J P

Gold — Don't Be Left Holding the Bag

Keep trying to talk gold down citing the 4Q of 2005 data, Phil. Maybe you just grabbed the wrong link, but at any rate, look at what happened in 2005, and how "Demand slackened" and "central banks dumped 665 tonnes" and gold went from $450-$550.

September may well be a down month for gold, and if that's all you're saying, great, maybe you can be a little more clear.

But you seem to be saying anyone who holds gold is a fool, and your data doesn't support that argument (or dispute it either) and to make it you're going to have to address the role gold plays and why people hold it. Since you seem to assume they will dump it on a moments notice.

Gold: Heading for a Trainwreck Due to Oversupply?

"but NY has actual gold but I just checked (you made me curious) and they do, in fact, have 9,000 tons of it in NY and there is even a tour so you can go see for yourself."

What keeps me responding is your dishonesty and misrepresentation. For instance, you say the above as if that 9,000 tons is US gold, it is not, it is owned by foriegn interests.

"You sound smart so I'm sure you realize GATA has an agenda so all the information they gather is, of course, going to prove the point of the Gold Anti-Trust Action Committe..."

Which is completely asinine in the face of the shear volume of carefully selected irrelevant facts you have cited here, or misrepresented here. The big difference is that GATA has evidence showing its theory.

Worse, when you present "facts" you're dishonest about it. You cite statistics as if they respond to a point when in fact that are completely irrelevant-- the Vault at the Federal Reserve in New York holding 9,000 tonnes of foriegn gold is completley irrelevant to the FACT that the annual report of the St. Louis Federal Reserve which I cited, shows that they hold zero gold, only gold certificates. Paper.

Unlike GATA, you are being dishonest with the "Facts" you cite, by snidely citing made up (eg the claim that hte US has %80 of the gold) or irrelevant "Facts" to support your position, while ignoring the real points I have made.

At first I thought you had just been mislead, or misunderstood and that you could be corrected. Now I understand that whether that is the case or not, you are a fundamentally dishonest person, and thus not worth wasting time arguing with.

I'm done here.

Gold: Heading for a Trainwreck Due to Oversupply?

There's a big difference between predicting that gold will hist $600 when its at $640, or $614, and calling for a "Trainwreck". In no way is $600 a trainwreck.

What you were seemingly saying is that the bull market in gold is over. This is very different. I won't debate where gold will go in the short term because I cannot predict it-- but I will say if gold goes to $600 or $550 even, it WON'T be because of central bank dishording-- even if your theory was correct, dishording is not what causes such small moves.

I think your ability to predice the direction of gold would improve if you understood more about the market for gold and the players in it, and so I suggest you read the GATA website. Frankly, to speak disdainfully about it and to publically make calls on gold is to reject one of the fundamantal sources of information about the gold market, they've already done much research on the subject.

Finally, on the subject of US gold holdings, you accuse me of the fundamental error you are making- that of confusing paper with gold. I am not undersestimateing US gold holdings, I simply went an pulled the annual reports of the Federal Reserve branches and looked at their holdings. They are not holding US Gold certificates, tehy are holding gold liability certificates-- that is to say, the leased the gold out years ago. Its not a "massive coverup" because the information is there in the annual reports for anyone to look at, if they will understand.

www.stlouisfed.org/pub...
Page 60.
$327M in gold "certificates". vs. $24B in outstanding currency. You assume these certificates are pricing gold at $42, and are US government certificates with gold backed at fort knox... but it does not say that, and this is not the case according to statements by Mr. Greenspan. Its not a cover up if you announce it publically and people turn a blind eye.

Gold: Heading for a Trainwreck Due to Oversupply?

Shad--

Being short gold stocks is a dangerous position to be in. What do you expect to happen? If you opened a short when gold was ahead of itself in the mid $700 then great, take your profits. But now? Look at the seasonal price history of gold. Its generally down in the summer, and up dramatically in the fall. Gold stocks are generally companies located in canada, and in canada the brokers take the summer off, so volume is down, prices are down, etc. Then in the fall, they come back and buy back in.

Consider buying put options on a major minor if you want to go short gold...at least then the worst you can do is lose %100 of your investment, instead of your shirt. Look at the price action of the positions you're short last fall... they were "Cheap" in september and quite dear in December.

The US is losing its place as the worldd reserve currency. Russia, India, China, South Korea, Singapore, Malasia, The UAE, Saudi Arabia, Iran, Syria, Pakistan, Turkey are all countries that have announced their intentions to diverisfy out of dollars and into gold. Phil may think that Russia, India and China are "small countries" hopefulyl you don't.

Also, why hold dollars when there is the Euro and the Yuan now? Both of these are the currencies of the future, the US government is acting irresponsibly and everyone knows it.

The US is a debtor nation- both internally and externally, our credit rating is effectively going down and the dollar is declining in value so holding large quantities of dollars is a bad idea.

What's the alternative? Silver? Maybe, Other currencies? Sure, the Euro is going to be more popular. Gold? Yes, historically this is the primary purpose and use of gold, and these countries have already started buying.

Gold: Heading for a Trainwreck Due to Oversupply?

Oh, its worse than I thought. You act as if $1 in 1833 is the same as $1 in 1964 (When we were still on the gold standard) and $1 now. In your world inflation doesn't even exist! Amazing!

