The Vet

Winmill: Don't Be Surprised By $2,400/oz Gold

This comment "gold does not have a good record of making people money" is repeated endlessly but when queried you will always find that whoever makes it always bases their assertion on a starting date of 21st Jan 1980 at a price of $850 USD an ounce. That was 9 years after Richard Nixon completely cut the link of the world's monetary system to gold something that had never happened in prior recorded history.

Sure that was a bull market spike that lasted but a few days and gold then went into retreat, but to take a single data point and use that to make the assertion that "gold does not have a good record of making people money" is simply distorting history. Almost every asset class available can be shown to have experienced "blow off tops" and then retreated later if you cherry pick the time frame.

When the world's money was closely linked to gold, as it always was for all but a few brief periods prior to 1971 there was no way that the "price" of gold measured in the currency it directly supported could appreciate significantly. It is mathematically impossible! Now that link has gone, it is truly "different this time".

Next Up for Paulson: A Gold-Focused Hedge Fund

The top will be in when all the pundits who are predicting that the top IS in, give up and become buyers again..

Precious Metals: Breakout, Fakeout or Shakeout?

A nicely balanced technical summary, but if the comment "Sentiment on the precious metals is almost uniformly bullish" holds up, then why is it that the majority of the comments made here in response to the article are actually bearish?

Hong Kong Recalls Gold Reserves: Why No News Coverage?

Someone in Hong Kong knows their history and want to avoid a repeat. When Britian went off the gold standard in the 1930's most gold reserves for many countries (especially the Commonwealth countries) were stored in London and denominated in British Pounds.

The pound was supposed to be as good as gold and directly convertible to metal but with a single swipe of the pen, that link was broken and every country which though it had real gold stored in London was left with paper pounds and England kept the actual metal for themselves and the pound was promptly devalued by repricing the gold. Of course the US saw what a good idea that was and soon followed suit, but they even added their own touch but confiscating the public's holdings of metal first!

Time for a Silver ETF Renaissance?

Has anyone any comment on the way that silver holdings in SLV act?

Looking at the holdings of silver it is obvious that there are long periods where the holdings remain static, typically up to around 20 trading days, followed by a couple of days of sharp moves. The periods of static holdings seem to be when the silver price is dropping but quite significant changes in the POS often produce no change in the shares issued or the silver held. Generally the trend is up with only a few significant reductions.

Sell the Franc, Buy Gold

At least the Swiss told the world it was devaluing its currency. Others have been doing the same but keeping quiet about it. Just look at a chart of the Yen/USD for last month and you see that the Yen weakened steadily from around 88 to the dollar to over 98 to the dollar.

That's over 11% depreciation in just over 30 days; the Swiss haven't topped that - yet....

Gold ETF Inventory Increasing at Record Pace

On Feb 09 09:35 AM know nothing wrote:

>
> Serial numbers should be required, to verify existance of inventory
> in each ETF.

Serial numbers and accurate weight of every bar held by GLD are listed for all to see on the GLD website.

A lot of people who seem intent in knocking GLD's holdings haven't bothered to do even the most rudimentary DD.....

GLD's gold comes from the LBMA in London where, on average, they clear around 20 million ounces (over 600 tonnes) every trading day. The few tonnes added to GLD's stash every few days doesn't even register as a blip on those sorts or quantities.

(link to the LBMA stats page. Also read the FAQs available on this page to show that the numbers are actually given as millions of ounces DAILY averages for each month listed.)
www.lbma.org.uk/stats/...

Has Gold Appreciated Too Much to Be Inflation Protection?

Smarty has it right... By continually measuring gold in US dollars (or any other fiat currency) we are comparing one variable against another variable. We shouldn't be saying "gold is up today" we should be saying that the "US dollar is down today".

If the values of all currencies were reported in the press and on the web as the number of currency units, be they dollars, yen, pounds or euros that could be bought with one once of fine gold then we would have a fixed measure to make real comparisons. My using the same measure for all commodities as well we could determine real prices against a real standard. No fiat currency is a real measuring standard today as they are all being manipulated by traders, banks and governments to meet their agendas.


On Jan 27 11:40 AM Smarty_Pants wrote:

> I would suggest recasting the question somewhat. Your frame of reference
> is limited.
>
> Instead of citing the "price of gold" utilize the "value of dollars".
>
>
> Anyone who buys an ounce of gold will always have an ounce of gold.
> The question is, how many dollars can you trade it for? What is the
> value of the dollar going to be in the future?
>
> Given that the supply of tradable gold is increasing very slowly
> and the supply of dollars (or digital equivalents) is increasing
> very quickly, I don't see how the number of dollars per ounce of
> gold will decrease over the long run.
>
> I recall reading somewhere that the only real power a central bank
> possesses is the power to devalue the currency.
>
> Gold has been a much better store of value than the dollar ever will
> be for the long term.
>
> I posted this information some time ago for another similar article
> on SA, the 2008 data may be a bit dated now, but the point holds.
> Note that 1971 is when Nixon closed the gold convertability window
> and any pretense of monetary restraint was abandoned:
>
>
> Median house price in 1970: $17,000 (US Census)
> Price of gold in 1970: $38/oz
> One median 1970 house: 447+ oz of gold
>
> Median house price in 2000: $119,600 (US Census)
> Price of gold in 2000: $279/oz
> One median 2000 house: 428+ oz of gold
>
> Median house price in 2008: $210,000 (Natl Assoc of Realtors) <br/>Price
> of gold in 2008: $800/oz
> One median 2008 house: 262+ oz of gold
>
>
> Over the course of 38 years, an ounce of gold held value much better
> than a dollar did. You could easily buy a median house for around
> 450 oz of gold at nearly any point in that continuum, yet the number
> of dollars required for the same purchase increased by over a factor
> of 12.
>
> So recast your question: 30 years from now would you rather have
> 10 oz of gold or $9,000?

