Source: Bianco Research

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The Financial Times – Bernanke’s QE silence a blow to gold price
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The 5 per cent fall, gold’s largest daily drop in more than three years, has triggered a nervous reappraisal of the precious metal among some investors: how strong can the fundamentals of the market be, they ask, if a non-denial from the Federal Reserve chief can have such a marked impact? The nervous shake-out has continued this week with gold on Tuesday dipping below its 200-day moving average, a technical indicator closely watched by traders, for the first time since mid-January to touch a low of $1,664 a troy ounce. Many analysts and investors believe the eventual shift to monetary policy tightening by the Federal Reserve will mark the end of gold’s decade-long rally, which has lifted prices from less than $300 an ounce in 2001 to almost $2,000 last year. By promising to keep rates at zero until 2014, therefore, the Fed has pushed back the gold price peak, which many analysts had expected to come in late 2012 or early 2013. “The consensus within the Fed to extend the zero interest rate policy to beyond 2013 does, all other things being equal, imply an extension of the gold bull market,” says Philip Klapwijk, head of metals analytics at Thomson Reuters GFMS, a leading precious metals consultancy. “Maybe in the short term QE3 matters,” agrees a gold specialist at a large hedge fund. “The more important thing is that rates are on hold and I don’t think that is going to change.”

Category: Gold & Precious Metals

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

43 Responses to “Time To Sell Gold?”

  1. Yah might want to listen to Evon von Greyerz before you sell your gold.

  2. I’ve started becoming more and more bearish on gold. I keep seeing tons of Cash for Gold shops popping up in affluent communities, commercials on tv about gold investing, etc. Once I see a celebrity with a tv show or informercial telling me how I can make a killing in gold, I’m going short.

  3. eddiebe says:

    Selling gold in what is arguably the greatest financial fractional paper bubble the world has ever experienced would be reckless at best and totally insane at worst.

  4. louis says:

    Have they offered I/O loans to buy Gold yet?

  5. Frilton Miedman says:

    The primary reason for gold’s increase has been currency devaluation.

    Where gold has increased 7X over the last decade, that means the dollar is worth 1/7th it’s value over the last decade, or that inflation has increase 7X.

    Uh, wait…that doesn’t add up, does it?

    OK, then let’s say gold is a predictive indicator of future printing…uh, no, that doesn’t work either.

    OK, golds industrial applications are increasing demand?…no, not really.

    What would increase demand so much?

    Me thinks warehousing by the TBTF’s.

    As with the CDO scandal, where they promoted derivatives based on garbage sub-prime loans as “triple A” assets to intentionally bloat housing prices while shorting them outside public view and then finally manipulating/cornering oil futures to starve the middle class consumer of disposable income and trigger the onslaught of mortgage defaults to collect on their short exposure.

    With gold, all they have to do is release enough warehoused physical at the right time to inundate supply & cash in on counter-positions.

    Then, when/if the lawsuits pour in, they pay a small fraction of their gains in out-of-court settlements.

    Owning the government is an incredibly lucrative business.

  6. mathman says:

    Thanks Frilton for elucidating the issue so succinctly.

    People taking the big banks to court are liable to encounter MEN IN TIGHTS, though:

    http://www.dailymail.co.uk/femail/article-2111246/Brosiery-mantyhose-men-seek-warmth-comfort–fashion-statement-patterned-tights.html

    oh my!

  7. crutcher says:

    What would you think of this chart if in the next 5 years the price ranged from say 1400 to 2000? Consolidation at these levels is possible, which if fundamentals are favorable leave plenty of room above.

  8. thetruthseeker says:

    Before even considering selling gold, you might want to read Jeremy Grantham’s firm’s report on how gold’s move has primarily been driven by emerging market consumers. This makes perfect sense when you consider the fact that China and India alone account for close to 60% of total global gold demand. Just go to http://www.gmo.com and you can find the report. More importantly, we are in fiat currency bubble and gold is extremely underowned when you look at it as a percentage of total financial assets.

