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  • The Bundesbank is repatriating at least part of its gold from New York (where 45% of the country's reserves are held) and Paris (11%), according to Handelsblatt. Steve Liesman says the Buba has confirmed the story, and the amounts are to be announced tomorrow. [View news story]
    The real question is why are they repatriating. I mean really why, not what they tell us. There is a message here.
    Jan 15, 2013. 12:10 PM | 4 Likes Like |Link to Comment
  • Gold And Silver Outlook For January 14, 2013 [View article]
    In these transactions, the dollar only serves as a means of exchange. You can buy any currency and gold with dollars and use that to pay for crude (or anything else for that matter). Bottom line, we don't care whether our currency us used or not. The Japanese, for interested in what the cost of crude is in yen, not the instrument that they choose to use to pay for it.
    Jan 15, 2013. 10:36 AM | Likes Like |Link to Comment
  • Gold And Silver Outlook For January 14, 2013 [View article]
    It is hard to look at any investment in a very short term context and that is particularly true with gold. Unlike most investments, gold is a hedge against "loose" money policies and, unlike most investments, does not have attributes such as earnings, cash flow or operating risk that serve to help in the analysis of its likely performance in the market. What impacts its performance are macro trends and events that are generally attributable to the economic policies of nations.

    The real attraction of gold today comes from long-term economic mismanagement in most of the developed world and the excessive levels of debt that have been allowed to accumulate. When usually wise and sane economists and treasury functionaries publicly suggest that the debt crisis can be solved by minting trillion dollar platinum coins or tearing up Treasury securities held by the Fed, you know that they are either desperate or not thinking. It does not take a college degree to figure out that if it were possible, there would be no need to collect taxes to cover government expenditures! That suggests to me that we are nearing the end of the "loose money" era and that the ending will not be managed or controlled, but rather, imposed by the market and thus disorderly.

    Beyond soon, it is very hard to know when this will happen, but you will want to own gold when it does as buying it then will be expensive.
    Jan 14, 2013. 09:56 AM | 2 Likes Like |Link to Comment
  • Where Are We In The Secular Bear Market? [View article]
    I think that your point would be stronger and more apparent if you adjusted your charts for inflation. Had you looked at, say, Zimbabwe, your chart would be rising sharply as everybody was losing their money. Weimar Germany in the 20's is another example.
    It is unfortunate, but understandable that most investor advisors look only at nominal movements in the market, but even more unfortunate for those who do not realize that much of their gains are illusory for all but the government who taxes these illusory gains anyway.
    I believe that most people invest because they want to increase the purchasing power of their assets and if so should look only at real returns.
    Jan 9, 2013. 04:09 PM | Likes Like |Link to Comment
  • 2013: The End Of Gold's 12-Year Winning Streak [View article]
    It's really pretty simple: when sound money policies are pursued, gold languishes, when they are not, gold flourishes. If you think that we (or anyone else in the developed world) is pursuing sound money policies, you should not invest in gold. Those who think otherwise should invest in gold. History will show that it is invariably a winning investment in those circumstances.
    Jan 6, 2013. 11:22 PM | 7 Likes Like |Link to Comment
  • The central thesis of gold bugs - that the Fed has lost control of the money supply - is now "in tatters," writes Dennis Gartman. The bulls only hope is a more dovish FOMC in 2013. It may be so at the margin, but not materially so, he says. Gold -1.8%, but - as they say - off the lows[View news story]
    The real problem is that at some point money printing causes interest rates (swap rates, actually) to turn up. At that point, the die is cast and debt service becomes increasingly expensive, consuming an ever larger portion of revenues. Eventually, default is the only option. Latin America offers plenty examples, but so does Europe without needing to go further back than a single century.
    Sovereign defaults are a much better reason for purchasing gold than the simple fear of inflation.
    Jan 4, 2013. 05:00 PM | 2 Likes Like |Link to Comment
  • Gold investors are making a "major mistake" if they think the latest Fed minutes indicate the end of QE is likely by mid-year or even year’s end, Peter Schiff writes, seeing the recent decline in gold prices as a buying opportunity. The Fed's hands are tied, as any end to buying Treasurys or MBS would result in higher rates that might tip the economy back into recession. Gold finishes the day at $1,648.90, -1.5%[View news story]
    The real problem is that at some point money printing causes interest rates (swap rates, actually) to turn up. At that point, the die is cast and debt service becomes increasingly expensive, consuming and ever larger portion of revenues. Eventually, default is the only option. Latin America offers plenty examples, but so does Europe without needing to go further back than a single century.
    Sovereign defaults are a much better reason for purchasing gold that the simple fear of inflation.
    Jan 4, 2013. 04:55 PM | 3 Likes Like |Link to Comment
  • Gold Cannot Seem To Make A Move Even With Fiscal Cliff [View article]
    I think that anyone who buys (or sells) gold on the basis of demand (or lack thereof) from the jewelry or industrial users does not understand that the significant mover in the price of gold is its value as a currency.
    When sound money policies are followed by the developed nations, gold's value diminishes and when sound money policies are abandoned - as they have been for some time now - gold's value is on the rise.
    The really big mover of gold prices will be the inevitable default of one or more large banks and/or sovereign borrowers.
    Those who believe that zero percent interest rates will stay forever, probably believe in Santa Claus and the tooth fairy. Eventually, interest rates will turn up and the game will be over. Those who doubt this need only look at the percent of revenues that sovereigns spend on debt service now and what happens to that number as interest rates rise. Doing so will demonstrate that there are few nations who can pay interest rates that have been customary in the past without using up all of their revenues.
    Once that point is reached by one of the larger of the developed nations, all debt and all major currencies will become suspect and gold will become the safe haven.
    Dec 28, 2012. 04:04 PM | 1 Like Like |Link to Comment
  • Paul Van Eeden On Why Gold Is Overvalued [View article]
    One might think (from the article and most of the comments) that the US was the only country in the world and the dollar the only currency. Obviously that is not true. In addition, in the developed markets "money" moves freely and events in say, Japan or Europe impact the financial markets in the US, just as water always seeks its level in series of interconnected tanks. In addition, limiting the analysis to the US money supply includes what are called (improperly) Eurodollars, (which are bank deposits held in the US by foreign entities) but does not include the leverage created by these dollars that support borrowing in dollars to finance, say mortgages in Hungary. As might be expected, those dollars were converted into local currency, the forint, to purchase the house - which means that dollars need to be purchased to service the mortgage. In effect, the Eurodollar market represents a gigantic short position against the dollar and will be the source of steady dollar purchases in the market. When added to the deleveraging taking place in the dollar banking system the effect is very powerful.
    It is also very dangerous because it is highly deflationary and in a deflation the problem becomes one of debtors not being able to service their debts; and, when that happens, all money (which is debt) becomes suspect. In addition, when that has happened in the past, the only solution has been to devalue the currency relative to gold. So far, I see no other solution on the horizon. Everyone would like to get rid of debt through inflation, but there are times when that does not work and I would suggest that this is one of them.
    Nov 30, 2012. 11:02 AM | 1 Like Like |Link to Comment
  • Agreeing on the creaky condition of the fiscal position of Western governments, two economists come to the opposite conclusion on gold. Lombard's Leigh Skene thinks the EU debt crisis has set in play a deflationary spiral in which gold falls (and sliver plunges), while John Williams says 2014 will bring realization of the U.S. government's insolvency and a soaring price. [View news story]
    Pretty much everybody understands why gold increases in price during an inflationary period, but few understand why gold rises in a deflation. The answer is simple: in a deflation, borrowers can no longer repay their creditors and all debt becomes suspect. Gold is not someone else's liability and takes on the role of money as currency (which is debt) is no longer trusted as a store of value.

