Skip to comments.Do We Goldbugs Finally Have Your Attention?
Posted on 11/13/2009 6:45:21 AM PST by SeekAndFind
The past two weeks have brought two massive paradigm shifts to a Gold market that has been morphing literally on a daily basis for the past few months. During this time, the pundits and purveyors of misinformation and tripe have done their best to student body left Gold back into obscurity as an ancient, barbaric relic. They certainly get an A for effort. Now that Gold has made its debut above $1100 an ounce, theyve switched their tactic and are now calling it a bubble. Well deal with why this cannot be the case in a bit.
For the past 9 years now, students of history and common sense have been literally shouting from the rooftops that Gold was the place to be as the monetary tradewinds shifted back in 2000 and the fiat inflationary cycle began to go parabolic. While the multi-trillion dollar deficits might be a surprise to many, for those who understand how these things work, it is just a mundane repetition of history and yet another confirmation that man cannot alter the laws of economics or his own intrinsic predilection to ignore events past.
From 2000 up until recently, there was a constant battle going on. Central banks and the IMF would sell off their physical Gold to suppress the price. Between 1999 and 2002, Gordon Brown, then Englands Chancellor of the Exchequer made the extremely wise decision to sell a good chunk of Mother Englands Gold (395 tonnes) in the $275-$300/oz area. The people were so enthralled by this obvious economic genius that they made him the Prime Minister. All sarcasm aside, this was only one prong of the tactic to suppress Gold prices.
The second prong consisted of large New York and London banks mercilessly shorting Gold in the paper futures markets. For most of the last nine years, the bulk of these futures contracts were rolled over or settled in cash; taking delivery wasnt really en vogue. There have been many people such as Jim Sinclair working hard in the trenches to educate people on the merits of taking delivery and fighting the cartel by taking their playing chips off the table. Gold in your possession cannot be leased out by a central bank to various third parties, nor can it have futures contracts written against it.
Despite even these Herculean suppression efforts, the price of Gold made the journey from $275 to $940 in fairly short order. Surely, there were many gut checks in there; days when the metal lost 5% and the pundits would scream the bubble had burst and it was all over, now please buy some mortgage backed securities. There were some epic struggles like the Battle for $700 shown below.
Through the past nine years the game was played under the rules of central banks and the IMF. In the past two months, countries, large players, and even Gold producers have turned the game on its head. Suddenly everyone wants physical metal, not paper promises. And dont give us the 90% bars either; we want the good stuff. Suddenly, there are instant buyers for IMF sales that were previously guaranteed to suppress prices. Suddenly an IMF sale sparks a rally to a new all-time high. China tells NY and London banks to take a long stroll off a short pier by issuing a directive to its state banks to walk away from commodity derivatives contracts. And, even more telling, central bank selling has been dropping steadily over the past few years and has been nearly nonexistent in 2009.
And finally, Barrick is closing its infamous hedge book. What was once a 20 million ounce boat anchor on the price of Gold has become a multibillion dollar boat anchor around Barricks neck and theyve finally had enough. The book, now around 3 million ounces will be closed by next year according to Barrick boss Aaron Regent.
Oddly enough, it is not the collapsing US Dollar that is driving this decision, but rather a realization that Gold production likely peaked in 2001 and that even a tripling in exploration budgets across the mining sector has yielded precious little in the way of new discoveries. During this entire time period, demand for Gold has been rising consistently, thanks in no small part to the continual abuse of paper currencies by governments around the globe. The existence of serious supply-demand dislocations immediately rules out the prospect of a speculative bubble. Granted, there are plenty of smaller players who are dabbling in Gold without the slightest bit of understanding as to why theyre doing it. The next correction will undoubtedly send many of them running back to mainstream newsletter writers demanding a refund. After all, they were supposed to be living on the beach in 6 months; the advertisement said so!
The shattering of the old paradigm as it relates to Gold is very similar to a paradigm that was shattered with regard to stock investing nearly a decade ago. In that case, the conventional logic was that the market always went up in the long run. And for 18 years, that had absolutely been the case. Even the crash of 1987 hadnt done much to derail the bull market. However, when we crossed into the new century, the paper paradigm changed with the major indices going nowhere in the past 9 years and change. Yet many conventional financial professionals are still investing as if it were 1995 then blaming the markets for client losses when they should be blaming their own inability to see that our world has changed dramatically.
