Gold and Silver
December 5, 2012
Jim Kingsland is off today due to illness. If you haven’t, please be sure to watch this video.
Gold may be weak again due to year end selling pressure, but its bull market remains intact.
Goldcore has graciously given CAMI permission to put its educational video about gold on the CAMI site.
This is definitely worth a watch. If the pace is too fast, use the players pause button to read the information more slowly. If the music is not your style, turn the volume down. I like both the pace and the music. This is a well done presentation!
October 27, 2012
Is there gold in Fort Knox?
It’s a question that has been increasingly asked as the state of U.S. finances deteriorates. While American currency is fiat currency, or backed by nothing, the U.S. government claims that it has possession of nearly nine thousand tons of gold, making its cache of the yellow metal - the largest gold stockpile in the world. The veracity of the U.S. claim is critical as such a large gold reserve represents an important national asset valued at a half-trillion dollars.
The U.S. says it stores most of its gold at Fort Knox, Kentucky - the remainder of which is
held at the Philadelphia Mint, the Denver Mint, the West Point Bullion Depository and the San Francisco Assay Office. Those who are doubtful of what exactly is in Fort Knox are frustrated with the U.S. Treasury which has steadfastly refused to conduct a new audit of U.S. gold holdings since its last accounting nearly 40 years ago.
Not since 1974 has a member of the public been allowed access to Fort Knox. In that year, a group of reporters were shown one vault filled floor to ceiling with gold bars. The reporters were not allowed access to any other vaults within Fort Knox and no audit of gold at the facility has since been conducted by the U.S. Treasury.
David L. Ganz (pictured at left), a veteran numismatic journalist, author and attorney was part of the group reporters who toured Fort Knox in 1974 and was shown the single gold filled vault, but not all of the vaults within. He confims he did see gold bars, but not the entire stash of U.S. gold at the depository.
Listen to a recent interview of Mr. Ganz conducted by CAMI’s Jim Kingsland. Click the link below to hear what Mr. Ganz saw for himself nearly 40 years ago at Fort Knox. Decide for yourself after hearing this compelling interview of an eyewitness to history:Top
October 2, 2012
I don’t normally do a cut and past, but this piece of work by PIMCO should be looked at for the straight, or “simple” facts about gold:
GOLD – The Simple Facts
- For more than a millennium, gold has broadly managed to maintain its real value, even as various currency regimes have come and gone.
- The supply of gold is constrained, and we see demand increasing consistent with global economic growth on a per capita basis.
- Given current valuations and central bank policies, we believe investors should consider including gold and other precious metals in a diversified investment portfolio.
Article Main Body
When it comes to investing in gold, investors often see the world in black and white. Some people have a deep, almost religious conviction that gold is a useless, barbarous relic with no yield; it’s an asset no rational investor would ever want. Others love it, seeing it as the only asset that can offer protection from the coming financial catastrophe, which is always just around the corner.
Our views are more nuanced and, we believe, provide a balanced framework for assessing value. Our bottom line: given current valuations and central bank policies, we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies.
We believe investors should consider allocating gold and other precious metals to a diversified investment portfolio. The supply of gold is constrained, and we see demand increasing consistent with global economic growth on a per capita basis. Regarding inflation in particular, we feel that the Federal Reserve’s decision to begin a third round of quantitative easing makes gold even more attractive.
We see the Fed’s actions in the wake of the financial crisis as a paradigm shift whereby the Fed is attempting to ease financial conditions and encourage risk-taking by increasing inflation expectations. Its policies will likely result in continuous negative real interest rates because nominal rates will be fixed at close to 0% for the foreseeable future.
To be sure, gold isn’t the only asset with the potential to hold its value in inflationary times. For U.S. investors, at least, Treasury Inflation-Protected Securities (TIPS) offer an explicit inflation hedge. What’s more, TIPS tend to be less volatile than gold and, if held to maturity, are guaranteed to receive their principal back – barring a U.S. government default (which we see as incredibly improbable). Still, history shows that gold is highly correlated to inflation and has unique supply and demand characteristics that potentially lead to attractive valuations.
A unique store of value
For more than a millennium, gold has served as a store of value and a medium of exchange. It has broadly managed to maintain its real value, even as various currency regimes have come and gone. The reason is that the supply of gold is not at the whim of any governmental power; it is fundamentally supply constrained. Total outstanding above-ground gold stocks – the amount that has been extracted over the past few millennia – are roughly 155,000 metric tons. Each year mines supply roughly 2,600 additional metric tons, or 1.7% of the outstanding total. This is why gold can be thought of as the currency without a printing press.