Treasuries' True Risk

Paco, congratulations on an excellent piece.

Many cannot understand the difference between fiat money and gold as a means of representing value because they have only been exposed to fiat as the basic unit of valuation and store of value.

The argument that the world could not advance economically due to the obvious limit in annual production of new gold is a fallacy. Under a gold standard the price (expressed as a weight of fine gold) for every good or service would adjust according to the ease or difficulty (expense in labour and energy) of producing that good or service relative to the expense incurred in producing the price of that quantity of gold.

As a result an increase of demand for a commodity or service which could not be easily met by an increase of supply at a particular price (expressed as a weight of fine gold) would result in an increase in the price of that item until the supply could meet the demand. As this increase could exceed the increase in the supply of gold the prices of all other commodities and services would have to fall slightly to maintain reasonable relative values.

Increases of demand for all commodities and services (growth) over and above increases in the supply of gold in turn would result in an increase in the "price" of gold relative to everything else but supply would always remain relatively stable, so as a result the economic system and prices would also be stable.

10 Reasons to Reject Rusoro's Bid: Gold Reserve's Desperation Presentation

James, when you make statements like "No evidence in support of this allegation has been provided. Why have no criminal trespassing charges been filed against Rusoro if this is the case? " I am afraid I have to doubt your due diligence and/or motives.

Rusoro has made public statements admitting that they drilled GRZ's Choco 5 property and GRZ has included the trespass as part of their claim before the courts in Ontario.

So what is it? Is your DD so superficial that you missed those points, or do you have another agenda for publishing misleading information?

Venezuela Looms Large in Gold Reserve's Slide

Despite the lack of information from Venezuela, Gold Reserve unlike many other juniors is quite well cashed up and has a 35k tpd mill and process machinery ready for delivery next year.

Venezuela may be able to block Brisas but they can't confiscate the cash and equipment even though the market prices GRZ as if they already have.. GRZ has approx. 56 million shares issued so that gives it well over $1 a share in cash without considering the value of the equipment, but it trades at 35 cents?

Countdown of Manipulated Gold Price Running Out

Short selling of anything requires buyers to take the other side of the trade. Gold is still one place that there are buyers prepared to step up and there are no government restrictions on their activity so the short sellers have a market to ply their trade and they don't need any gold to sell in order to participate.

COMEX works in cash and generally settles in cash. You can be sure that if too many longs start standing for delivery of real metal the exchange will quickly change the rules to force cash settlements only at the manipulated paper price, not the real market price, and the short sellers know that protects them regardless of what happens to real gold.

Banning Shorts Works in Fancy Restaurants, Not the Marketplace

If short selling allows an investor to be "bearish on stocks they don't own" the obvious opposite position is an activity that allows longs to be "bullish on stocks they buy but don't pay for".

Of course that is possible through buying call options or sell puts, just as the bearish crowd can either sell calls or buy puts. If bears want to speculate on drops in the stock price then they should use the options market, the same way as the bulls have to.

So until the system allows bullish investors to buy stocks without paying for them, why should shorts be allowed to sell something they don't own?

The Disconnect Between Supply and Demand in Gold and Silver Markets, Part II

The major risk to the metal ETFs like GLD and SLV is not their structure or management but the fact that as stocks they can be sold short.
Naked short selling is the worse, but even "legal" short selling where stock is borrowed and then sold creates more long holders of stock than there is metal in the vault to cover that stock.

Ultimately in the worse case 100% of the metal could be redeemed leaving zero "real" shares but the same number of borrowed shares would remain in long shareholders accounts backed by nothing except the creditworthyness of the short sellers.

Of course once the backing of gold dropped, few new buyers are likely to step up and the price would fall leaving the shorts sellers of the stocks with a tidy profit and the long shareholders with nothing. Current SEC rules can't even force the shorts to cover or deliver stocks they have sold, so don't expect any protection from the regulators.

The Strange Case of Dr. GLD & Mr. Bullion

While the ETF's GLD and SLV (for silver) should always trade close to the spot price due to arbitrage of the authorised participants, there is another factor to consider. That is that the metal backing each share is less than the "official" stated figure due to short selling. Short selling (regardless of whether the shares are borrowed or sold naked) increases the effective float without a corresponding increase in the backing metal.

SLV has already appeared on the Reg SHO list on a couple of occasions indicating without a doubt that there were sellers of the stock who were unable (or unwilling) to borrow stock and this resulted in a failure to deliver stock. There is no way that a share sold short to a long shareholder or bought by an authorised participant for redemption can be distinguished from a share backed by real metal. Even if there was no naked short sales and no duplicate borrowing of stock, a situation where each real backed share was sold to two long shareholders could exist and the entire float could be redeemed for metal leaving the equal number of shares in the market no longer backed by a single ounce of metal and supported only by the credit of the short seller.