well see a significant leg higher... the big new thing in gold. I'll explain...

Banking capital adequacy ratios, once the domain of banking specialists are set to become centre stage for the gold market as well as the wider economy. In response to the global banking crisis the rules are to be tightened in terms of the assets that banks must hold and this is potentially going to very much favour gold. The Basel Committee for Bank Supervision (or BCBS) as part of the BIS are arguably the highest authority in banking supervision and it is their role to define capital requirements through the forthcoming Basel III rules.

In short, they are meeting to consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today. At the same time they are set to increase the amount of capital banks must set aside as well. A double win potentially.

Hitherto banks have been much dis-incentivised to hold gold while being encouraged to hold arguably riskier assets such as equity capital, currencies and debt instruments, none of which have fared too well in the crisis. With this potential change in capital adequacy requirements. bank purchases of gold would drive up its value relative to other high quality qualifying assets, increasing its desirability for regulatory purposes further. This should result in gold being re-priced to bring it on a par with all other high quality assets.

Currently banks have to have core Tier 1 capital ratio of 4% of which will rise to 6% from the beginning of next year. In addition to its store of value merits, central to the argument in favour of gold as a bank reserve is its countercyclical nature to most other assets in that it tends to be inversely correlated. Gold is ideal as it bears no credit risk. it involves no other counterparty and it is no one's liability. It is a reserve asset diversifier if you like.

This is a treble win for gold - it would be a major endorsement of its role in preserving wealth and as a store of value from the highest financial authority, it would lead to significant purchases of gold by major financial institutions and it would lead to a reappraisal of its value with respect to other Tier 1 capital such as quality sovereign debt. Under the new rules gold could become a very significantly larger proportion of a reserve pool which is about to grow very much larger.

The 2 questions that come to my mind are when and how much metal - on timing Basel III kicks in from January 2013 with a further tightening in capital adequacy ratios in 2018. That said, it is not yet clear when gold's re-rating to Tier 1 might take place.

In terms of amount of gold that could be purchased that is harder still - if we thought that say 2% of total current Tier 1 capital held by commercial banks globally might be converted into gold (forgetting for a moment about the increases in capital yet to be seen) - this would suggest that 2% of the $4,276 bn would be converted to gold. That is equivalent to $85 bn in gold which at current market prices is equivalent to 1,700 tonnes of gold.

Another way of looking at this is to consider that commercial banks would be holding gold for precisely the same reason that central banks do - and the largest 110 central banks in the world have 16% of their reserves as gold - as such a figure of just 2% is really quite a modest expectation - ultimately it will be a question of price and expectations of price change that would determine the rate of uptake in the short term.

For those anxiously about the lacklustre market - this could well promise to be game-changer of epic proportions.

Wed, 05/30/2012 - 14:02 | 2476531 SDRII
Wed, 05/30/2012 - 14:21 | 2476607 Winston Churchill
Winston Churchill's picture

Rush hour traffic was like that everyday in Tehran.

Wed, 05/30/2012 - 14:02 | 2476532 Gloeschi
Gloeschi's picture

SNB recycling EUR into gold for lack of better alternatives.

Wed, 05/30/2012 - 14:03 | 2476534 fonzannoon
fonzannoon's picture

How can this not be a fantastic environment for the miners? With the cost of energy to extract the metals dropping huge what I I missing here? Other than the generally suck?

Wed, 05/30/2012 - 14:12 | 2476576 junkyardjack
junkyardjack's picture

"I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements - that is, not in reading the tape but in sizing up the entire market and its trend."  -Jesse Livermore....

Wed, 05/30/2012 - 15:10 | 2476874 exi1ed0ne
exi1ed0ne's picture

Miners have the possibility to see some profits on increases in gold that outpace the inflation in fuel, labor, and other operating expenses (which have been growing). However, they are also huge tax donkeys that operate according to the pleasure of whatever Government presides over the land where the mine is located. Given the growing tendency of even "Developed" "First-World" countries taking contract Law and wiping their ass with it, owning such paper claims are hardly a risk free endeavor.

Wed, 05/30/2012 - 14:05 | 2476546 Winston Churchill
Winston Churchill's picture

Ignore ya.

Laugh at ya..

Fight ya.

Ya Win.