The downside of gold is that it generates no interest. One ounce of gold today will still be only one ounce next year and the year after that. Because of this, gold is sometimes referred to as a non-productive financial asset, but we feel this characterization is misleading. Rather, we believe gold should not be thought of as a substitute for equities or corporate bonds. These have equity or default risk and therefore convey risk premiums.
Instead, gold should be thought of as a currency, one which pays no interest. Dollars, euro, yen and other currencies can be deposited to receive interest, and this rate of interest is meant to compensate for the decline in the value of paper currencies via inflation. Gold, in contrast, maintains its real value over time so no interest is necessary.
Today, the forward-looking return on holding U.S. dollars, and most other major currencies, has been artificially lowered by the Fed’s commitment to keep interest rates pegged at near zero for the next few years; real yields on U.S. government bonds are negative out to 20 years. In such a world, we believe the desire and willingness of investors to hold gold relative to other currencies increases dramatically, creating the potential for continued price appreciation.
The real price of gold
Of course, investors must also consider valuation, especially since some believe gold is overpriced. Figure 1 shows the inflation-adjusted value of gold since 1970. There is no doubt that gold prices, which averaged $1,630 in August, are high. However, in inflation-adjusted terms, gold is 12% below its 1980 peak. Inflation in 1980 hit 15% year-over-year, and inflation today is running much lower so some may question the validity of comparisons to 1980. While we believe that inflation over the next several years is likely to be higher, on average, than it has been over the past 20 years and that the tail risks are for much higher inflation, this speaks more to the outlook for the nominal price of gold.
The price of gold in real or inflation-adjusted terms is less affected by the rate of inflation and more impacted by the level of real interest rates because as discussed previously, it is the real interest rate that drives the relative attractiveness of holding gold relative to other currencies. With real interest rates negative on average for the next 20 years, it is of little surprise that gold is trading near its all-time inflation-adjusted high.
Even the inflation-adjusted value of gold doesn’t tell the whole story, however. Thanks to productivity gains and economic growth, per capita GDP is significantly higher today than 30 years ago. Thus, the average person today has more wealth and, all else being equal, can afford to pay relatively more for gold.
To Chinese, gold has never seemed less expensive
Figure 2 shows the ratio of gold prices to per capita GDP in the U.S. and China. In dollar terms, gold is still 34% below its 1980 peak, as U.S. per capita GDP is higher today. Furthermore, this is a relatively U.S. centric view, and considering that China represents the largest source of global gold demand, we believe investors take an overly myopic view at their peril. Chinese per capita GDP has grown at an 18% annualized rate for the past 10 years, compared with just 3% per year in the U.S. Thus, while gold might seem quite expensive to those of us in developed economies, its price seems much less expensive to those in faster-growing emerging economies like China.
Another way to think about the relative value of gold is to consider what a return to the gold standard might look like. In other words, what if the entire world’s gold were used to back the global supply of fiat currency? Globally there are roughly $12.5 trillion in physical and electronic currency reserves. Given that there are 155,000 metric tons of gold above ground, this equals an approximate price of $2,500 per ounce if all of the world’s reserves were to be backed by the entire stock of above-ground physical gold.
Not really so pricey
These points lead us to believe that gold valuations are not as stretched as a naïve look at its nominal price might suggest. Central banks globally are seeking to depreciate their currencies in a beggar-thy-neighbor attempt to stimulate their domestic economies (the Swiss National Bank is a prime example). Therefore, we believe investors should consider owning gold, precious metals and other assets that store value as long as central banks continue to print and maintain negative real interest rates.
September 29, 2012
And the winner is….. SILVER (from Finvez.com):Top
September 28, 2012
Yesterday I noted that gold was at an all time high against the Euro. There is another way to express this. The euro (and the Swiss franc) are at RECORD LOW VERSUS GOLD.
As if to riddle you with the question – ‘Which came first the chicken, or the egg…” Which is it? Is it that gold is going higher against these currencies, or is it that the franc and the euro are falling versus gold? That’s one of those loaded questions where both answers could be right. However, since every day society pretends that paper currency backed by nothing is the medium of exchange, the paper funny money that dominates society is what is being taken to the proverbial shredder and declining in value so that it is the haggard state of paper currencies reflecting underlying economies that is declining.
