Archives: 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000
The best Gold for hedging and protection against currency debasement is, of course, Gold bullion. Popular Gold bullion coins are South African Krugerrands, American Gold Eagles, Canadian Maple Leafs, Perth Mint Kangaroos and Austrian Philharmonics. Popular Gold bullion bars include those produced by Johnson Matthey, PAMP, Credit Suisse and the Perth Mint.
In any discussion of the future of Gold, or of the price of Gold, the first thing that must be realized is that Gold is a political metal. In the true meaning of the word, its price is "governed".
This is so for the very simple reason that Gold in its historical role as a currency is fundamentally incompatible with the modern worldwide financial system.
Up until August 15, 1971, there has never in history been an era when no paper currency was linked to Gold. The history of money is replete with instances of coin clipping, printing, debt defaults, and the other attendant ills of currency debasement. In all other eras of history, people could always escape to other currencies, whose Gold backing remained intact. But since 1971, there is no escape because no paper currency has any link to Gold.
All of the economic, monetary, and financial upheaval of the past 30 years is a direct result of this fact.
The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold.
With 25, 50, and 200 day Moving Averages
The Easter weekend saw a remarkable event take place in the US. That bastion of "all the news that's fit to print" - the New York Times - actually printed an op ed from the first Reagan Administration's budget director David Stockman. We put a link to this article up on our home page, something that we VERY seldom do. If you haven't read it yet, please do so. The op ed is called State-Wrecked: The Corruption of Capitalism in America. Mr Stockman did a very good job indeed. That is not in the least surprising. What IS surprising is that he got it printed in what is the leading light of the US mainstream printed media.
It certainly was surprising to several other "leading lights" who contribute regularly to the New York Times - notably Mr Paul Krugman. In fact, the odium which was rained down on the head of Mr Stockman from all the bastions of the mainstream media was notable. Again, not at all surprising. What Mr Stockman wrote about in that op-ed is apostacy from first word to last.
Off the top of our heads, we can't remember a like instance of the "establishment" giving cognisance to the "other side" since Friedrich Hayek was mysteriously awarded the Nobel Prize in Economics in 1974.
At any rate, as the US paper markets ground back into action, another mysterious thing happened. For no discernible "reason", the paper prices for the Precious Metals suddenly fell out of bed. On April 2-3, the spot future Gold price sagged by $US 47.40 or 3.0 percent. Over the three days between April 1-3, Silver slumped by $US 1.53 or 5.4 percent.
When we say there was no discernible reason, we mean it in terms of the so-called "markets", of course. There are any number of reasons why those in charge of the monetary system would decide that this is a good time to "dissuade" their subjects from seeking the protection of the precious metals. The mess in Cyprus had set a new precedent - that of the raiding of bank deposits - over the previous week. The North Koreans had ramped up their rhetoric in response to a US stealth bomber which just happened to have flown within targetting distance of their bunkers. In Japan, the central bank was getting ready to announce that they were going to leapfrog the Fed as the biggest (proportional) money printers in the world. And, perhaps, somebody had sneaked an advanced look at the US unemployment numbers due for release on Friday, April 5.
As an almost certainly pre-planned "response" to the sudden precious metals swoon, many of the big global commercial banks duly "reduced" their price outlooks for Gold and Silver over the rest of the year. The financial media fell all over themselves crowing we TOLD you that Gold (and Silver) were dangerous! Meanwhile, more renegade ex-establishment types were luminous in their fury. The difference was that this time, none of them got to "vent" in the New York Times. Here's a notable example by Mr Paul Craig Roberts: The Assault On Gold. We have no doubt that what Mr Roberts asserts in this article is largely true. But these "policy devices" didn't start in April 2013. They have been going on for a very long time.
Two of the statements Mr Roberts makes in his article are as irrefutably true as they have always been:
On August 14, 1974, newly appointed President Gerald Ford signed a law that once again made it "legal" for Americans to own Gold. That law was due to come into effect on December 31, 1974 - and legal "trading" in Gold commenced on the same day. On Monday, December 30, 1974, the AM fix in London was a record $US 197.50. On Tuesday, December 31, 1974, Gold trading began on US futures markets. By the close of trade on that day, Gold had fallen to $US 182.50 or 7.6 percent. A week later on January 6, paper Gold hit an intraday low of $US 153.00. That's a fall of 22.5 percent. Bingo, an almost instant bear market. Makes the derring-do during the first week of April 2013 pale into comparative insignificance, doesn't it?
The idea was crudely obvious. Give Americans the right to own Gold after a 41-year "hiatus" and instantly strip any of them who had the temerity to go out and by some. Those who bought physical Gold were badly hurt. Those who chose to buy paper Gold on the futures markets were eviscerated. Needless to say, the big banks and futures and brokerage houses took the other side of the trade. They were short big time. It took Gold four years to regain its level $US 197.50 level of December 30, 1974. In the year after that - between the end of 1978 and January 1980 - Gold tacked on another $US 652.50 or 330.4 percent. Needless to say, the vast majority of the "public" only got into Gold in very late 1979 or early 1980. They got eviscerated again. In fact, it took Gold exactly 28 years - until January 2008 - to regain its January 1980 highs in nominal terms. Gold still has not regained them in terms of purchasing power.
Governments and the paper markets have a LOT of practice at "dissuading" people from buying Gold. They can't stand the monetary heat Gold gives off so their solution is to keep everybody out of the kitchen.
That remains their solution to this day. It has not worked particularly well since 2002 but that doesn't mean that they will not go on applying it. What choice have they got? If the Gold "price" reflected the true state of global monetary affairs, the entire system would be in total chaos. It is in total chaos, of course, but the symptoms are still being masked by every means available. It is obvious to everybody that (to quote Mr Roberts - see above) "trouble is approaching". It is equally obvious that the attempts to stave it off are getting more and more desperate.
On April 5,,the US Labor Department released the latest official employment figures - for the month of March. Payrolls grew by an infinitesimal 88,000 jobs - less than a third of the revised (upward) figure for February. At the same time, the people who are NOT in the US labour force (and therefore not officially "unemployed") rose by 663,000 to 90 million. This was very handy, since it allowed the US Labor Department to announce that the headline figure for March unemployment had FALLEN to 7.6 percent in March from its 7.7 level in February.
If any clearer demonstration of the utterly and perversely FALSE nature of modern government economic "statistics" is needed, we cannot see any way to help those who need it. On the day when this latest illustration of the US "recovery" was released, Gold wiped out more than half of its losses for the week with a rise of $US 23.50. Yes, weeks like these are sent to try us. Such has been the case for decades now. But if you are holding physical Gold as INSURANCE against the meldown of the paper system as you should, you will be used to this kind of thing by now.
(Chart appears here in original analysis)