do you guys realize just how inane the gold/silver argument has become? one year ago:
1. of course the miners are up; they represent leveraged plays on the gold price and why wouldn't you want to own ounces in the ground. its free money.
2. of course GLD/SLV are up. even though its paper gold, they allow the avg investor to own gold with just a click of the button.
3. the official price is up. of course it is dummy, the price is rising and just reflects the devaluing USD.
now:
1. of course the miners are down; all they represent is paper gold. they don't provide any value since you are subject to poor management and expense costs due to energy expenses.
2. of course GLD/SLV are down; they're just paper gold in baskets. they really don't have any gold in their vaults.
3. of course the official price is down. in fact, who cares if it crashes? what REALLY matters is the street price plus the huge premium that will overall add up to over $2400 in value and much higher.
that last one is really insane. when i cashed out my pm's last yr the coin dealer checked his computer screen on Kitco and offered me the official price minus 4%. i then received a 1099 last month on the cash i received on which i will have to pay ordinary income taxes on, not capital gains. truly sucks. the illiquidity of pm's is a big problem as well.
For one year ago:
- The miners were rising despite being under immense pressure. The reasoning is still sound; price movement does not change fundamentals.
- GLD/SLV will track whatever the official prices do.
- That sums it up: USD debasement means other currencies will rise, including gold.
For now:
- They're still being pressured, that's all. Quality has always varied.
- GLD/SLV will track whatever the official prices do.
- Where is the retail buyer? The average westerner still hasn't come to grips with what's happening. That's when premiums rise wildly.
For the last point, the paper/physical disparity is all that matters. Retail metal has not experienced shortages the way high-volume, large bar capacities have. Retail liquidity will remain good until insufficient bullion is available to produce individual ounce and gram pieces. Central banks and other large financial institutions do not buy by the ounce, nor are they fond of publicising their purchases. This "shadow demand" is massive and grinding away while the public lacks understanding. Why do you think the official line is negative on gold while official actions consist of scrambling for metal? Paying exclusive attention to the retail side is like deciding to hop on the Bitcoin bandwagon when it's accepted in as many places as MasterCard & Visa.
Deflationary forces cause asset depreciation, which should include gold by contemporary logic. Let's take a look at this with approximate gold and USDX values from the first trading day of this January to yesterday's close:
| Date | Gold | USD |
| Jan | 1575 | 79.6 |
| Now | 1645 | 79.7 |
| +4.4% | +0.1% |
This very well may be due to nuances in the basket that the USDX is composed of, although the dollar has been rather strong against everything recently. Maybe there's more than meets the eye here, or in this case price. Remember, housing is dropping again. Hint: look at gold in all currencies, not just USD.
So why hasn't gold taken off like a rocket? Simple: fiat liquidity.
It boils down to this: for every dollar on the buy side, a multiple of dollars has to be used to slam precious metal prices and cover underwater shorts so the banks don't instantly implode. That money initially comes from the Fed, which is levered up by banks. The sideways chop between ~$1600-$1900 is being used to clear out the shorts as much as possible so as to not be overrun. Then the banks will join the momentum. Whether that happens at another breach of $1900 or above $2100 or even higher, I don't know - it does make sense for the banks to fight things off until their lackey is re-elected in America and key positions at other institutions have been established.
In any case,
physical metal cannot be conjured any more than Bitcoins can be counterfeited. Likewise, contracts for delivery of gold would work the same way as contracts for delivery of Bitcoins, as would the above dynamics. For this reason, physical gold is independent of illusory pricing established through trading of contracts - it will just take more of a shortage for that to become apparent enough for everyone to understand. By then, the supply will probably be nothing but scraps because it's being obscured to the extent that Bitcoin's supply is transparent.
Contracts for gold are just like a hosted Bitcoin wallet - not truly under your control and potentially vapor. MF Global, anyone?
so, in other words, you can't lose be it inflation OR deflation! you've solved it; the perfect investment!
For now. When a ranged equilibrium is attained, it'll be back to normal. It's kind of like an asteroid being caught in a star's gravity well and settling into a stable orbit.
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Greece was just round one of the upcoming sovereign debt destruction PLUS the CDS implosion that will accompany it.
The implosion already occurred, and the reaction was exactly the same as in other instances of deflationary deleveraging. It may have been executed via differing means, but the end result is still at least $1 trillion (that we know of) in liquidity dumped into the same type of financial shell structures that we see in JPM, et al.
Do you really think further defaults will be met with the restraint that was so lacking this time around?
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As for the actual spot price, it effects me on two occasions. When I buy and when I sell. Between those points (which I anticipate to be decades apart) the spot price has not an iota of impact on me. What's even nicer is that I don't have to think about or manage it at all, nor do I have to pay fees to someone else to do the thinking for me.
Right there - no need to chase yield like a bullsh*tting Buffett.
I've used this comparison:
Contemporary finance looking for yield is like older nuclear reactors, such as the Fukushima Daiichi plant, which require
active safety measures.
Gold is like thorium reactors which use much safer passive methods that generally require neither power, nor direct intervention (and doesn't offer much in the way of weapons-grade material).
Looks like Gold outperformed today. Bitcoin...well...not so much.
Still pretty good for currently having ~25% annual inflation... and you can't really naked short Bitcoin yet
On a long enough timeframe anyway.