Mines have not opened in recnet years because environmentalists and the price of gold made it untenable. Sure, some mines have increased production, but demand is growing faster, and demand growth is accelerating. You speculate as to what the source of the demand is, and you denigrate it as unsustainable-- but this is your speculation, not fact. More likely both historically and logically, is that gold has not increased in value so much as hte US Dollar has declined in value. Further, demand is coming from the fact that gold is a better asset to hold than dollars. Dollars are not trustworthy, while gold is an asset whose primary industrial purpose is to act as money.

Central bankers are not keeping the price of gold up, asinine statement that, as central bankers want to keep the price of their currencies up to cover up their inflating them. Think about it-- why do the central banks announce publically that they are selling gold? To depress the price. Why do they sell gold at hte bottom of the market and announce this publically? to depress the price.

Hell, I'm being a fool for even debating this with you. Alan Greenspan admitted in an interview and it was confirmed in FOMC meeting minutes that the federal reserve acts to manipulate the price of gold-- TO KEEP IT DOWN.

This is not up for debate, its a stone cold fact. And its the only thing that makes sense-- Central banks are not commodity traders "Taking a double off the table"... they are in the business of issuing fiat currency.

Gold: Heading for a Trainwreck Due to Oversupply?

You're welcome to start looking at the facts any time you like.

First off, Central banks don't have a double to take off of the table. That's nonsense. They aren't buying gold onthe open market as a hedge against their currencies. They are SELLING gold on the open market because they know the price of gold when priced in their currency indicates the level of inflation in the country. This is why the price of gold was in a bull market in the US between 2000 and 2003, but not when priced in euros, etc.

China has announced its intention to increase their holdings of gold. Your statements indicate a profound ignorance of the nature of money, and actually, the economic concept of inflation. The purpose of China increasing its gold holdings is NOT to get rid of Yuan and hold "shiny bits of metal" (using that phrase is proof enough that you don't know what you're talking about- this is the kind of thing that socialists tend to say when they misrepresent keynsian economics. Here's a nixon quote for you: "We're all kenysians now!"

What was I talking about? Oh, yes the facts of which you are ignorant-- China will not be buying gold with Yuan, they will be buying it with Dollars. Where do you thin our trade deficit goes when we import chinese goods and don't export nearly as much to them? They are holding dollars and ratheer than hold dollars that are increasingly becomming worthless because of US inflation-- they are dumping those dollars to buy gold. Of course they are also buying oil companies, gold and silver mines, water, and every other resource they can get their hands on. But they hold about a trillion dollars in devaluing paper, and buying gold lets them store that value in an asset that will not devalue in the interim before they can use it.

The US government shouldn't hold gold because they can never hold enough to back up the dollars they have printed. However, when the US dollar fails-- as all fiat currencies do, and the American currency has three times already in US history-- those who hold gold will be able to b uy canadian wheat, oil, water and chinese manufactured goods.

What's the alternative to holding gold? Holding paper, and if you hold paper currency, you're losing %15 of your wealth each year. (Depending on current inflation which is around %8 as measured by the CPI, but has been as high as %13 in recent years as measured by M3 before they started printing it-- and the reconciliation of the inflation that's occured since 1980 but that was not seen because the USD was the reserve asset of most international banks.)

We've been exporting dollars for decades and as a result have been able to hide the effects of inflation. Now its gotten to the point where the people holding all our dollars have had enough, and CHINA, INDIA and other major nations are moving out of the US Dollar. When those dollars come home to roost, we will have extremely high effective inflation (Decades of inflation realized all at once) or possibly a self-feeding hyperinflation.

The disdain you showed in your last message is the disdain of a fool who belittles that which he is ignorant of. You should be embarassed, not spewing insults.

Gold: Heading for a Trainwreck Due to Oversupply?

You're assuming that central banks have not been selling any gold between 2004 and 2006, while talking about possible changes to the agreement whiereby central banks sell gold! The "percentage of assets" is an irrelevant figure, because its measured in fiat currency. The questions is, how many ounces do they have.

The reality is, you do not know. The statistics you are counting on count both physical gold and "gold notes" that is, gold that has been sold already, or "leased". Its not real gold, and thus it cannot be sold onto the market without creating an equal demand to find the gold (on the open market) to satisfy the note.

Please visit gata.org for a thurough investigation of the state of gold in central bank vaults.

The name of the game is-- sell gold short so that inflation does not look as bad. You've fallen for their propaganda, masquarading as statistics.

Gold: Heading for a Trainwreck Due to Oversupply?

You note the bias of one report, but ignore the bias of the other. The real question is what are the actual facts. An anecdote from one company is not going to tell us the trend. Gold has had a low price for over a decade, and is not even a quarter of the way to its previous high (inflation adjusted) and miners have not been opening new mines for 15 years or so, it doesn't make much sense to claim that suddenly there's an oversupply. Furthermore, scrap gold is a figure that is very hard to quantify.

Finally, what makes you think there is any gold in central bank vaults? Who knows when they ran out, or will run out, but after 20 years of dumping gold onto the market-- particularly when the price was already low- the ratio of central bank gold to fiat currency in circulation is at a low for all of recorded history.

That does not bode well for the age of fiat currencies.