The declining paper currencies are a stark reminder that gold stands as true money in that we humans assign it an intrinsic value that can only be enhanced when it is compared to something as fleeting as paper fiat currency which has an average historic shelf life of 40, or so years.
Once upon a time there was the old saw that an ounce of gold was worth a nice suit of clothing. That is no longer that case. While some can afford $2,000 suits, there are plenty of decent suits to be had for $800. Gold is not at $800 any more because of the problem with declining fiat currency. It’s not that gold has become less valuable but that dollars have lost value that it now takes roughly a HALF-OUNCE of gold to buy a fine suit.
With trillions in planned FED balance sheet expansion, trillions in expected budget deficits and trillions in unfunded mandates expect more paper currency deterioration. So far, as the reserve currency of the world, the U.S. dollar is fortunate to be above record lows against gold, but by only a few hundred dollars. Sadly that will change soon enough.
You know, I use that word “sadly” in a very serious way. It is not as if I am cheering for the demise of the so-convenient to use dollar bill. While I realize gold will be a financial fallout shelter for future dollar implosion, I can’t be happy that severe dollar debasement is on the way, especially when I consider the future in the context for my childred ages 8, 12 and 16. Tough times lie ahead. This generation’s financial system is filching from the future generations. That’s why this is a “sad” scenario in my eyes.
As for the euro zone, a credit downgrade appears to be right around the corner. Euro Pares Gain Amid Speculation For Ratings Cut- ECB Under Pressure – http://bit.ly/Q7D785
I may be a gold fan, but this is taking things a bit too far? New Gold-Plated Case for the iPhone 5 http://on.mash.to/QXP7sj from @mashable
Do yourself a favor and buy some real financial insurance and spend $5000 on some real gold.
DON’T LOOK NOW: Goldman Cuts Q3 GDP Forecast To Stall Speed 1.9% http://tinyurl.com/czxwck7
Here’s Why You Don’t Vote Obama if you Are Concerned About the Ecoonomy. The Whole shooting match is close to unwinding. I am of the belief that the economy is being held together for the sake of a smooth election cycle. After that? Let’s hope the you-know-what doesn’t hit the fan. THE Friday PMI is your signal of a DEAD Canary in the coal mine. Only problem? Romney’s problem of gaining traction. He Should be a shoo in. The Chicago PMI Report Was One Of The Nastiest Pieces Of Economic Data We’ve Seen In A Long Time http://read.bi/SqKOEG
As I have long suspected, no deep deflationary period (not with trillions in money printing globally). Instead we are entering a portal to STAGFLATION. This also helps to explain why gold is not yet at $2,000. Yes, prices rise in a stagflationary environment over years, but at a slower pace than in a HYPERinflationary environment where prices can change hourly. I think John Williams at Shadow Stats still may be right in the long run about hyperinflation as massive reserve creation will eventually impact the economy by destroying the dollar, but Mr. Williams has been too early. We are not Zimbabwe, nor are we the Weimar Republic. Thus far, money creation has been for the direct benefit of the banking and shadow banking systems. The Helicopter dropping of cash has not been directed to Main Street America. As long as labor market deflation continues and wages adjusted for inflation remain supressed, the hyper inflationists will have to wait for their grim scenarios to unfold.
August 21, 2012
Yesterday I directed you to a link that discusses the possibility that China could be close to catching up to the U.S. as a world gold power. Not to be outdone (though China will outdo them), Russia has been accumulating the hard yellow stuff.
Russia Accumulates Gold As It Consolidates Below Resistance At $1644/oz – Business Insider http://bit.ly/NXMg28
As I have been chirping recently, Gold is a gift horse and soon the gold horsey is going to gallop to higher ground (eg. today’s rally).
@peterLbrandt, a person who has a large following on StockTwits and his own website, had predicted a $1200 handle as a possibility for gold as recently as July 27th. Today he tweeted he was long. Peter, many take you quite seriously. Thanks for scaring the living daylights out of us barely a month ago. Mr. Brandt is just part of the problem of extreme predictions found on the web. I hold the delusional $10,000+ gold predictors in contempt as well. The motivation to buy guy should be connected with PROTECTION from a very hobbled financial system as we know it today. These high, or low and mighty predictions obscure the true reason one should be buying gold: The financial system is in a precarious state; you buy gold for its reputation of being a store of wealth through human history. Kapish gold predictors???