  9. CSF says:

    Yes, it might be a good idea to sell gold if the following appear likely:
    1) The Federal government can shrink the deficit below 3% of GDP .
    2) The Fed can unwind a 3 trillion dollar balance sheet and raise rates.
    3) Despite the austerity of steps 1 and 2 the U.S GDP continues to grow at 2.5% or better, placating the voters while providing sufficient tax revenue to finance the Federal debt valued at 101% of GDP.

  10. carleric says:

    The death of gold has been proclaimed by the sell-side for years while touting equities which have gone exactly nowhere. What will happen is not really predictable. You have to remember you have a real ignorant SOB in charge at the Fed. Heck, I remember when most people worshipped at the feet of Alan Greenspan. I will sell gold when Dennis Gartman starts buying. He is the greatest prognosticator of gold to fade.

  11. DeDude says:

    If it was only owned by gold-bugs it would be like “no problem”. But a lot of speculators and people with no emotional attachment to the yellow metal are owners and sellers of it.

  12. bonzo says:

    CashForGold signs is NOT an indicator that gold is topping out. Rather, it is an indicator that (a) many Americans are hard up and need to sell their possessions for cash; (b) gold price is high enough that CashForGold businesses can offer a non-laughable amount of money for someone’s beloved gold necklace or gold tooth and also pay their overhead expenses and still have some profit left over.

  13. yankee19 says:

    What has changed? Gold rallied from low 1500′s to almost 1800 – then had a huge 1 day drop and correction. Is that the end of the bull market? We are gonna have negative real interest rates for years to come along with enormous currency devaluation to liquidate government debt – see Carmen Reinhart’s historical perspective in “The Liquidation of Government Debt”

    http://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf

    Gold, over the course of this bull market, is going much higher…

  14. gordo365 says:

    CSF – you nailed it.

    I you think US is going to pay off it’s debt in today’s dollars you are crazy.

  15. woolybear1 says:

    I own a lot of physical and I am not sure at all about holding it. I wish Barry would offer an opinion?????

  16. yankee19 says:

    woolybear1, why would you hold ‘a lot of physical’ if you aren’t sure about it?

  17. Randel says:

    I am recalling this from memory, and we know it if faulty per BR’s recent posts; but I was a kid then and recall Reagan allowing Americans to hold gold again in the early 80s, just as prices peaked. The Governments around the planet then dumped their holdings, driving the price down. So watch out. They have that incentive again.

  18. yankee19 says:

    Randel – what did sovereign debt and deficit levels in the early 80s compared to now? Global Central Banks, particularly Emerging Markets’ CBs like China and India, are adding to their gold reserves…

  19. Petey Wheatstraw says:

    Jeez, here we go, again.

    Frilton:

    If “they” (the Fed) release physical, then “they” (foreign central banks) and individual and institutional investors will scoop it up in a flash.

    After the past week’s correction (a British/US event, IMO, and tres foolish), the reclamation of value has been steady, as usual.

    http://www.kitco.com/charts/livegold.html

    In fact, I don’t think it can reasonably be called a correction (a correction being, again, IMO, a steady sell-off , of greater magnitude, and lasting days or weeks — not a sudden sell-off event of 5%).

    re: the top chart: There are valid reasons why gold has maintained its upward momentum during this time of uncertainty, and those reasons are still valid.

    As for manipulating gold as they would any other commodity, gold is different (for reasons that are stated at many places, and repeatedly). Example: If King Tut were alive today, he would want your gold.

    As I have said before, I’ll start to worry when gold goes to $600/oz. If it goes below that, I’ll sell all I own and buy more.

    DollarsAndCocktails:

    Doesn’t it seem strange to you that stores are opening for the purpose of BUYING gold? Doesn’t it also seem strange that the recent decision against those selling less-than-gold to the witless was solely because what they were selling was not actually gold and/or was sold based on deceit by trusted personalities?

    What do you think would happen if suddenly, someone opened a store offering top dollar for residential RE?

    http://motherjones.com/mojo/2012/02/glenn-beck-gold-compay-forced-refund-45-million-defrauded-customers

  20. …recall Reagan allowing Americans to hold gold again in the early 80s…

    Nixon, and the ‘early 70s’ ..
    ~~

    “…there’s another date in gold’s history that should be celebrated: January 1, 1975, when all restrictions on owning gold were lifted.