    I would also note that in past deflationary depressions the answer has invariably been found in the devaluation of the currency versus gold.
    Nov 29, 2012. 09:41 AM | 7 Likes Like |Link to Comment
  • Commodity Chart Of The Day: Gold [View article]
    All that may be fine for traders, but if it were that easy, we would all be very wealthy. Gold like most financial assets move on the basis of events. If we were to return to stable money tomorrow, there would be no need to own gold, but I don't think that is going to happen soon. We think of say, a cash dollar as an asset, but forget that it is someone else's liability (or debt). Right now there is too much debt and much of it will never be repaid. That will happen either through inflation or outright defaults (deflation). In neither case do you want somebody else's debt.
    As for equities, there are hardly any that do not have a lot of debt. Those that have to default will take a hit to capital because debt gets repaid first.
    Gold suffers from none of these risks.
    Sep 28, 2012. 05:41 PM | 1 Like Like |Link to Comment
  • Today's Gold Rally Is NOT Justified [View article]
    Gold is up more than 500% since 2000, when the market peaked. The problem is that the central banks have been creating too much money and governments have been creating too much debt. Who would have thought that government debt was not only not risk free, but riskier than some private debt. Gold is the safe haven in periods like this and will protect against both inflation and deflation. Not bad when you consider that these are the two major risks on the economic horizon.
    Sep 7, 2012. 11:21 AM | 1 Like Like |Link to Comment
  • Gold hits its highest level since February, +1.4% to $1,731 as QE expectations for next week ratchet up following the payroll report. Silver and copper follow suit, both posting large gains and multi-month highs. And don't forget Beijing - now getting serious about its own stimulus efforts. [View news story]
    A silly barbarous relic for some, but in times of excessive credit creation, inflation and deflation it does a pretty good job of protecting the purchasing power of one's assets. It may have gone unnoticed to some, but the purchasing power of dollar assets has declined by over 30%. Check out the performance of gold during the same period. You will see that the number is over 500%.
    Sep 7, 2012. 11:12 AM | 2 Likes Like |Link to Comment
  • Will Gold Resume Its Rally In The Near Future? [View article]
    Gold is rallying on inflation fears, the main driver for gold so far. The real move will come when gold starts rallying on deflation fears and we are not there yet, but gold could be significantly higher (or not) when that time comes. Right now it is seen as an inflation hedge; eventually it will be seen as money.
    Sep 1, 2012. 09:35 AM | 1 Like Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    I think that you fail to understand that there are times when people turn to gold as a safe haven for their wealth and times when they do not. Typically the times when they do are times of monetary instability and the times when they do not are times of monetary stability. Stuff like commercial use of gold like for jewelry in India is not really relevant to the big picture. If you think that monetary stability has returned, you are right to be short of gold; if you do not then you are wrong. If you fear deflation or inflation, you are also wrong to be short of gold. From my perspective, the current crisis ebbs and flows, but is far from over.
    Aug 15, 2012. 06:13 PM | 21 Likes Like |Link to Comment