Oh, and I have no delusions that gold can still be the subject of bear raids. We’ve seen them on the scale of some daily moves of $50 to $100. Be ready for anything, but I would be deeply shocked if gold fell to at $1200 handle. As for $10k gold? That will take years, imho, and is putting the cart way before the horse. I am not fooled by people who make the spectacular future up predictions. They are either trying to make a name for themselves, or are trying to sell you something under dubious pretenses. I find it all quite distrubing.
To ramble on further… If gold fell to $1200 becaase of an unforeseen fix to what encumbers the financial system, that would actually be a great day. Think about it. If gold falls to $1200 because the financial system collapses, i would be inclined to believe that it would be a temporary condition. The will to live and rebuld is a very long term trait in people. The banksters would like you to believe that you and I can’t survive without them. There is nothing further from the truth. Finally, to believe that the charts are predicting a spectacular collapse or melt up is to believe in the tooth fairy. No chart can ever predict momentous and out of the blue events. These are charts useful for looking at patterns, but they are not crystal balls. Previous patterns are not a guarantee of future results.
Seemingly smart people just don’t get it when it comes to gold. There has been recent whining that silver and platinum were out performing gold and that it must be taken as a signal that gold was about to roughed up. Are these people somehow turning their brains off to make such outrageous conclusions? Gold is entitled to lag, but history is on the side of those who realize that gold eventually catches up. I like silver as much as the next guy (especially Morgan dollars), but gold is ultimately in the driver’s seat; it is the premier form of money. Silver tags along (for anyone who doubts this, re read, or read for the first time your 19th century monetary history). Silver is not going to lead gold, nor shall platinum. LMAO.
A political note (as this stuff ultimately impacts financial markets): Obama’s campaign ran a deficit in July, while Mitt continues to rake in the bucks, but don’t let this fool you into thinking that Mr. Romney will be the shoo in president elect in November (although the recent gallup poll gives Romney supporters some comfort). The way I see it, 165 million are dependent upon Uncle Sam through all sorts of government programs (better known as being on the government dole). This large group either doesn’t have the $3 to spare (the minimum begging figure from the Big O campaign), or much of this group may not have the internet connectivity, or ability to do an online transaction. They however, are still likely to vote for the man who has made the government largess available to an ever bigger crowd. I’ve always embraced the notion of follow the money, it’s just that in this case the non working poor may not be so generous with donations, but will still likely vote (at no great cost to them) in favor of the fellow who has given them some extra cash for food and iPods.
Stock Market Climbs the Wall of Worry
I am quite cognizant of the market rally and have been fortuitously banking coin in various options plays. The trend is your friend until it is over. Even if the Fed doesn’t come up with much at the Jackson Hole, Wyoming event on the 30th, the appearance and perhaps execution of a bond buying event in Europe should be helpful to the financial markets by itself (I continue to believe the Fed will be on hold until the December meeting). I still see these happy times as a fairly short term phenomenon. Structurally, Europe is still totally FUBAR. The piper will eventually be paid. I am still looking for the blow-off top. When it happens, look out below, but for now the bias for certain market darlings and broader market averages is higher.
August 18, 2012
Yes, after calling for a tight trading range for gold this year at the
beginning of the year at the FUN show in Orlando, I am starting to warm
to the idea that gold will soon resume its climb. I still see more QE as
an essential catalyst: If the ECB has it way and caps bond yields
(essentially a ploy to buy an unlimited amount of bonds), that would be a
positive for gold. Plus there is the Fed and what it decides to do,
though Fed QE may not come until after the November elections. At any
rate, with QE a certainty at some future point on both sides of the
Atlantic in what would be desperate moves to save the financial system
and other positive fundamentals contained herein, gold is poised to
rebound – maybe not tomorrow, but in a time frame before the end of the
year since these markets are discounting mechanisms that are looking
ahead by six months. I can’t emphasize more that gold is a gift horse in
this $1600 range.
I have not had much to say about stocks. The trend has been a friend
of the bulls. Potential QE could add to additional upside momo though a
new crescendo in stocks, could ultimately be followed by nasty
unpleasantries. Good luck with that. Things are happening faster than
ever. Please pay close attention to management of your assets.
Monday Morning Developments:
Heard the rumour China is buying 6,000 tonnes of gold? It may not be as crazy as it sounds: http://bit.ly/NJHuFn
Italian cash-for-gold shops quadruple as financial crisis deepens http://tgr.ph/QS5KE2
Billionaires and Central Banks Belly Up To The Gold Bar
Last week, I noted in passing that fund manager John Paulson has been loading up on gold related securities. According to a filing with porn obsessed Securities and Exchange Commission (they like to watch that stuff) , 44% of Paulson’s $24 billion fund is now exposed to gold through purchases of the GLD ETF, shares of Novagold, on going holdings in other miners and the sale of bank and energy stocks.