    Why no mention of April 5, 1933, and January 1, 1975?…”
    http://www.lewrockwell.com/blumert/blumert35.html

  21. Petey Wheatstraw says:

    Randel:

    I don’t think anyone dumped gold because of Reagan. I do, however, think that Nixon’s depegging from it, followed by the Carter/Volker raise in interest rates, had quite a bit to do with it. This was followed by Greenspend’s perpetually low interest rates, and then gold went mano-a-mano with the dollar, and kicked the living shit out of it.

  22. Petey Wheatstraw says:

    woolybear1:

    This above all else — to thine own self be true.

  23. Dollar & Cocktails, you might want to look up Minsky’s Bubble checklist and see if some celebrity is an indication that something is in a bubble.

    Eddiebe nailed it.

    Louis nailed it.

    TheTruthSeeker nailed it.

    CSF nailed it.

    Bonzo nailed it.

    Yankee19 nailed it.

    Gordo365 nailed it.

    Petey nail it.

  24. Robert LeRoy Parker says:

    Hi Peter Wheatstraw,

    You are right on with the Volker fund rate increase breaking gold. He also let the market take the prime rate way up to finally squash inflation. The beginning of this action started at the Fed meeting on Oct 6th, 1979, a day or two after Volker had a meeting with the g-10 in Basel. In the fed minutes from Oct 6th, Volker has the recorder turned off before he talks about what the Europeans had to say to him in Basel. I wonder what took place in that meeting at the BIS? Probably something along the lines of the Europeans telling Volker to get your act together because you’re going to collapse the whole international finance system if gold keeps running away.

    However, there is another big factor that kept gold down for those 20 years and that was the advent of the otc gold market (LBMA) and gold forwards. The huge amount of paper gold that was created at the LBMA synthetically increased the supply of gold by massive amounts, effectively diluting the value physical gold.

    The spot paper gold is still a giant as the LBMA’s daily turnover as of q1 2011 was 240 billion daily. That is a lot of currency looking to hedge in gold. Far far greater than the comex where people operate on margin. So how does the price rise in gold fit in with the LBMA’s continued operation and paper gold dilution? I suspect the price is managed upward given the tight channel gold has maintained for years now. Why? Most likely because value expansion acts stretches the supply of actual physical gold which is inherently limited and probably long since cornered by central banks and sovereign wealth funds.

  25. louis says:

    I wonder if Greenspan bought any Gold in 1999, 2000?

  26. NoKidding says:

    “I keep seeing tons of Cash for Gold shops ”

    Both sides of the transaction can’t be wrong. Which one is more likely to know the right price?

    At some point the USD is going to do an N:1 split to pay off bond holders.

    Is N 2,7,10? Thats what Greece is negotiating right now. The US is not Greece – it’ll be easier because it can be done unilaterally after the federal reserve bank is nationalized.

  27. Sechel says:

    Depends if Gold is a hedge or a trade.l

  28. Randel says:

    Petey, Mark, & Yankee19:

    You are right. President Ford did allow gold ownership again. On April 5, 1933 Americans were made criminals by FDR for holding\hoarding gold. My faulty memory was recalling the Gold Bullion Act of 1985 sponsored by Ron Paul, signed by President Reagan, authorizing Golden Eagle coins. By then the gold price had already started to come down. I stand corrected, and should not have implicated Reagan. The facts cited above are from the US Mint.

    For some reason, I still have this vague sense that foreign governments were selling gold in the early 1980s.

  29. Frilton Miedman says:

    Petey Wheatstraw Says:
    March 8th, 2012 at 2:14 pm
    Jeez, here we go, again.
    “Frilton:

    If “they” (the Fed) release physical, then “they” (foreign central banks) and individual and institutional investors will scoop it up in a flash. …..”

    Petey,

    In perspective, there are approximately 175,000 tons of Gold in existence globally.

