Jay: Thanks for your insights into the Gold markets [7]. Your take on Gold is very interesting and something to watch for in the future. You mentioned the return of "real assets" in regards to many other commodities, gold included. Do you believe it's people wanting to hold on to these assets in favor of economies weakening or the increase in demand from the likes of developing countries such as India and China?
Boon: I would like to draw a line between precious metals and commodities; I see the former as a form of currency, Gold in particular. We are living in a world of fiat currencies. All the paper money printed by central banks are no longer backed by Gold. In particular, the total US money supply has more than doubled in the last few years [1]. The more money they print, the lower the purchasing power. Investors are buying Gold because they want a currency that can retain its purchasing power, and that's not paper currency. As with commodities, it's simply because of supply and demand. The developing world has gotten richer with a rising population of middle class who demands better food and higher protein, who has money to spend on stuff.
Lenk: Boon has made some very good points about gold. I'm still slightly unsure about gold's direction. Ever since the heavy correction we seen recently, gold seems to be going nowhere. We have to remember the American government still hold substantial amount of gold in their vaults, if they were to liquidated even a small percentage of their inventory to raise capital, gold price will not hold. Retail gold don't seem to be doing too well because of the high prices. Currently china is the largest gold producer in the world, is there a need for them to diversify their foreign reserves to gold? Will the next US fed rate cut be the last cut? If it is and the American economy stabilizes the dollar will rebound and that's bad news for gold. So there is something to think about. Even so I would still like to have a little exposure to gold.
Boon: Yes, Gold is going no where at the moment. If you are going to be a net buyer of Gold in the coming days/weeks, that's exactly what you want it to be. You want to buy it cheap and sell it when it's expensive! No, I disagree -- the US government has no Gold in their vaults [with exaggeration, 6, 8]! Personally, I believe the diversification by foreign governments as well as SWFs into "real assets" is inevitable and some are already doing so. I don't like speculating what the Fed is going to do -- the Fed follows the market; the Fed follows interest rates [2, 9].
Lenk: I thought gold inflation adjusted price has not reach all time high of the 1980s yet. Isn't it about the $2000 mark in today's market?
Boon: My mistake. I should have said new high, instead of new all-time high. You are right that Gold has yet to make a new all-time high in inflation adjusted terms.
Lenk: Don't know how accurate wikipedia [3] is but according to this American has largest reserves in the world. And also IMF [4] might be dumping some gold and also I read somewhere that the Swiss is considering dumping some gold too but not in open market. This also provide a funny read: The Gold Scam [5]. Boon, I hope you don't misunderstand, I'm not trying to undermine your forecast. Just giving the readers some impartial views and something to think about.
Boon: Lenk, for information on Gold, I would like to draw your attention to the Gold Anti-Trust Action Committee [6, 8]. There's a great deal of information on their website that's never talked about in the mainstream media. As I have said before, I don't speculate on what the Fed is going to do. Similarly, I don't pay much attention to what the IMF is going to do. Yes, they are a big player in the market, but what they are going to do doesn't really change my long-term view. In most cases, the big players tend to do things at the wrong times and wrong prices. For example, China Investment Corp invested a big stake in the Black Stone Group, but that IPO has been going downhill ever since it started trading. Gorden Brown, the ex-Chancellor of the Exchequer of the UK, sold 3/4 [some said 1/3, some 2/3, anyhow...] of the UK's national Gold reverse. That selling didn't tank the Gold market. In fact, it marked pretty much the lowest point of Gold in the last 10 years! Everybody is free to express their views. Many thanks for your comments!
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References:
- Williams: Shadow Government Statistics
- Why I Want to Abolish the Fed too!
- Official gold reserves - Wikipedia, the free encyclopedia
- Fund to sell gold reserves to plug budget deficit - Telegraph
- The Gold Scam
- GATA
- To Jay
- Is IMF trying to recover its gold by pretending to sell it?
- Prechter: Stocks, Commodities, Interest Rates
Related posts:
6 comments:
I believe there's a report somewhere that said that gold actually 'decreased' in value in times of inflation, but due to the perception that gold is an inflation hedge it would probably move up in inflationary times.
Either way inflate or deflate, can't really go wrong with gold in times of excess. It's those dreadful 15-25% corrections that make the strong heart faint.
Let's hope it breaks and stays above 910 for this run :)
Hi,
Thanks for referencing my article The Gold Scam.
On a serious note. Why do you even care about Pretcher? He has a Eschatological obsession an he sees the end of the mythic fifth wave everywhere.
As a matter of fact, he's been predicting the top of the markets since 2006 and the top of gold since it was at 400.
He made a great and bold prediction in the 80s, but since then he's been wrong every single week.
He's only fault is to be dogmatic about Elliott Wave theory and not realizing that on a fiat money system all values are relative.
For instance, if you were going to use a gold backed US Dollar to measure the Dow, you would see that the Dow has been in a neat crash since 2000 just like the theory predicted.
His claim that gold is going to go down comes from the interpretation that if the Dow is undergoing a crash gold should follow. Problem is elastic money is more and more elastic and global.
We are paying the price of the magic of fiat money, but it is not in inflation terms, but other forms of destruction of wealth (like the environment).
The next crash will not be financial but environmental, and thanks god it will not be in the coming weeks.
opine,
The author of The Gold Scam has this article:
http://thepoliticsofdebt.com/?p=224
umph,
-- Don't mention it.
-- Some of my investors raised the views of Prechter to me, and I thought I could make an interesting and, perhaps, educational case here for my readers. That's why.
-- Prechter is an Elliottician, and Elliotticians often 'relabel' their charts.
-- Yes, Dow has been crashing since 2000.
-- Based on your view that we are paying the environmental price, how would that price be reflected in your view? What's your investment thesis? I believe we are in a period in which "real assets" will outperform "paper assets".
Boon,
Thanks for the link. Most illuminating.
The more uncertain the times the higher it will go. And these are very uncertain times indeed.
Latest Billion dollar writedown.. HSBC. Funny how the value of money seems to be ever decreasing, no one seems to bat an eyelid now. Billion is the new million.
On another note, gold never did reach 910, seems to be some big seller up there, just waiting to push it down!
Let's see how it goes this week.
All the best and good luck.
umph here. Lost my logging information.
"-- Based on your view that we are paying the environmental price, how would that price be reflected in your view? What's your investment thesis? I believe we are in a period in which "real assets" will outperform "paper assets"."
I am investing selectively in some real state. This is a long term investment plan, and I expect to double the money in real terms over 20 years. This is a shaky territory and you need to thread carefully.
Right now, I don't see many buying opportunities otherwise.
I don't think that there are many "real assets" left. Most assets are paper or influenced by paper assets right now.
umph,
Best of luck!
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