Join Ya.

Game over.

Wed, 05/30/2012 - 14:49 | 2476768 MunX
MunX's picture

Sup Ghandi

Wed, 05/30/2012 - 15:11 | 2476880 exi1ed0ne
exi1ed0ne's picture




Wed, 05/30/2012 - 14:07 | 2476550 BGO
BGO's picture


could it be that so many asset classes are so messed up that gold has (temporarily) fallen off the market manipulators' radar? seems likely.


Wed, 05/30/2012 - 14:26 | 2476635 NotApplicable
NotApplicable's picture

Giant computers don't have memory lapses.

Wed, 05/30/2012 - 14:07 | 2476554 tmosley
tmosley's picture

This is paper gold.  People who don't know any better are shifting paper into paper gold markets.  They will get MF'd before too long.  Probably just as the paper PM market looks to be in a recovery (for maximum pain).

Buy physical if you don't like getting MF'd by gangs of mutant zombie bankers.

Wed, 05/30/2012 - 14:25 | 2476627 jcpicks
jcpicks's picture


Wed, 05/30/2012 - 15:04 | 2476843 goldm3mb3r
goldm3mb3r's picture

I have plenty of physical but my pension rules state that I can only hold shares / funds. I have significant paper silver and gold, do you think that it will pay out paper when it pops or that the physical price will accelerate away from the paper price ongoing, meaning that I will get an reaming both ways?

Wed, 05/30/2012 - 15:58 | 2477117 Rip van Wrinkle
Rip van Wrinkle's picture

Switch to a SIPP if you're in the UK managed by what used to be called a 'pensioneer trustee'. They can be expensive but so can losing your entire pension pot.

Wed, 05/30/2012 - 14:08 | 2476559 Calls and Putz
Calls and Putz's picture

Asian central banks MUST buy gold.  There is no similar necessity for them to own stocks, debt or whatever the paper flavor of the day is.

Wed, 05/30/2012 - 14:11 | 2476568 Johnk
Johnk's picture

Spiderman towels have no counterparty risk.

Wed, 05/30/2012 - 14:20 | 2476602 Temporalist
Temporalist's picture

No counterparty risk?  Wherever Spiderman is Venom follows. 

Wed, 05/30/2012 - 14:11 | 2476571 Boilermaker
Boilermaker's picture


Stocks are making their miracle run into the close.  Ben ain't done yet, here comes the relentless bid up.

CHOO CHOO....I think I can, I think I can, I think I can...

Wed, 05/30/2012 - 14:21 | 2476605 Conman
Conman's picture

Safe to say its expected at this point and traded on by many. Sad markets are just a friggin joke these days.

Wed, 05/30/2012 - 14:14 | 2476587 newengland
newengland's picture

And what does the BIS know that most banks and traders don't?

The gist: gold may be introduced as Tier 1 capital for commercial banks by January 2013.

Happy reading ;-D

Wed, 05/30/2012 - 15:39 | 2477020 RockyRacoon
RockyRacoon's picture

I posted the entire article above... looks like a few folks are scared enough to neg us. 


Wed, 05/30/2012 - 16:08 | 2477144 newengland
newengland's picture

Oh well, Rocky. I guess you can give someone the facts, but you can't give him good judgement. The BIS holds the whip hand over the global bank system. Interesting times for gold and those who own it...

Wed, 05/30/2012 - 16:12 | 2477158 RockyRacoon
RockyRacoon's picture

Maybe this will just scare more of the crap out of them....

Ambrose Evans-Pritchard at The Telegraph yesterday in London..."Europe's debtors must pawn their gold for Eurobond Redemption".   The link is here.


Europe’s debtors must pawn their gold for Eurobond Redemption - Telegraph

The plan splits the public debts of EMU states. Anything up to the Maastricht limit of 60pc of GDP would remain sovereign. Anything over 60pc would be transfered gradually into the redemption fund. This would be covered by joint bonds.

Italy would switch €958bn, Germany €578bn, France €498bn, and so forth. The total was €2.326 trillion as of November but is rising fast as Europe’s slump corrupts debt dynamics. The sinking fund would slowly retire debt over twenty years, using designated tithes akin to Germany’s "Solidarity Surcharge".

