Hong Kong's Gold Move Means Nothing

The report that Hong Kong requested the return of its 2 tonnes of gold to be stored in its new vaults and its suggestion that other Asian countries do the same and store their gold with them resulted in a wave of uninformed hype.

Statements like “the move deals a significant blow to London's historical role as a global hub” (from the aptly named Fool.com) and this weird non-article from a Marvin Clark that is all questions and no answers or opinions are typical of the new breed of gold commentary.

With reported central bank holdings of 30,000t, how can anyone think 2t is “significant”, even if the whole lot had been short sold by whoever they had it “stored” with? As one wit commented, “I moved my BBQ from my mom's house to my house last week. According to the vague premise of this mysterious 'logic', my BBQ must be going up in price soon!” They are in the running for my quote of the year.

I would also note the similarities between the Hong Kong announcement and this report on Dubai: talk of Dubai a “natural choice” for central banks in the region, Dubai to be home to gold backing an ETF. Well, they can't all be. These attempts at cracking London's fix (pun intended) on gold trading and settlement occurs with some regularity and is met with a yawn from experienced gold players. Every now and then a country tries to become a “bullion centre”: Shanghai, Thailand, India. They never get off the ground because the rest of the world doesn’t trust them, or trusts them less than London.

Unfortunately, I have noticed an increase in gold commentary from people who have no experience in the gold markets, and it shows. I suppose if no one wants to read your opinion on a leverage stock play, what else are you going to do but write about what is hot, even if you know sweet stuff all about it.

Editor to Journalist: “hey, gold seems to have passed some magic number, go write something on it for tomorrow's paper.” Journalist searches for last newspaper article on gold, does a google search and picks up some third hand commentary which misinterpreted “Gold ETFs allowed for EFP transactions” into “Gold ETFs allowed to settle COMEX futures”, and mashes it all together with some clichés and there you have an article for consumption by the general public who believe that the financial journalist knows what they are talking about.

I am thinking of starting an index of commentaries on gold and more specifically, the number by those who have never commented on gold before. I think it would make a very good bubble top indicator to be used along with the “receiving stock tips from a shoe-shine boy” (today to be substituted with taxi drivers I suppose). The number of Kitco forum posts might also be good, particularly the occurrence of the text “to da moon”.

Disclosure: Long gold via ASX:ZAUWBA

Comments

[Philman:]

Bron, I remember when you were very critical of articles concerning gold futures market based manipulation, written by James Conrad. You claimed, in what you wrote in the first article, that he didn't know anything, because he referred to the London Bullion Market as the London Metals Market, or something like that. Then, although you toned down your rhetoric as he proved himself more and more knowledgeable than you could have imagined, you continued to write skeptical comments each time a new article appeared.

That was back when gold was in the low $700s, and he was telling people that in a few months, it would soar. He was right and you were wrong. Doesn't that say something to you? Perhaps, that you either have blinders on, or are in denial...

That being said, I think that you are right about gold not going substantially over $1,000 per ounce, quite yet.

Sep 10 07:57 AM

[Philman:]

Hmmm...I take some of what I wrote back. I just read your other articles. It seems that you don't have blinders on. You just needed a bit of education on how the futures markets are manipulated. You seem to have gotten that, and added it to your existing knowledge of the cash market for gold. Bravo. You are now joining the ranks of the enlightened! I'll be following your articles...

Sep 10 08:06 AM

[Bron Suchecki:]

Philman, remember that James slagged off on the Perth Mint without really any evidence, so that's why I'm a bit skeptical towards him.

However, I don't remember ever saying do or don't buy at $700 or any other level.

You will notice most of my commentary is critical, but don't interpret that as me being negative on gold. I don't see any need to push gold, there are plenty doing that and I wouldn't be adding anything of value. But when incorrect statements or conclusions are being made, that is when I feel I have to say something, because no one else is.

What I disagree with is those who sieze on every event as proof of their position/theory because that is intellectually dishonest and is not someone seeking the truth. Sometime events are not significant, or have other explanations. A good commentator should be looking for evidence that questions their view, always testing it. If not, if they look to twist everything to justify their view, then they will miss evidence that shows a shift and reveals new opportunities.

Sep 10 08:47 AM

[NUCLEAR1929:]

exactly

Sep 10 09:04 AM

[bindlepete:]

"Experienced Gold Traders" "The London Market"

substitute "Experience Stock Traders" Merril Lynch or Goldman Sachs and you have my answer to this pompous declaration of every thing is fine, nothing to see move along.

Th propaganda flows stronger as things get away from the comforts of a very short history. If you can't recognize that the problems are new to youth then let age take over.

It will, if you are lucky.

Sep 10 01:50 PM

[Bron Suchecki:]

bindlepete, I don't see how you see my article is saying everything is fine, I'm just saying this one little 2t move is not significant. Suggest you reserve your opinion until my next article comes out

Sep 10 07:57 PM