    The top 14 central bank holdings, plus SPDR GLD holdings, account for less than 35,000 tons, that’s 20% of global holdings.

    Who owns the rest?

    What happens if, say, a colluding group of holders who collectively own 15, 25 or 50,000 tons decide to simply dump it onto the market after positioning themselves short?

    I read your whole reply and not one word has displayed the “why” behind golds valuation beyond parroting the usual “devaluation” song…the doom and gloom, fearful message that rings soooo familiar with the “rationale” for many imposed standards of late.

    I revert to my original point, if gold values as dollar devalues, how is it that gold has increased exponentially to the dollars devaluation?

    The dollar has devalued to 1/28th it’s value in 1900, but most of that devaluation occurred before 1980….so why is gold only now soaring?

    Before you answer, take a peek at a Gold chart from 1980- to 2000….that’s a whole lotta pain there, gold went nuts in the late 70′s and then it was 20 years of misery.

    Better yet, take a look at a 400 year chart of Gold….at around 1500 B.C. gold was worth more, in current dollars, than it is now.

  30. Frilton Miedman says:

    Petey, not to be redundant, I couldn’t resist reposting these -

    “There are valid reasons why gold has maintained its upward momentum during this time of uncertainty, and those reasons are still valid.”

    ~~~~

    Uh, really?…simply reiterating “there are valid reasons gold has maintained upward momentum” makes a fundamental argument?

    ~~~~
    “As for manipulating gold as they would any other commodity, gold is different (for reasons that are stated at many places, and repeatedly). Example: If King Tut were alive today, he would want your gold.”
    ~~~~

    “for reasons that are stated at many places, and repeatedly”

    Ever hear the story of Joseph Kennedy and the shoe-shine boy in 1929?

  31. Robert LeRoy Parker says:

    Hi Frilton,

    What happens if, say, a colluding group of holders who collectively own 15, 25 or 50,000 tons decide to simply dump it onto the market after positioning themselves short?

    This is a highly implausible situation. People that have giant sized wealth don’t need to dump their physical gold for any reason. It is the ultimate reserve asset; dumping it for a shorting opportunity is not worth the risk considering the volumes of paper gold traded at the LBMA. The value of the entire stock of above ground physical gold is cleared many times annually.

    A different question you should perhaps consider is, what happens when a colluding group of unallocated paper gold holders collectively demand to have their positions allocated into physical? Or what happens when the gold market enters a sustained period of backwardation?

    I’ll remind you that the LBMA is a fractional reserve gold banking system.

  32. Frilton Miedman says:

    Robert, let’s rewind to circa 2005-2007, then, replace “gold” in your statement with another asset class

    “This is a highly implausible situation. People that have giant sized wealth don’t need to dump their >MBS assetsMBS derivativesNYSEMBS, CDO and CDS derivatives< is cleared many times annually."

    Once the real estate market was so obviously overvalued that the conclusive outcome was a crash, short positions were a near guaranteed winner for those who knew what CDO's actually were comprised of….the rest of us were made to believe they were just simply "triple A" assets, perfectly fine to depend on for your life savings & pension..

    It helped that while CDO's were being pawned s "triple A" at the same time the entities that stood to benefit from a real estate crash were also able to corner the oil futures market, inflate gas prices to ensure an onslaught of defaults by constricting disposable incomes..

    The Pentagon, concerned with financial terrorism, went as far as to investigate it and concluded the crash of '08 may have been engineered. – "the attack has three stages, two of which may have already been implemented:
    The first phase was a speculative run-up in oil prices …."
    -http://www.globalconflictmaps.com/2011/03/01/kevin-d-freeman-2008-financial-crisis-work-of-economic-warfare-by-financial-terrorists/

    Where Bernie Sanders recently "leaked" CFTC records from 2007-2008, it would appear the "terrorists" were situated right in downtowm Manhattan.

    To do the same thing with gold would be even easier, skip having to manipulate a secondary market to stimulate the crash.

    Again, I revert to my original point, if gold values as dollar devalues, how is it that gold has increased exponentially to the dollars devaluation?