There is also the matter of the infamous fund titan George Soros. It appears that when he is not busy writing checks to fund organizations intent on tearing apart America, he’s been dumping shares of the mega banks and… ta da… accumulating an additional $100 mln in gold exposure through the GLD ETF, also according to an SEC filing.
We also discussed via this blog central bank accumulation of 157 metric tons of gold during the 2nd quarter of this year as revealed through the World Gold Council’s (WGC) latest statistics.
Admittedly, I have a bad habit of understating the obvious and briefly suggested that readers consider that if the so called smart money is adding to gold holdings that it is probably not a bad idea to consider what these entities have been up to.
I’ll take it a step further and amplify my sentiments. THIS STUFF GOES BEYOND MERE DEFENSIVE ACTIONS ON THE PART OF CENTRAL BANKS, PAULSON AND SOROS. These are bold moves on the part of Soros and Paulson, who have a history of success in making such bold moves – Soros with his legendary bet against the British Pound in 1992 and Paulson in 2007 with the $20 bln he made in his short selling of doomed subprime mortgages. Now these two guys (billionaires) are buying gold and Central Banks are practically hording gold. I will be blunt: If this doesn’t make you stop and think for a moment, or two about looking at adding to your own gold holdings perhaps investing is not something you should be involved in. lol. Actually, I’m serious. The body evidence is growing enough to suggest that big players are anticipating events that are likely to push the price of gold higher. These guys play for keeps; they know the smell of true victory in the making of Billions (with a capital-B) in profits on their speculations. They are using the paper vehicle of an ETF to speculate. This isn’t the purchase of some gold coins, or bullion pamp bars to barter in the future for some food; they are intent on reaping enormous profits.
Yes, I realize, that Paulson’s fund has been down and out recently and ridiculed in the financial press and that Soros has yet to have a super replay of his 1992 success, but these are still people with billions of liquidity on hand unlike most of their critics, even well heeled critics, who are actually poor in comparison.
At the very least, keep an eye on moves by the real elite with respect to gold. They are seeing something that the masses are not seeing, yet.
I am also aware that the doomers are tying these gold purchases in with the recent orders that have been submitted by Social Security, Homeland Security, even the weather service for massive amounts of hollow point bullets – as in a billion bullets (all innocently explained away by these agencies). That makes for great scary story telling that the end is drawing near. I am a believer in connecting the dots and the dots are mighty strange these days, as in strange things are happening as Central Banks hoard gold and non military government departments by ammo as if they are gearing up for social unrest and seem to be planning to shoot first and ask questions later. BUT I have no inside track to what is going on at DHS, or SSI so I am going to save the dot connecting for another day. There is already plenty of speculation on the web about what it all supposedly means. Present events are what they are and I shall say no more unless I see more evidence.
The best thing to do fpr now is to follow the money. Watch the 13F SEC filings that forces the billionaire to reveal his hand (though delayed). All the rest at this point is noise and idle speculation as strange as it all seems.
One more little thought. The fiat Ponzi masters – the deranged group of financial alchemists who create paper money backed by nothing out of thin air and their ever dependent constituents – ought to congratulate themselves for a job not so well done. By relegating gold buyers to kookdom and constantly disparaging gold as a relic, they come out looking like the odd men out that they are when billionaires and central banks embrace gold. The world is moving back to a gold based financial paradigm – much like the action of a slow but steadily moving pendulum. When push comes to shove, even the greedsters of the paper realm will suddenly warm to gold as they finally get the message that gold has always had intrinsic value and will be the go-to place to maintain wealth. At roughly $1600 an ounce, gold is a gift horse these days. When the rest of the world tires of valueless paper currency games, you will not be able to get gold at such a low price as today, or perhaps at all. As I noted yesterday, through the leasing schemes of the western central banks to attempt to suppress gold (a relatively unsuccessful exercise over the last decade) there is likely LESS gold than what appears on the books.
I will say it again. Gold is and has always been real money. Last week the European arm of the CME decided to accept gold as collateral on demand. Just another nail in the fiat currency coffin. The paper regime is becoming so damaged and hobbled where no one in banking can trust no one and not surprising it is gold that is used to intervene and guarantee transactions. Not a surprise to those of us who have long understood the role of gold, but this is yet another example of gold’s detractor being caught completely flat footed and exposed for the oafs that they are.