Unfortunately, another of the very negative sides of the attack on Gold have been the ad hominem attacks on proponents of Gold-backed currencies and those who promote the reality that Gold is in fact real money. The attackers use the term Gold Bug to paint a picture of little men sitting in fallout shelters wearing tinfoil hats with stashes of food, water, and enough weapons to make the debate about Iran seem pretty foolish. That just isnt the way it is. Simply put, a Gold bug is someone who understands Golds historical role as money and seeks to educate others in this regard while protecting their own assets from the abuses heaped on paper currencies by their custodians.
So today I, an admitted Gold bug, ask: Now
do we finally have your attention?
“So today I, an admitted Gold bug, ask: Now do we finally have your attention?”
I’m sorry.... now what were you saying?
Man Arrested At B.C. Border With Terrorist Resources
Syrian man was arrested at the Canadian Border last month with $800,000 in gold coins
Question...how did the Bretton Woods agreement work, why was it eliminated, and would something like that be worth re-kindling?
I think the “ammo bugs” have the more realistic outlook. If this economy collapses we’ll be trading in bullets, beans, and bandaids, not gold.
I bought gold about 10 years ago when it was $288.00 an oz . I guess I should cash it in now for worthless dollars and buy more now at $1,011.00 right ? 0bamanomics at work . Share my good fortune or wealth redistribution .
What's your take on how gold's price has fluctuated over past century or two?
Depends. If 10 years ago, you had a $100,000 mortgage and $30,000 in gold...and today your gold is worth $140,000...and your mortgage is still $75,000...you could cash out 75k and be better off.
In other words, it depends on your overall situation.
All this gold people are buying...all the ads, bring in your unwanted jewelry...where is it going?
it’s being used to electroplate tungsten bars so that they can be sold to gold ETFs...
If you are talking about physical metal, certainly.
If you are talking about paper that SAYS I have metal, of course not.
I get calls about the latter all the time. My responses are dismissive and rude.
I bought 10 Krugerrands 8 months ago and am up 46.4 %. I guess you could say.....so far so good. Ummmmm...I wish I bought 50 Krugerrands instead of 10 but I was a bit cautious since I never owned physical gold before. :-(
How do you do your check to make sure the gold bars are not the ones found stuffed with $10-a-pound tungsten? Go into the bank vault and drill them?
“...stuffed with $10-a-pound tungsten?”
When it all comes down, you’ll be glad you have that tungsten.
It tastes great with beans!
FWIW, the time to buy gold was 3 years ago.
When *everybody* is saying buy, it’s long past the right time to buy - same is true with any investment, be it real estate, bonds, stocks, porkbellies, whatever.
Where does one just store bars of gold though?
No, you pay money for the same crooks, scoundrels and thieves to “assay” them for you.
Sure, buy plenty of ammo (and food) first.
But if you have to flee for a safe haven, how much wealth can you carry on you in ammunition?
Gold is literally “flight capital.”
Can you offer a shred of proof to back up your rumor?
I could just as easily post that you are a Chinese communist spy disguised as an American, with equal "proof."
Ending B-W was the final step in a process that took almost seven decades. Nobody's going to say we were better off in 1910 than we are now. At least not with a straight face maybe...
Gold was pegged at 35 bucks an ounce (after confiscation from the public and banks) in the US. Treasury stood ready to buy and sell to foreign central banks at that price. Other countries pegged their currencies to the dollar, thus providing a link to gold. The US ran out of gold by 1968, and by 1971 all currencies were floated, and not backed by anything other than taxing authority, etc. There isn’t enough gold to run a world economy.
Read about the gold plated tungsten bars last night on FR. Scary! and has klintoon written all over it.
ping for later
Why so defensive???
Check this link the PRC bragging about gold plated tungstan bars AND coins http://www.tungsten-alloy.com/en/alloy11.htm
I read that too. I checked the density of tungsten (19.25) and gold (19.32) and they are close enough there might be some truth to that. Making the tungsten bar just fraction of millimeters larger in all dimensions would make it weigh exactly what a true gold bar would weigh. The size difference would be too small to tell without exact measuring instruments. Scary.
In that case...do just that.
How do you do your check to make sure the gold bars are not the ones found stuffed with $10-a-pound tungsten?
You offer ZERO proof, just some illiterate Chinese website offering to make tungsten jewelry with a gold veneer.
Please link a sourced article on actual gold bars being traded, that have been found with tungsten cores.
Not rumor mill articles from bogus websites. Actual articles, from real news sources.
