Before reading any further, check out this story from CNNMoney.com: $600 gold: Want in? Think twice. The link was also posted on 321 Gold.
Finished? Did you notice the sub-head on the story? "Gold's meteoric rise over the past five years has enriched precious metals investors -- should individual investors follow suit?"
Now this is subtle, isn't it? Should all us unwashed "individuals" who don't collect other peoples' money to invest or print it on order to lend it out get into Gold? As you can see from the story, the answer is clearly "no". Just as clearly, the message is that we poor little "individuals" should go on giving our money to the institutions and the mutual funds and the banks and the insurance companies et al to invest for us.
That assumes, of course, that all us individuals have been looking the other way over the past five years while Gold has risen from just above $US 250 to just below $US 600. Sadly, most individuals have been doing just that. But just in case they may have stumbled upon the fact that Gold has doubled and quite a bit more since 2001 while the stock markets (in the US at least) have been going precisely nowhere, CNN has come out to tell them that Gold is not a place they want to go.
And just in case the message has not sunk in over the course of the story, this parting shot does its best to make sure there is no misunderstanding: "Not everybody could handle losing 40 percent in one year ...Most people probably don't need an investment in precious metal funds."
Remember the Nasdaq dot-com telecommunications bust, boys and girls? Well, Gold can be even worse than that. Imagine losing 40% in a single year? When was the last year that Gold lost 40%? There hasn't been one since Gold and the Dollar were divorced in 1971. But gold or precious metal "funds" are a different matter. Gold funds and Gold stocks - like many other stocks or "funds" - have been known to lose 100% in a single instant. That's right, many are the financial assets which have been marked, not to market, but to zero.
The message is the same as it has always been. The only difference is that for most of the past 25 years, it has not been necessary to bring out the message at all. People did not have to be talked out of buying Gold, they had no intention whatsoever of going anywhere near it. The problem is that since the beginning of 2005, Gold has risen exactly $US 150 (or 34.2%) from $US 438.40 to $US 588.40. Despite all the efforts of the Carnival barkers of Washington and Wall Street, that has tended to get people's attention. This is especially the case since stocks and bonds have done nothing at all. It is even more the case in recent months with the obvious end of the housing boom in the US.
The financial powers that be have created a monster, and have no way to tame it. The American public was weaned off any form of rational saving by the market bubbles of the 1990s. They were pushed into negative saving territory by the housing bubble and mortgage re-financing craze of the first half of the present decade. Over that 15 year period, they have come to rely almost totally on perpetually rising financial assets to maintain lifesyle. For a huge amount of Americans (and people in many other parts of the world too, most certainly including Australia), the idea of living comfortably off a paycheck (in most cases two paychecks) has become ludicrous to even contemplate. All these people have become dependent for their economic futures on the "returns" from their investments and/or from the increased valuations of their houses.
The problem is that these returns have dried up. And since most people cannot survive financially without these returns, they have been casting about in increasing desperation for a market - any market - that is going UP. That has led in two directions. It has led to a big increase in US investment money pouring into foreign stock markets - especially Asian stock markets. And it has led to a big increase in money going into the precious metals funds. Not the precious metals themselves, mind you, not in the US, but the ETFs and the mutual funds which buy the metal and also Gold stocks and Gold futures.
On the internet, and in the dwindling number of paper based newsletters out there, Gold has been "in the news" for years. But in the places where most Americans get their "news" - ABC, NBC, CBS, CNN, CNNFN, CNBN, Fox News, Barrons, The Wall Street Journal, The New York Times, The Washington Post, BusinessWeek, Time, Newsweek, et al - Precious Metals in general and the price rises in same in particular have only surfaced very recently.
Most of what has been "reported" is a variation on the piece linked to above on CNN.
If there was any way at all that the financial powers that be in the US could have prevented the price rise in Gold which has taken place since the start of 2005, it would have been taken. Before the start of 2005, Gold's more gradual price rise could be and was explained away as a mild reaction to the weakening of the US Dollar. But since the US Dollar stopped weakening at the end of 2004, this explanation does not suffice. It becomes even weaker in light of two facts. First, Gold's rise in $US terms has accelerated since then, and accelerated greatly over the past six months. Second, Gold is rising rapidly in terms not just of US Dollars as was the case in 2001-04, but in terms of every world currency. This is an absolute worst case scenario for the global fiat money paper system and it is worsening by the week.
We can expect a lot more pieces about Gold in the future from the "mainstream" press. All of them will be along the lines of the CNN peice. "Gold is way up." "Should YOU buy any?" "NO!!"
Remember the reporters who were "embedded" with the US forces in Iraq in order to report on the US war against and occupation of that country? What came out was exactly what those in charge of the war and occupation wanted to have come out. The situation with regard to the mainstream financial press in the US is exactly the same. The difference is that the stakes here are MUCH higher. The political and financial establishment can survive a losing war - they've done it before. They can even withstand a collapse of the markets and the economy of their system. They've done that before too. But what they CANNOT withstand is any type of cascading loss of confidence in the MONEY behind their system. No establishment, and no economy, can withstand that.
Gold as MONEY is the greatest threat to political rulers of any stripe. It strips them of their prestige, their power, and their exalted place in the world. And, since the "mainstream" media is, by definition, the establishment media, they will do their best to discourage anybody from contemplating, let alone taking up, the ownership of precious metals.
For the mainstream media, the only thing more blasphemous than actually advocating Gold ownership would be to question the paper money system itself. If and when we ever see THAT discussion surfacing in the mainstream media, we will know that the sitution is nearing the terminal stage.
In the meantime, the more stories like the one in CNN the better. The one thing that irritates people more than being told what they should do is being told what they shouldn't do. Woe betide the mainstream media and the political and financial establishment behind them on the day that people realise that the thing they REALLY shouldn't have done is to listen to ABC, NBC, CBS, CNN, CNNFN, CNBN, Fox News, Barrons, The Wall Street Journal, The New York Times, The Washington Post, BusinessWeek, Time, Newsweek, et al.