Stocks have fallen out of bed.Gold has fallen out of bed. At $1680, gold is about back to where we saw the February break out gain traction thanks to the moves of Fed led Ben Bernankster. Operation twist continues in perpetuity to keep rates low and the Fed has also provided multi trillion dollar swap lines to keep the Euro banks operating. What many seem to miss is that QE3 is actually underway though the Fed has figured out that it is better to go about its usual business of slathering the financial system with the grease of funny money without calling it QE3. I have called it QEx.
This area for gold is a major area of support. If the gold market falls further, it will signify a sudden and major change in thinking – that the Fed has given up on QE for 2012, as crazy as that sounds.In other words, I don’t believe the Fed Head and his cohorts are not packing their bags for a May through November trip to Cancun because it’s an election year and they are not supposed to do anything more in 2012, yet the markets seem to think this is the case.
So the Fed has the markets right where it wants them – in a bit of a snit that there will be little chance for officially announced QE part-whatever as the nation moves closer to the November election. Time and time again, Bernankster has been a bear killer in the stock market by eventually spiking the punch bowl even more.
Again, with the Fed it is a proposition of watching what it and its central banking cousins do. The Fed ultimately has no choice but to continuously greasing the wheels of the economy through its ongoing accommodation. The European Central Bank and the Bank of England will be doing liquidity injections at the same time, on an as need basis. In the U.S. the economic data has been too noisy to negative. Between some of the major government goosed economic reports (I will be surprised if the labor department doesn’t come up with more spectacular employment numbers on Friday) and privately generated economic data that’s weak it’s hard to know what to believe. If I were a betting man, I would bet that the Fed has no intention of putting the monetary brakes on at this point in the economic suspense.
Let’s also remember, the Treasury Department’s quarterly refunding looms next week (http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/auctions.pdf). Hmm, how to spark a flight to quality to coax investors to participate in next week’s fun? Spook a variety of markets that benefit by QE by planting, or feigning a little monetary responsibility by lobbing some doubtful remarks about QE into the market place. Is it conspiracy theory talk? In the case of the Fed, I prefer to call it “connecting the dots”. Though it says it wants to be more transparent, the Fed only tells us what it wants you to hear, leaving it up to interested parties to figure out the rest.
Ben Bernankster is a liar and I don’t take at face value what he says….
I simply do not like Bernanke, what can I say? I am offended by intellectuals such as Bernanke who do not possess discipline – made worse by the tremendous power they possess to further their own goals at the detriment of society in general. What is Bernanke’s constructive purpose? You can answer that question in many ways, but ultimately his actions will lead to no good. Just my two cents there on Ben.
And to add insult to injury today, Obama holds a rare news conference on this Super Tuesday. That ought to be a market confidence builder like all of his other press conferences. Right? Hahaha!
Have a day!
Zerohedge.com reports Citi is telling its clients that gold will reach $2400 dollars an ounce this year and “3,400 in future years”. The Citi report goes on to warn of short term weakness that could take gold back to $1,600 which Citi says would be an even better opportunity. This, of course, is picking numbers out of a hat, but it comes from the hat of a well known brand name in the financial industry, even if that brand name also qualifies to be in the ultra club of too-big-to-fail-Zombe banks.The only bit of newsworthiness that I see in this is that a mainstream financial entity has something positive to say about gold, but then again, these analysts from the ‘street’ have for years missed the gold rally so since it’s Monday I view Citi’s gold dispatch in a curmudgeon like way.
Thanks Citi, but you should have been pounding the gold table years ago.So while we’re at the prediction game this morning, let’s go to video tape, as a famous sportscaster used to say. The first video from 2011, which actually popped up on the Lou Dobbs (of now Fox fame) FaceBook fan page features a fellow by the name of Lindsey Williams. Williams claims to have an inside track to two “elite” sources within the Iluminati. Williams is on record predicting $3,000 to $4,000 gold by the end of 2012. Williams proclaimed the dollar “will be deadm bot out of existance, but dead by the end of 2012 in order to bring in a new world currency.” Williams, through his unnamed sources said such a new world order currency will have to be backed by gold! Williams was interviewed by Alex Jones of Prisonplanet TV who took a moment to vent over how he and Williams were and still are always declared to be wrong. This s the same guy who strongly suggested that the gulf coast would slide into the gulf during the BP disaster.
