The Shoeshine Boy

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Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
The Shoeshine Boy

The Shoeshine Boy

http://www.fofoa.blogspot.com/

This is a rather lengthy read but well worth it. Here is a summary from the end of the article.

 

There is no such thing as a physical gold bubble.

So, to wrap this beleaguered post up, let's just say that we have the distinct makings of a parity break between paper and physical gold in the works. The supply of paper gold must rise while the supply of physical is withdrawing (deregistering). The flow must also rise, at least in nominal terms, so the price will skyrocket to take up the slack. And as expanding paper competes with a rising price for the "slack taking-up" role, who do you think will win?

Could they each have their way? Could the price rise to take up the extra demand while supply contracts at the same time as easy paper dilution wins itself a lower price? Confused yet?

Well, this situation leaves us with an uncomfortable question. If the only price of gold we know today is the price of paper gold, what is going to happen to "the price of gold?" Will it skyrocket? Or will it plummet?

And if we apply the principles learned in John Law's amazingly long piece in a logical way to this uncomfortable predicament, we'll find ourselves at the conclusion that the true Nash Equilibrium is to take possession of physical gold. And, if you already have some, not to sell it while the price is rising OR falling (this time).

And with the supply of paper gold rising to meet demand while physical is being withdrawn, the only conclusion we can come to is that the gold buyers **IN SIZE** will have to stop buying from the price discovery marketplace because, if they do their due diligence, they'll clearly see that subsequent physical delivery has become impossible at the present price.

So, in conclusion, the price of gold will plummet!

That's right. At some point in the future, after the price of gold rockets upward, it will fall like a box of rocks! And right about that time you'll see more of Robert Prechter on CNBC than you ever thought was possible.

But here's the challenge. When the price of gold falls to $200 per ounce, try and get some physical. I'm sure that Kitco will sell you some from their pooled account. And GLD will be standing ready to sell you a share at $20. But just try to take delivery. I think you'll find it will be impossible at that point.

And that's why you've got to take delivery NOW, at the current "high" price of $1,300. Don't wait for the dip. Oh, yeah, the big dip is definitely coming. A **BIG** "correction." But will there be any physical available? Perhaps at $1,200 if you're really lucky. At $200? No way.

 

scbt's picture
scbt
Status: Member (Offline)
Joined: Oct 22 2008
Posts: 20
Re: The Shoeshine Boy

1307 gold today---High

21.60 silver today---30 Year High

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