Or is a grand conspiracy afoot, where thousands of traders, reporters etc are all refusing to print the truth that you somehow know?
A simple drill would discover the fraud. You are posting what would be a huge story. Please post a link to a real article about gold bars being traded, that were found with tungsten cores.
I will eagerly read them.
Just don't post juvenile rumors and bogus websites as "proof."
Please post a link to an actual news story proving this.
Nobody would electroplate gold over tungsten. A simple scratch test would reveal the tungsten. Now, a tungsten slug could be molded inside of a gold bar, that’s true. But if these rumors have any basis in fact, then when physical delivery is made, a simple assay test involving a drill will reveal the fraud, and the “tungsten scare” will soon be behind us.
I invested in copper last year and I’ve doubled so far.
Not good to act sooooo defensive. Makes folks start to wonder what someone’s hiding or trying to peddle.
Straight out tell us this gold plating of 640,000 tungstan bars in Fort Knox ain’t so, that the story is all wet.
“””””When *everybody* is saying buy, its long past the right time to buy - same is true with any investment, be it real estate, bonds, stocks, porkbellies, whatever.”””””
I agree in a normal market but with the gov. spending the dollar into infinity - dollar collapse, or significant devaluations are likely.
Commodities like energy or food will always be in demand regardless of other asset declines and can serve as store of wealth. You have to be an active investor, there is a time to be in gold and at times to be in other assets like corporate bonds, RE or stocks, each has it’s day, sometimes years
Dow 10,000 today is inflation adjusted to Dow 7,500 in 2000 dollars
If you truly believe the dollar is going to appreciate over the next 5 years keep your paper money in your mattress, If you think it is going to fall significantly you want to put it somewhere where you will preserve it’s value.
The trend is your friend
Place your bets and we will see where it all settles out in 5 years.
LOL, "Ammo bugs": Coined term of the day!
I happen to agree, but am playing it safe by having pre-1965 silver coins too.
Coincidentally, I just sold off all my gold. I think we're at a peak, and I expect a correction soon, probably down below $900 (at which point I'm going to buy up a bunch again).
Not enough for 100% reserves maybe, but that was never the issue. The real problem is that the price of gold is just not stable enough. People complain about inflation/deflation a lot these days but what we got now is heaven compared to what we had with gold.
Do we still own real gold??? I have no idea.
THIS IS A MUST READ !!
As much as people love $1,114/oz gold now, with inflation it's only twice what the price was in 1935. That same time frame saw a 120-fold increase in the real value of Dow Industrial stocks.
Seems like the trend is really trying to say something here.
“well be trading in bullets, beans, and bandaids”
That was the investment advice I got. Food, medicine, ammo.
And I’ll add toilet paper, people will trade six cans of beans for a roll of TP.
“Where does one just store bars of gold though?”
Lost-wax cast the gold into the stature of a bird, and paint it black, then hide it in plain sight.
The fallacy in the equation is making Gold equal to a fixed amount of Currency, instead of the Currency equal to an amount of Gold. Had the latter been set, then the value of the currency would track with the Gold price - but then the banksters couldn't steal with their fiat money games.
See my #42.
Look at the rigidity modulus. Tungsten is much stiffer than gold and will ring like a bell if you tap it. I have a W block and it practically sings. My gold bar...well I don’t have one.
Bulk Modulus W 311, Au 171
Rigidity W 160, Au 26
Young’s W 411, Au 79
They are pretty different thermally, too. Au is three times more thermally conductive and will feel chillier longer if you hold it. This is why wood feels warmer than aluminum even when they are the same temperature.
I didn't think people were supposed to know about that. It was found by AA analysis, and I had heard about it in the '80's, working in that field, but never heard anything about it again. Weren't they Maple Leafs?
Having $20 always equal to one oz. of Gold doesn't mean we have stable prices. Money's needed for wages, for rent, and for food, and it's those prices that matter.
In terms of wages, rent, and food we got a price of gold that jumps all over the place from one month to the next and always being able to buy gold at the same price is irrelevant.
Without mentioning home safes, consider that people have been burying it safely in the ground for centuries, if not millenia. Look at all the hoards that have been discovered this year alone. Nobody stole it, the Governments did not sieze it, till centuries after the owners had been worm food.
Well, if an ounce of gold is $1000 then $1000 is an ounce of gold. So much for your fallacy.
Adjusting for inflation shows how much of everything else an oz. of gold can be traded for.
Thanks for the additional information.