  33. Robert LeRoy Parker says:

    Frilton,

    Replacing the “physical gold” in my statement with “MBS, CDO, CDS, etc” is beyond ridiculous. None of these are a reserve assets and all have huge counterparty risk, e.g. subprime mortgage holders. Physical gold on the other hand has zero counterparty risk (beyond movie quality bank heists), and is in fact defined by the IMF as one of two assets without a corresponding liability, the other being the SDR.

    The comparison is simply invalid.

    As for your question, I never asserted there was a direct numeric correlation between the dollar and gold as perhaps some others have. I proposed that the price of gold may have in fact been carefully managed upward, which is in direct contradiction to most gold bugs that constantly assert downward suppression.

  34. Frilton Miedman says:

    Robert, let’s have this “ridiculous” conversation in 1979.

  35. Robert LeRoy Parker says:

    Frilton,

    The LBMA didn’t exist in 1979. If you look at my first post on this comment form I agreed with Petey Wheatstraw that Volker was able to brake gold by raising rates and inducing recession. I’ll also point out that the US current account was nearly balanced at the time and the entitlement situation, budget deficit, and total debt were all far more manageable. Further the Euro did not exist and China was not an economic superpower in the process of forming a currency bloc.

    Raising interest rates currently is out of the question until at least 2014 as Bernanke has told us. Additionally people are so fearful that they are chasing zero yield coupons for safety. Even paying for the safety of t bills in some cases. The overwhelming fear is of deflation, as opposed to inflation ala 1979.

    I’m happy to talk about 1979, as I find it very interesting and useful to learn from. But simply saying 1979 does not prove anything.

  36. [...] Fed Hands – GoldSilver Silver’s fresh swings heighten need for strategy – MarketWatch Time To Sell Gold? – The Big Picture ECONOMY/WORLD/HOUSING/BANKING A Philosophical Look at Unemployment – [...]

  37. Prinicipal Programmer says:

    Clearly the gold rise has served its purpose – signaling a message of financial instability – and that fact has been noted by policy makers and the proper changes have been implemented. We should be good to go, ‘hunky-dory’ one might say, moving forward.

    So yes, I think it’s a good idea to get out of physical gold now, and move into T-Bonds & Stocks, preferably all in IRS / Fed approved and registered brokerage and retirement accounts so they can ‘means’ test me and have accurate cost basis information.

    Political/Establishment 2012

  38. Frilton Miedman says:

    Robert, the LBMA’s systemic problem of turning gold to paper only reinforces my point that gold prices are probably being pumped prior to a dump.

    Most buyers of gold are oblivious to this, every bit as they were oblivious to what CDO’s were comprised of – they only went with group-think, relied on in media (CNBC) promotion and trust for ratings agencies.

    group-think

    This is why I quoted Petey’s statement “for reasons that are stated at many places, and repeatedly”, that’s a Joe Kennedy/shoe-shine boy moment if I’ve ever heard one.

    The “ridiculous” assertion that this has similarities to the CDO market stands.

    The LBMA is acting in the role of S&P/Moody’s/Fitch during the CDO fraud in this scene, simply acting to pump prices for the advantage of friends in high paces that understand what’s really going on….outside of group-think public understanding.

    At the height of the CDO bubble, no one could answer what those instruments were specifically comprised of, the info was being suppressed from public view – read the story of Kyle Bass to understand how lucky he got in bumping into someone who packaged them after many months of searching.

    The TBTF’s bloated RE prices through artificial credit driven demand and by intentionally pumping the market full of fraudulently rated CDO’s – worthless paper comprised of 90% liar loans rated “TRIPLE A”, shorting them behind the scenes, and then stimulating oil prices to constrict an already extremely over-leveraged consumer.

    An argument is can now be made that LBMA is doing the same with gold.

    When you want the skinny on gold conspiracies, you go to GATA.

    Your question of “what happens when paper holders request physical” only ratifies my point, GATA estimates there are 50,000 tonnes of paper gold that isn’t physically represented, that’s 30% of all gold in existence.