In effect, Germany would share its credit card to slash debt costs for Italy, Spain and others. Yet it is the exact opposition of fiscal union. While eurobonds are a federalising catalyst, the fund would be temporary and self-extinguishing. "The fund is a return to the discipline of Maastricht with sovereign control over budgets," said Dr Benjamin Weigert, the Council of Experts’s general-secretary.

The ingenious design gets around the German constitutional court, which ruled in September that the budgetary powers of the Bundestag cannot be alienated to any EU body under the Basic Law -- the founding text of Germany’s vibrant post-War democracy.

The court warned that open-ended liabilities are unconstitutional. The Bundestag may not establish "permanent mechanisms which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate," it ruled. Chief Justice Andreas Vosskuhle said that any major step towards EU fiscal union would require "a new constitution" and a referendum.

The fund implies a big sacrifice for Germany. Its interest costs on joint debt would be much higher than today’s safe-haven rate of 1.37pc on 10-year Bunds. Jefferies Fixed Income says it would cost 0.6pc of German GDP annually. The Council of Experts -- or `Five Wise Men’ -- argue that this would be modest compared to the growth adrenaline of rescusitating monetary union.

Yet it is not charity either. One official said a key motive is to relieve the European Central Bank of its duties as chief fire-fighter. "We have got to get the ECB out of the game of distributing money, and separate fiscal and monetary policy. Germany has only two votes on the ECB Council and has no way to control consolidation," he said.

Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. "The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations," said the proposal.

This demand could enflame opinion in Italy and Portugal. Both states have kept their bullion, resisting the rush to sell by Britain and others. Italy has 2,451 tonnes of gold, valued at €98bn in March.

Alessandro di Carpegna Brivio, a gold expert at Camperio Sim in Milan, said Italy should treat such proposals with care. "Everything being done at a European level is in the interests of Germany and France, to save their banks. It is not in the interest of Italy," he said.

"We should use our gold to take care of our own debt, collateralizing bonds above 100pc of GDP. That would be a far more targeted approach," he said.

David Marsh, author of books on the euro and the Bundesbank, said Germany is not yet ready for the redemption fund. "The Germans have to do something, but I don’t think it will happen before the elections next year. Spain will have to go through storm first," he said.

Ultimately, a sinking fund cannot tackle the root cause of the eurozone crisis. It may cap debt costs but it does not alter the intra-EMU currency misalignment between North and South, or help the Latin states close the chasm in labour competitiveness.

The South would still face the long grind of "internal devaluation" -- or wage deflation -- breaking societies on the wheel. Yet the Redemption Pact is at least a first step back from Purgatory.

Wed, 05/30/2012 - 14:19 | 2476597 papaswamp
papaswamp's picture

UST's continued lower return will cause a bit more money to flow in.

Wed, 05/30/2012 - 14:21 | 2476603 pissing_excellence
pissing_excellence's picture

fly pelican fly

Wed, 05/30/2012 - 14:22 | 2476608 jimmyjames
jimmyjames's picture

What does Gold know that stocks don't?


The old silent Sentinel that stands on the hill high above the turmoil of daily life and like it has done for thousands of years-it just watches-

It hears nothing-it is deaf to the world-

It has seen it all many times before-

It knows every secret-

It knows "all"

Wed, 05/30/2012 - 14:22 | 2476609 reader2010
reader2010's picture

“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves,” wrote Norm Franz in his book Money and Wealth in the New Millennium (2001).

Wed, 05/30/2012 - 14:38 | 2476710 Dubious Maximus
Dubious Maximus's picture

Stealing that quote. Thanks.

Wed, 05/30/2012 - 19:12 | 2476611 Money 4 Nothing
Money 4 Nothing's picture
What Does Gold Know That Stocks Don't?


Nothing to us, Gold builds Nations, good luck trying to convert in a cashless society under Martial Law. Plastic card money on it's way.

Good grief. Stop thinking like Barbarians.


Let the "Hope and Change Red Arrows fly" are TPTB giving you more power? or less?


Wed, 05/30/2012 - 14:23 | 2476614 solgundy
solgundy's picture

what does gold know?........DEFLATION....the condition in which gold best performs

Wed, 05/30/2012 - 14:46 | 2476751 sessinpo
sessinpo's picture

Actually, that is incorrect. In a deflationary environment, that is when debt is imploding and people are scrambling for fiat cash to cover debt. Even in after the 1929 collapse, gold fell with most commodities. It is the period afterwards when it becomes "golden".