I’ve got news for both Williams and Jones, if there is a future one world currency and by extension the end of U.S. sovereignty and the individual sovereignty of every individual nation (puzzle over that for a few minutes) – then Williams was wrong in 2011.To rejigger the trillions in fiat paper debt that over hang the present world financial system ($109 trl in 2010 World Economic Forum) versus the fairly finite amount of available gold pegged at about $10 trillion worth (in 2012), the likely price of gold in Williams’ 2012 doom scenario should actually be many multiples of his $4,000 forecast for 2012. If they (the establishment) keep the ball rolling to 2020, to maintain some modicum of economic growth, world debt will have to grow to $200 trillion, according to the World Economic Forum!
Then there is well known CNBC and Fox Business guest Peter Schiff, who runs his own gold and metals bullion company. (I hope none of my readers have used his overseas storage “services”). This is from 4 years back…
$5,000 this year? Settle down there, Sparky! Last I checked gold was around the $1700 mark. The gold market still has yet to gallop up and over $2,000 as has been widely predicted this year. That’s a bandwagon that your writer has jumped on as well, though in my writings at the beginning of the year I cautioned that getting to $2000, while likely, is going to be a volatile ride (eg. the shenanigans of last week). Color me skeptical, but I am not seeing $3k, or $5k gold in 2012 unless there is some sort of huge and unanticipated rent (tear) in the fabric of society.That gold remains below $2,000 is a testament to just how much the paper-bugs want their system to live and a testament to the power they possess: they jam the system with funny money; they steal if they have to ala MF Global when the need arises; they change the rules to ensure they don’t lose while they kick the proverbial can down the road ala the ISDA failing to declare a credit event in order for CDS to be exercised even after a 70% haircut on Greek debt. Rumors of the death of dollar hegemony are greatly exaggerated (for now) due to this sort of method of operation.
This is also why I wrote at the beginning of the year that the longer the powers that be extend their game of limitless creation of liquidity and by extension their growing corruption, the greater the chance that we shall see some sort of systemic implosion that might end up creating a world where we wake up one morning to an overnight skyrocket in the price of gold, but who knows if it happens (though the odds of a collapse seem more and more likely, how such a disruption would transpire and the greatest mystery of all, which has made many eat their predictions: When?Maybe it is a touch unfair that I use a few video examples from a few years back to demonstrate the folly of longer term price forecasting. Schiff even admits that he doesn’t have a crystal ball, but since he’s pandering to the tv interviewer. he ends up falling into the trap of being pinned down for a price prediction. Even the use of technical tools, imho, has largely gone awry both short and long term in the lithium like atmosphere of massive central bank printing. Massive liquidity pumps distort all sorts of asset values and render many once reliable technical indicators unreliable. While I agree with many of the reasons offered in the videos as to why the long term outlook for gold is bullish, scoping in on an exact price a year, or even three years from now is looking at gold from the wrong perspective.
So take what Citi, or any of the others say with a grain of salt even if there may be some positive connotations for our industry. I am very much coming around to the notion that hyped up forecasts create the wrong motivation to buy gold and the metals in general. I speak of greed, especially of fantasies involving get rich quick price moves. the gold business would be better served by under predictions and then over delivery on an actual future price.The fear purchase of gold is alive and well. That’s something that can’t be fought because there are legitimate reasons to be fearful, though there are those who embellish those fears and dupe people into paying too much for gold. We can look at it two ways. Doing things out of fear is the wrong way of doing things (you can become an easy mark). Or we can say doing things out of fear, like buying gold, relies on a bad gut feeling – in the case of gold the bad gut feeling is about the future prospects for the out of control financial system, along with all of the other geopolitical tensions. Choice number 2 brings me to…
Prudence, or seeing gold as a form insurance against future problems. It makes no so sense why otherwise well educated people would concentrate wealth into paper.That is imprudent. Now, I am not saying that one should “diversify” in the tradition of the Wall Street paper bugs. Their idea of diversification is some money in government bonds (paper), corporate bonds (paper), stocks (paper), GLD (paper), Munis (paper), ETFs (paper), and if you have a rare financial advisor, he puts you into 10% gold. That is is not real diversification – that is concentrating wealth in paper with a smidgen of gold as if you are adding a little bit of pepper to your soup. Many investors need to put away the childish things that Wall Street has taught. Perhaps this is a time not diversify as Wall Street sees it, but to concentrate investing into in the direction of certain hard assets that have been working in inverse to what is going on with the financial system – like madmen who see no problem with undimited doses of money injections? And by concentrate, I mean holding the lion’s share of investment in an area that has real value. I’m not giving personal advice, but just making a suggestion.Your best friend is to be aware of long term trends. The trend is your Friend. We know over the last decade gold has risen in lockstep with every upward adjustment to the national debt ceiling. If government inflation data were reliable we would see a correlation between higher prices and higher gold. Prices, as I posted on the http://financialbalderdash blog over the weekend, are way up over the last decade, but alas we get watered down government inflation numbers – can’t pay those Seniors too much social security (gotta keep demand for cat food high). We also know that over the last 40 to 60 years that our dollar, which remained fairly constant in its buying power from 1800 to the early 20 the century, has withered away and has lost about 98% of its buying power since the days of government issued silver and gold certificates (now long gone).