    What happened with paper holders of worthless CDO’s?

    GATA also believes that the LBMA operates at the behest of central banks whom are motivated, as you note with Volcker’s past actions, to suppress gold prices.

    Why would the LBMA encourage a gold bubble?

    Because, when gold bubbles burst, gold prices remain suppressed for decades.

    Ironically, the existence of the LBMA vs 1979 only fortifies the idea of price manipulation, not debunk.

    In a day and age when government officials work in collusion with wealthy private entities to screw us, I’ve learned to give weight to conspiracy theories when sorting wheat from chaff.

  39. Robert LeRoy Parker says:

    Hi Frilton,

    I’ll try to address your points, although I’m not sure I followed all your thoughts clearly.

    You did not acknowledge that physical gold has no couterparty risk and no corresponding liability and therefore is nothing like a CDO. Paper gold is totally different on the other hand. I fully expect the price of paper gold to collapse as the LBMA seizes up when its fractional reserve foundation breaks. Weak hands that don’t understand why they hold gold will probably sell into this event to the line of people in the know. Physical gold is the ultimate reserve asset in the current system, that is all.

    As for GATA and group think. I do not go to GATA for the skinny on gold. I think GATA is pretty much exactly wrong. What I am suggesting is exactly the opposite of what GATA asserts in fact. I say the LBMA wants a rising price of gold so as to stretch the value of physical which cannot be easily printed like paper. GATA says the bullion banks act in concert with the central banks to suppress the price of gold to instill confidence in fiat. Imo, fiat is a far superior medium of exchange than bullion and 99.9% of people will agree, so there is no need to worry about fiat vs gold, and most everybody does not. The real battle to pay attention to is sovereign debt vs gold, and one could very easily that the world is amidst the largest bubble in history, that of sovereign debt, right now.

    >LBMA encouraging a gold bubble so that it can burst and price will remain suppressed.

    I don’t agree with this statement. Imo, it is far more likely that the LBMA doesn’t want the paper gold bubble to burst because it will be systemic and break the whole international finance system. Picture lehman times 1000. After all, the market makers at the LBMA are the same banks running wall street.

    We know from the LBMA’s own data that there is at least 240 billion daily turnover in gold and 90% of that is spot transactions. Yet there are only 7000 GD bars in the London vaults. It isn’t hard to deduce that the LBMA is simply paper moving back and forth between central banks, sovereign wealth funds, and a few of the richest giants in the world. After all, there are only 56 members allowed full gold trading privileges.

    What happens when one entity of sufficient size is refused allocation and then shout the emperor has no clothes? A run on gold occurs, price discovery breaks, paper gold goes to zero, and physical gold encounters infinite demand in the face of zero supply (beyond weak hands at the margin). Physical will cease to trade until price rises enough for a physical only market to emerge. Do you think the giant wealth at the LBMA will be content with cash settlements rather than physical in this situation? They will try to buy physical elsewhere until price discovery is found again.

    So in a sense I agree with you that paper gold can be compared to CDO’s, but the whole time I have been talking about physical gold, which is nothing like a CDO.

    Kyle Bass is very much in agreement with the previous sentence, as reflected by his actions and comments on gold.

  40. Frilton Miedman says:

    Robert, to quote myself on GATA – “When you want the skinny on gold conspiracies, you go to GATA.”, I did say “conspiracies”.

    I also mentioned “In a day and age when government officials work in collusion with wealthy private entities to screw us, I’ve learned to give weight to conspiracy theories when sorting wheat from chaff.”

    Unless you buy the idea that the government, the SEC, CFTC, and others in politics did not turn a blind eye to the CDO/mortgage scandal in exchange for “legal” favors, revolving doors, and campaign contributions, my point has no merit to you, it never will and we may as well stop talking.

    If I want food for thought, I look to extremes and decipher from there, I did not say GATA is necessarily fact, but they have been around a long time, they are unquestionably the single most focused organization on the topic, they will scour the topic for all potential details more than any other organization…granted, the same could be said of the National inquirer, but again, I look to them for a wider peripheral, not necessarily empirical fact or sole source of info.

