Dave G

Decoupling Of Physical Gold And Paper Gold Prices

The paradox evident from these these discussions is that for the past year or so holding any investment of any class - including cash - has been a losing proposition. This is a near impossibility, but actually has and is going on. The only explanation is massive, forced selling (aka deleveriging) on a scale never seen before to satisfy margin calls, bank regulators and redeeming hedge-fund owners. Further, there is no end in sight even though CB's have lent, swapped and printed more than $1 trillion with credit still getting tighter. Swaps, and lending are not doing the trick. Only real expansion of the monetary base will alieve this crisis.

This craving for liquidity has created a monstrous dollar shortage that is a total illusion.Yes, the demand is there, but it is like oxygen for a man stuck inside a box; he will do anything to keep the supply coming in so he can live; make any promises, give away anything he has to keep the oxygen flowing.

How can this end? Only one way. CB's will create more oxygen, more dollars, to allow the man to breathe. He needs only to satisfy his creditors with paper, not wealth. When this finally occurs, the demand for dollars will drop, credit will loosen, commodities will behave more like they have for the past 500 years, gold will rise and companies will start making money again and presumably their stocks will rise too.

So when will this occur? When the maximum point of pain is reached by the most amount of people. A 'political' event, when the pain of not acting is greater than following the inevitable course that they must.

One more cliche is appropriate. It's always darkest before the dawn.