Trace Mayer

Gold Rises, the Dollar Falls: Is This Really a Good Thing?

Trader Mark, You are right that this rise for the monetary metal is just getting started because of the unwinding of the gold carry trade and start of the dollar carry trade. Mr. Alan Greenspan testified twice before Congress saying 'Central banks stand ready to lease gold in increasing quantities should the price rise.' Central banks carry gold in the vault and gold out on loan as the same line item; in effect they report cash and accounts receivables as the same thing. As a result, central banks have only 1/2 to 1/3 of the physical gold as reported on their balance sheets.

This means they hold not 30,000 tons but more like 8-15,000 tons of physical metal. All of this has been thoroughly documented by publicly available documents. To add further pressure the dollar is now becoming the carry trade currency. The unwinding of that massive central bank position will be extremely bullish for the monetary metals priced in their fiat coupons. As the value of their fiat currency coupons are valued like the common stock of nations and because of gold's rise in all major currencies it does not bode well for governments worldwide.

www.runtogold.com/2005.../

China's Latest Hunting Trip

paultaut, backwardation is not a theory but an objectively verifiable fact and my articles cite credible and verifiable sources to prove that fact. I did not make the assertions you claim. I did make some assertions in the various articles. I continue to stand by my assertions and do not 'ignore what they previously have pushed'. Here are the verifiable facts which you appear to misrepresent or ignore:

9 Dec 2008 - Discussed gold backwardation and made assertions that extended and prolonged backwardation may precipitate a currency crisis, that the FRN$ store of capital expense will increase and that gold's purchasing power would increase. At the time of the article gold was $771 and is currently $969. Purchasing power was discussed later in the 11 Feb 2009 article.

seekingalpha.com/artic...

4 Feb 2009 - Discussed silver backwardation and the declining gold/silver ratio. At the time of the article the ratio was 72.56 and is currently 68.86.

seekingalpha.com/artic...

11 Feb 2009 - Discussed the continued DOW decline. Made the assertion that gold's purchasing power would continue to increase and focused on the DOW/Gold, DOW/Silver and S&P 500/Gold, S&P 500/Silver ratios. Asserted that the DOW when priced in the metals would continue to get cheaper because of declining potential earnings in those metals. At the time of the article the DOW/Gold was 8.7 ounces and is currently 7.5 and was 7.2 yesterday (23 Feb 2009).

seekingalpha.com/artic...


On Feb 24 01:06 PM paultaut wrote:

> Two weeks ago both Trace and MyWealth were pushing a Theory called
> Backwardation.
>
> According to this theory, Gold would move up because Spot Gold was
> higher than Gold Futures. Gold went into contango and went up.<br/>
>
> Both Parties now ignore what they previously pushed. Mind you, this
> was just two weeks ago.
>
> What I would like to know is: "Is the Theory Dead or waiting to be
> reborn?"
>

Peter Schiff: Outlook for the Gold Market

"For the gold bugs, the inflationary spike is OVER. ....All the Fed's quantitative easing will do is simply slow down the deflationary forces"

Gold is the ultimate form of deflation because it is the ultimate form of payment and is always accepted. When capital starts moving into gold there will be no chance of getting it out and then the economy goes into stasis.

www.runtogold.com/2008.../

Peter Schiff: Outlook for the Gold Market

"At some point, the central bank selling is going to turn into buying. Who are these guys kidding?"

Between all the selling, leasing and other derivatives it appears the alleged central bank gold price suppression scheme may be ending as the central banks have less than half the gold they claim. Mr. Robert Landis, a graduate of Princeton University, Harvard Law School and member of the New York Bar, asserted in 2005, “Any rational person who continues to dispute the existence of the rig after exposure to the evidence is either in denial or is complicit.” When the market realizes this it will be very interesting for the gold market. While it would be unlikely it appears Schiff may not even be aware of what is really going on in the gold market.

www.runtogold.com/2005.../

Dollar vs. Gold - Can We Trust This Change?

"I would say a move over $83 in GLD signals we could have the "change" here."

Viewing gold as a portfolio asset is against economic law. Everything else is a portfolio asset; including the USD.

"There is not a single country on the planet that is on the gold standard."

That does not mean that a 'gold standard' is not in effect. So likewise all governments could vote to repeal the law of gravity and go off the 'gravity standard' but it would be fruitless.

www.runtogold.com/gold.../

"A Mad Max collapse would have to occur for gold to reach the level goldbugs are screaming about"

While a global 'Mad Max' Armageddon event is possible it is neither very probable nor a prerequisite to increasing the dollar gold price. The only real prerequisite is gold's velocity as a currency in ordinary daily transactions. Thus, one can be a 'gold bug' without the Mad Maxian undertones.