texpat

Should Gold Bulls Worry?

To ncalmd: Whether gold is like tulips, the fact that it has been the money of choice for 6000 years means that this is very unlikely to change soon.

As for buyouts of junior PM miners, major producers aren't interested in running penny ante operations. They would rather acquire a multi-million ounce property and develop it themselves. There have been some acquisitions of this nature, and look for more to follow.

Gold production has declined for several years now. It has become harder to find big deposits, costs have risen, and the permitting process has become a nightmare in most jurisdictions. As with peak oil, there is a good argument for peak gold.

Gold and Silver: Price Does Matter

The World Gold Council is a joke. It continues to promote gold as jewelry, even as gold's role as an investment or insurance has grown in importance, to the point where it now accounts for most of the demand. Gold Field Mineral Services is another joke--they deliberately ignored the fact that central banks have turned net buyers--a SEA CHANGE--by dismissing it as an aberration. How can their numbers be correct? If demand is truly down that much, the only explanation is that central banks were selling or leasing so much gold--and have now stopped--that supply is now inadequate.

U.S. Dollar at a Crossroads – Is Gold’s Rise Poised to End?

The US dollar has passed the event horizon. Gold will eventually go to the moon.

Price of Gold in Dollars (Record High), Euros (-10%) and Yen (-10%)

"This indicates that the strength [in gold] is solely a function of a weaker dollar rather than any real pickup demand."

Duh. The big picture is clearly a bull market when measured against any currency. What are you guys, day traders?

Gold Price Manipulation: So What?

From a narrow standpoint, you may be right. From a broader standpoint, the problem is that if the manipulation ends in a blow-up, a lot of people will get hurt. Taxpayers for one, because the banks who are short and have to cover en masse will get bailed out, particularly if they're acting as central bank proxies. Force majeur will be declared on the commodity exchanges, so those who thought they could take delivery of bullion will receive paper instead. All of this will further erode confidence in what is already a shaky system. It therefore matters a great deal if the gold price is being manipulated.

Investor Demand Drives Gold Scarcity and Price

35K tons at 400 tons a year would stretch to 90 years. But over half of those 35K tons has been leased (and sold), never to return. Few central banks want to sell any more gold, which is why the Chinese recently had to get it from the IMF.

Intraday Charting: Response to Obama's Speech

You're right, gold isn't a commodity and it just stores value. Which is precisely why the Chinese, who are rightfully concerned about the future value of their colossal US dollar holdings, could start to buy gold in a big way. They recently announced that their reserves had gone from 600 to 1054 tonnes, and to the extent that the IMF sells gold, most of it probably won't see the market, but go straight into the Bank of China's vault. China's problem is that they can't acquire all the gold that they probably want, because there isn't enough available without sending the price to the moon.

On Jun 24 12:01 PM Trent Hauck wrote:

> I must disagree. I can't see gold rising significantly, because while
> it is a commodity, I would say that's a misnomer. Gold really doesn't
> do much besides look pretty and "store value" whatever that means.
> Other real commodities can be the inputs to production and thus will
> rise as the industrial machine starts to turn again.

9 Cures for Gold Fever

I wouldn't classify a deed as a paper asset. It represents something tangible that is no one else's promise. A stock certificate also represents something tangible, but firms can go bankrupt. So can your broker, which can be a minor or major problem if the stock is held in their name.

Incidentally, one of the best explanations of fiat that I ever read used deeds to make the point. What's a deed worth? As a piece of paper, next to nothing. What gives it value is the fact that it represents ownership of a house. You can therefore trade it for a Rolls when you discover that the car dealer is interested in your house. The dealer later decides he wants a yacht instead, so he transfers the deed to the yacht salesman. The government sees this and thinks it's a good way to stimulate economic activity, but the problem is that not everyone has a deed. There's a lack of liquidity. The government therefore starts printing deeds for which no houses exist and decrees that these new deeds must be accepted in the same way as all others.

9 Cures for Gold Fever

The big point that you've omitted is that gold has no counterparty risk, whereas every paper asset does. That's why I maintain a bullion position of at least 20%, and even more during times like these.

5 Reasons to Join the Gold Rush

With regard to #5, gold isn't a commodity. Commodities get used up, whereas almost the entire historical production of gold is still intact, either as bullion, coins, or jewelry. During economic stability, the demand for gold stems mostly from jewelry. But in times of uncertainty, gold acts as money, being acquired to preserve purchasing power when paper assets of all types start to look dubious.

Gold has been money since the beginning of recorded history. Its role as such seems very secure. When paper money is managed responsibly, holding gold is no better than holding paper money in a mattress. The problem is that the quantity of paper money is subject to political whim, which is why the prudent hold gold as insurance and why gold sometimes performs well as an investment, when the uninsured start to bid on what is a finite pool of insurance policies.

Jim Sinclair: Gold, Swine Flu, Communal Emails

1) The "comrades in gold arms" metaphor won't affect everyone the same way. And to leap from that to idolizing gold?!
2) Jim Sinclair doesn't rail much against the evil cabal. Mostly he just treats it as a fact of life. Maybe you're confusing him with GATA. He'd probably agree with GATA's analysis, but his tone is different, often similar to your "truth" and "confidence" outlook. That said, the financial system does not lack for execrable things that merit some vituperation.
3) A herd mentality is dangerous, but I don't see Sinclair trying to set himself up as a leader. His site has a large following because it is educational, insightful, and free.
4) Sinclair discusses other topics because they could significantly affect the gold price.

Freya, with regard to the Barron's piece, they interviewed Sinclair, so "Mr. Sinclair did not return phone calls" is misleading. So what if he buys tranches? He's not getting a discount, and it's much better than him taking a ton of options, which most senior management teams see as some kind of entitlement. If he sells some of his shares, so what? I believe he has provided well over $10M in financing so far. You can't believe everything you read, and Barron's is no friend of gold companies. Previously, they ran a hatchet piece on RGLD by someone who was a major short! Royalty companies like RGLD and TRE have far less risk than straight mining plays, but the market doesn't always account for this, which can lead to buy-outs at healthy premiums, like when NEM bought Franco-Nevada.