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, MidasLetter (20 clicks)
Long only, long-term horizon, medium-term horizon, gold & precious metals
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Whenever gold touches a new record price, goldbugs leap up and down and slap each other heartily on the back in a self-congratulatory ritual that is becoming as predictable as the 4 seasons. They are right, and they know it. For all the troughs in the chart since 2000, any tenacious golden insect who held on through trial and tribulation has only seen his fortune grow. Naysayers have gone silent, for the most part, but for that implacable breed who can still claim a flat earth when all the evidence is in supporting a round planet.

Gold is speaking to us, in its gleaming, grinning, golden silence, from its distant historical perch in the affairs of commerce among humans. It's telling us what fools we are to believe in the fiat paper issued by governments. It's telling us that many G7 governments are either in cahoots with or the unwitting foils of the elite banking set who pilfer the pockets of citizens (while padding the accounts of their delusional economists to keep the media talking only of economic cycles) and proclaim an “economic cycle” through the mouths of their delusional economists.

Gold is telling us that leverage is the avenue to self-destruction. It’s telling us that globalization is just a giant curtain behind which the multi-national pillager hides its arsenal of local competition-crushing techniques and artillery. It’s telling us that the media is lying and is another tool of the elite banking set, who ultimately fund these former institutions of truth who now rely on the financing of private equity to survive, rendering objectivity impossible.

Gold is illuminating the absence of responsibility in government and banking, and is warning us that if these fiat currency systems are not brought more into line with something representative of something with intrinsic value, then the economies of the world will continue to crumble, the financial system’s tumours will continue metastasizing

Gold is also telling anyone who has the mental acuity to pay attention that it is the best option of wealth preservation now and forever.

The world, according to gold, is an absolute mess. It's telling us that the financial system that should be the conduit for honest and good business has been hijacked by a bunch of Cosa Nostra types who have turned it into a giant casino, where the roulette table is rigged and the blackjack decks are stacked. The house, always the favorite, has been compromised to an extent that would embarrass Capone.

The great thing about gold, though, is while illuminating the problems, it also infers a solution.

While Greece crumbles and Portugal, Spain, Ireland, Iceland, the UK and the United States all totter at varying rates towards a similar fate, gold says, “buy me with your putrid stinking dollars, pounds and drachmas and you will be saved the excruciating pain of being burned at the financial stake.”

Woe betide the man for whom this falls on willfully deaf ears.

Major producers are a low-risk slow growth way to go. Mid-tiers have a better growth profile but with commensurate increased risk. Junior explorers have the greatest upside potential, but again the risk is commensurate with the reward. ETFs are a convenient way to play gold without the security hassle of burying it in your backyard, but the opportunity for administrative abuse offsets the convenience, and represents risk. ETFs that claim to be tethered to gold through participation in the derivatives (futures) market should be treated like the bubonic plague.

Recently, an opinion piece in The Wall Street Journal suggested a return to the gold standard as a viable solution to the problems of currency manipulation for political purposes.

Gold is telling us that this is the only solution for the clearly failed principles of economics advocated by Mssrs. Friedman and Keynes. Gold also suggests that abandoning the gold standard in its purest form and then much later in its bastardized form (which prompted Keynes’s proclamation of the gold standard as a “barbarous relic”) was the point at which the world lost its ability to achieve stable currencies and prices.

Ignore the naive dismissals of the uninformed who quickly produce pen and napkin to compare the amount of currency in the world to that of gold…that’s not what a gold standard means. It means that all the world’s currencies would be assesed a relative value in gold, and it would be not be able to produce currency in excess of what its economy was valued at in gold. (That’s a crude definition, and in reality, any new gold standard would doubtless be encumbered by a deluge of if-then equations that might derail it.)

The purpose of a gold standard is to bring accountability to government independent of elite financial manipulative interests. The United States wouldn’t be able to print money at will to solve every little meltdown that came along. Instead, it and all governments would have to suffer the full brunt of such bouts of economic fever, and would be forced to address the causal symptoms with a systemic approach. That in opposition to right now, where printing money with the current abandon is yoking future generations to a legacy of debt and irresponsibility, thus ensuring the perpetuation of such behaviour for those generations.

I hold little hope that any serious dialogue will occur on that subject, however, in the forseeable future. That would imply responsible leadership, and casting around the G7 table, none are thus appropriately attired.

Gold standard aside, gold is also telling us in no uncertain terms that the seeds of our own destruction we ourselves have sown. Same goes for the seeds of salvation which we shall soon need to find in the attic and start planting, as this rotten old system crumbles completely.

And ultimately, this is gold’s final message to the present generation. It's telling us that we’ve gone too far down the road to perdition. We are at the brink of the waterfall where no amount of dog paddling in the opposite direction will defeat the force of the inevitable. This is the point where gold tells us that the day of reckoning is upon us, and worse (or better) than any biblical prophecy, the demons and angels of that modern mythology will prove a metaphoric representation of those among us. Demons we have in spades. The question is, whither thou angels?

There are other gems of truth uttered on the invisible lips of gold.

For instance, gold quietly points out that these cycles of manipulation and perfidy on the parts of corrupt government through the ages results in one constant, oft-maligned but never permanently supressed measurement of value standing strong amid the rubbles of successive failed currencies: namely, gold.

Disclosure: Author long gold

Source: The World According to Gold