Wed, 05/30/2012 - 14:58 | 2476811 jimmyjames
jimmyjames's picture

Even in after the 1929 collapse, gold fell with most commodities.


No it did not-

Measured against everything-gold outperformed everything-

Wed, 05/30/2012 - 15:04 | 2476844 5880
5880's picture

gold prices were controlled by the Gov

illegal to own after 33

Wed, 05/30/2012 - 15:10 | 2476871 jimmyjames
jimmyjames's picture

gold prices were controlled by the Gov

illegal to own after 33


Yes gold was dollar locked but-everything fell against the gold value of the dollar-

And yes it was made illegal to own after 33 but-people still found a way to gold-or gold like always-found a way to the people-

Wed, 05/30/2012 - 20:08 | 2477764 prole
prole's picture

gold prices were controlled by the Gov

illegal to own after 33


Um, yeah the price of gold in US dollars was "controlled" up from a centuries* long price of 20.67 US$ per ounce to 35$ per ounce. This was done conveniently ~after~ Rosenveldt stoled the sheople's gold. He paid them off 20.67 per ounce then said "oh BTW you idiots gold is really worth 35$ per ounce, not that it matters because you just lost all yours.

And as far as being illegal to own, that should hardly matter to free men, and it was only pretend made illegal to own in one slave country, the rest of the world didn't matter or care what happened in US and could continue to own gold.  Gold's value goes over centuries and is immune to government edicts, though it is always vulnerable to piracy and theft by criminals (like Rosenveldt, and small criminals too)

The webpage I link here gave me the distinct feeling that 1933 was more a paper-gold stealing event and was in fact just the first MF global event. Then Rosenveldt, now "Jon" Corzine/"Jamie" Dimon. The song remains the same...

* "Centuries" may be a slight exaggeration on my part, but I Believe to be essentially true


Wed, 05/30/2012 - 14:24 | 2476623 walküre
walküre's picture

If you're a vile and vicious central banker .. and you discovered that investors are looking at gold as "the messenger" of more quantitive easing measures. If you're that evil rotten banker who officially claims to dislike gold (barbaric relic) but secretely takes a bath in a golden tub every night. If you're that guy and you have no intention of racking up the markets again and you just hate the pressure by minion bankers who ask for more QE every minute of every day.

Then what would you do?

Exactly. You'd play in the paper gold futures market to SUBSTANTIATE the RUMORS of FURTHER QE with sudden jerks in the paper price of gold to CREATE THE ILLUSION that someone, somewhere, somehow has foreward knowledge of more QE which would inflate oil, gold and other asset classes along with it.

Start thinking like a central banker if you really want to feel like you're in control.

Ben CANNOT officially commit to print more Dollars for at least another 8 to 10 months. If he's still around after the election, he might do something when the election dust has settled.

I love gold just like the next guy here but I've also learned to be patient and not get excited too quick and easy.

Wed, 05/30/2012 - 22:33 | 2478118 BalanceOrBust
BalanceOrBust's picture

Does Ben HAVE TO print more dollars just to buy up the fresh Treasuries?  Where else could sufficient cash be found to buy up all the fresh Treasuries.

Wed, 05/30/2012 - 14:33 | 2476680 Ted Baker
Ted Baker's picture






Wed, 05/30/2012 - 14:33 | 2476682 noses
noses's picture

Gold doesn't "know" anything. It just shows the people's resignation. They gave up on all the (toilet-) paper and start flushing it down the drain. Gold is too heavy, it stays in the bowl.

Wed, 05/30/2012 - 14:34 | 2476684 Temporalist
Temporalist's picture

Gold knows there are currency wars afoot and also that that leads to trade wars:

U.S. Proposes Duties as High as 26% on China Wind-Tower Imports


Everyone knows what trade wars lead to...

Wed, 05/30/2012 - 14:48 | 2476764 sessinpo
sessinpo's picture

Yep, I've been one of the few here trying to point out the currency war going on. The massive movements of gold (now requested by Germany) is a obvious symtom of that. It occurred in the past prior to 1929.

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