Yes, the gold price forecasts will continue to come but that’s all noise to me in what will be an ongoing battle to keep the overall Western financial system afloat by the Central Bankers, while those same monetary authorities take the opportunity when they can (as they did last week in gold and the week before in a failed paper dump of silver futures at the CME) to sully the reputation of the metals and delinking the upward trend of metals from their irresponsible behavior of infinite money creation (and even as these same Central Banks buy gold).
Have a great Day!Top
January 16, 2012
On Friday, Europe got the downgrades that had been for weeks warned of and largely built into the markets pricing mechanism. While there was some closing market turmoil and drama Friday, Major Euro markets like the Dax, FTSE and Cac, are each trading modestly higher with gains of less than 1%.
S&P futures have been little changed today while Wall Street has a day off for Martin Luther King, Jr. day.
Gold bulls are back at it again, lifting it another $12 to the $1642 level.
If you’re thinking we get a respite from the Euro drama, think again. Greece drama continues on this long holiday weekend. The country is so hard up for money that 14-billion-euros in interest payments being made by March 20 appears to be in doubt. The key word in the last sentence is March. Yes, this is going to drag on for months more. This weekend’s drama is focused on a breakdown in talks between private Greek bondholders (the banks) and the Greek government. The banks remain fully aligned with protecting their own best interests and that does not include taking a 90% haircut on their holdings. The writing is on the wall, to satisfy the banks, at some point Europe will have to monetize this crippled Greek debt so that the banks can remain relatively whole while the overall European financial system and its people suffer. That’s the reality of the true game, and it is why gold has nowhere to go but higher over the long term (of course with the now required volatility just to make things fun).
Either the above scenario happens, or the EU is kaput at some point. Germany has maintained the stiff upper lip of wanting to avoid monetization because of its past glaring problem of hyperinflation in the 1920s. The German’s hold the magic keys and I just don’t get the feeling that they are sympathetic enough to the plight of the Greeks, or the Italians by throwing billions of euros into a so called stability mechanism. It makes me wonder what the Germans will demand in return for even tacit support of a plan that would rescue the inefficient economies of Europe that are now over the proverbial barrel. At least the days ahead won’t be dull.
Back in the US. The week ahead promises to be an interesting one. Bank of America will get the ball rolling when it reporters earnings Tuesday morning. Other zombie banks due to report in the coming days include Citi and Goldman Sachs (which is technically a bank in the eyes of the government, though I am still looking for a Goldman ATM lol).
Other earnings due this week include numbers from Intel, IBM and Google.
There are also the make believe inflation numbers by way of the government’s PPI and CPI on Wednesday and Thursday. Just recently I was at my CVS pharmacy (I visit their a lot in an effort to remain above the daisies) and noted the smallest cans of tuna fish ever – 4 ounce cans on special for 99-cents. Unit price wise that’s a ripoff. I’m surprised they didn’t label the cans as “fun sized” portions. But smaller packaging is nothing new over the last 5 years and does a great job of masking price increases.
Some of the pundits are saying watch the shares of Carnival Cruise (CCL) in the aftermath of the tragic grounding of a ship off the coast of Italy, owned by a unit of Carnival. Sure, their could be a knee jerk lower, but the CNBC article over the weekend questioning the viability of cruise industry was a bit over the top. CNBC? Does this sort of thing happen a regular basis? No. One of the things I disliked most about CNBC were the meetings where we would try to come up with some “clever” angle to a story. Most ideas were not “clever”.
Have a great day!Top