    A point need be made regarding your sureness that gold cannot be compared to a real estate bubble.

    To a degree, you make sense delineating LBMA’s paper gold dilemma from real gold…however…

    The same point could have been made about “paper” real estate and “real” real estate in 2005….your point fails to delineate my mention that the LBMA fails to make any difference between the gold bear of 1980-2000 and now.

    If your point that “real” gold has merit, then “ral” home prices should be just fine.

    The argument on “counter party risk” makes no sense, Gold is a ghost of past currency standard…it has the same relative valuation risk that “real” real estate, commodity, softs, materials have, butsomething like real estate at least has an actual real world use, a real world value to it’s holder, Gold depends more on mass hysteria for it’s valuation.

  41. Robert LeRoy Parker says:

    –Who could disagree that politicians are by in large corrupt and the revolving door is a perversion.

    –GATA can be useful for some things imo, like digging up nuggets from official documentation, but it is their interpretation that suffers. I’d suggest reading ANOTHER (Thoughts!) for a more sensible version of what may or may not go on behind the scenes in the world of gold.

    –My sureness in physical gold as a reserve asset is no more than that of the central banks of the world. The “tradition” explanation from Bernanke is baloney.

    –I think there is no doubt that a large chunk of the western world academia that would like gold to be “a ghost of past currency standard,” and for it to be a simple commodity. But that just isn’t how the world works. Gold is basically religion in India, and it is certainly of huge importance to Asia and the Middle East. It can also be argued that the Eurozone is much more pro gold than the US, UK, Japan, etc.

    -People owning physical gold outright is very different from being heavily in debt for their house. People that own their house outright are just fine as there home still functions as a home to this day. If they bought at the top of the bubble for cash in hopes of making a profit, then that was not very smart. Right now the LBMA’s paper gold debasement interferes with gold’s function as a store of value. When paper gold blows up, people who own an ounce of physical gold today will still own it tomorrow. The difference will be that the LBMA no longer inhibits it from properly performing its function as a store of value.

    –You say gold depends on mass hysteria, maybe so (especially paper gold), but I say the same applies to sovereign debt.

  42. Frilton Miedman says:

    On the credibility GATA’s “conclusions”, the primary citation I make of GATA is verification of your own about the LBMA, regarding the paper gold problem – I’m not sure why any further discussion of them is necessary.

    On sovereign debt crisis’, they’re a lot more common than many seem to realize…it feels like the Greece drama was drawn out almost intentionally, replete with soap opera antics for good measure.

    On central banks holdings, one more time, the 14 largest economies only account for less than 30,000 of the total 175,000 tonnes globally, it’s not inconceivable to contemplate the idea they don’t have as much control as you believe they do.

    We’re running in circles, I debate the relative valuation of gold relative to home prices or any other tangible asset or commodity that has real use.

    Gold isn’t the only rare material on Earth, it has no major vital industrial application, no real physical use beyond jewelry and a pricey/replaceable electrical conductor – from where I stand there are two main reasons it’s value has exploded.

    1- The residual inability for old school Anti-Keynesians to let go of the past, like the older cavemen refusing to trust fire, off on the sideline warning the others that warmth comes at a dangerous hidden price.

    2-Hype, mainly political, all emotional. (It’s no coincidence gold bugs are also often 2nd amendment fanatics, “Soldier of Fortune” subscribers, Glenn Beck fans…etc)

    I think we can both agree that trading incorporates two extremes – FEAR and GREED.

    Either extreme is powerful in moving markets, gold utilizes both.

    With all the business media (FOX at least) talking fearful messages of global economic collapse, deep socialism conspiracies, Fiat destruction and end of days devaluation, it isn’t inconceivable to think gold is the perfect means to appeal to both emotional extremes.

    In terms of fundamentals, show me why gold has exploded so exponentially relative to the devaluation of the dollar, and no – NOT anticipated devaluation – I mean actual devaluation, the whole thing is very CDO-esque.

    That’s my story, I’m sticking with it.