This is a firestorm running through the bullion market as we speak. This is highly problematic because it came from a reputable dealer, in supposedly one most trust places on Earth to purchase bullion on a bar that was manufacturer by a old Swiss shop and to top it off, it had it paperwork including serial numbers.
With the amount to currency debasement happening worldwide, this does not bode well for people using Gold as a wealth reserve asset. I bet GE is getting many orders for their ultrasound machines right now as people are auditing stocks of gold to see of they are affected. It will be interesting to see if the gold price starts to rise if more cases are reported to the public? Bitcoin is another value unit that has come on the scene and after reviewing the price charts seems to be increasing at a bullish pace. It was non-existent a few years back but something has shifted and people seem to have confidence in this exchange unit or whatever you want to call it to the fact is trades currently over $12 and it has had a top at over $30 in 2011. Interesting times we live in.
Video (Breaking News)
This was insightful commentary with a serious conversation about the ratio of gold / dollar and oil prices. With large amount of debt issuance ahead to cover current budgets and long-term liabilities, it is almost “in the bag” that we will see higher prices ahead. We will see some major corrections along the way the will allows commodity prices to fall across the board then we will be talking about the doom of deflation (I actually think this will be needed to bring incomes and cost of living back in-line) then the bulls will come out again to pump it back up. Its a cycle but in the end, the trend is certain, higher prices for things you “need”, lower prices for “wants” (better production but not enough demand) and steady or falling wages and they will translate into the fore mentioned scenario.
We have too much debt in our system and not enough money to pay it off. Our track record on letting things default and fail not good, so the assumed course of action will be more support and debt to try and keep things smooth. This will not work because of the debt issue and the scarcity of money we have created with issue money as a debt instrument in society. This will be the defining issue we will tackle in the next 25-50 years and it will shape our society beyond that.
Forbes - Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.
Sounds like good advice in the time where we are trying to get out of the biggest financial crisis since the Great Depression. We are dealing with record global budget deficits and central banks that are seemly standing ready to print as much money as needed to try and revive the economy. This means a serious devaluation in the current purchasing power of your currency. Gold does a very good job (some would say par excellence) for preserving relative purchasing power as a wealth saving instrument.
The Chinese government have been signaling this to their citizens for over 2 years now. We should be wise and take heed to this advice. We would be stronger as a nation if we had a large private savings in this country that was not just in U.S. dollars. What this would mean is lets say we have a currency collapse, we would have serious pain while we figured what new monetary system to bring into being, our population would have hard currency that they could use to get goods into this country. Its just like having insurance but you hold the policy so you would not need to worry about some third party going out of business and not being able to follow through on their obligation.
There could be a political motive for this as well, all our major commercial banks having sizable short positions in gold and silver. No bank or government wants to see the gold price reflect their true value because that would be much higher and then you would have to talk about what caused this on all the financial channels and this would not be a fun conversation. Now lets says many Chinese people start buying more gold and sliver, this would force the commercial banks to cover their position or close it out and that would do two things.
First, it would cause major losses when settling these short positions. Second, as they shorts were retired, it would drive the precious metals price much higher. This would complicate U.S. policy on economic issues. I don’t know what the Chinese motive is, but I wanted to lay out an alternative scenario.
Forbes - The People’s Bank of China(PBOC) recommended yesterday that 1 billion Chinese consider buying gold as a hedge against inflation and to preserve values in a world where currencies can fall. The PBOC Financial Markets Review came out just as several major currencies were indeed declining in value against gold; the dollar,1%, the Swiss franc,2.5%, t he British pound, 2%, and the Japanese yen, 2%.
I love the $1,650 call by Goldman Sachs. 1650 is the magic number these days, I wonder where I heard that before (*cough Jim Sinclair *cough). Gold is really breaking out, currently last time I checked it is at $1,370 per ounce. We are seeing the reaction to the multi-trillions of new debt we are creating. Its a total debasement of the U.S. dollar.
As long we continue this path, gold is going higher and the dollar will continue to lose value. The USDX (Weighted currency index) is at 77, (70) is the lowest it has been recorded at. Goldman stated in this article that gold prices will come down when the economy recovers. This may be true but we will need to see major cuts in federal spending and much higher taxes. Right now, gold is being re-monetized as money and if this fully occurs then even if the U.S. dollar regains confidence, people may still use gold to store wealth because they are not certain if our politics will not revert back to the same old games we have been running in this country since the end of WWII.
Bloomberg - Gold may rally more than 20 percent from this month’s record to a high of $1,650 an ounce in 12 months as the Federal Reserve takes action to stimulate the U.S. economy, according to Goldman Sachs Group Inc.
Dan Burrow wrote a very simple and concise article laying out the case for a doubling of the price of gold from is current price that is hovering around $1,220.00 per ounce. Focusing on the driving factors like money supply growth and inflation expectations are based in solid logic for this move. Geo-political risk is another factor that was not mentioned.
With the tensions in Korean, Israel and Europe, those situations drive fear higher. When fear and uncertainty rises, people seek safer havens for their wealth and gold has been the de-facto standard for thousands of years for just that. Another point that has not been getting as much press but is still very relevant is declining mine productions around the world. Most of the large deposits are giving diminishing returns and are require you to dig deeper and deeper into the earth. Bottom-line is that it is a safe bet that gold will drive higher from here.