Podcast

Nick Barisheff: The Case for (Much) Higher Gold Prices

A look at the big picture
Sunday, June 30, 2013, 11:32 AM

This interview was recorded three weeks ago. We've been unsure of how well-received an interview about "$10,000 gold" would be received while the yellow metal experiences its worst quarter, price-wise, in history. But rather than sit on it any longer, we're releasing it now and will trust our readers to look past the current price of gold and focus on the long-term macro arguments Nick presents. ~ Adam

Nick Barisheff, CEO of Bullion Management Group recently published the provocatively-titled book: $10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven. In this week's podcast, Chris sits down with Nick to learn the math behind this forecast.

I was reluctant to put up a number and a timeframe. And when I say $10,000 gold, I do not mean this year, or even next year. It is probably a plus or minus five years scenario. What changed my mind was in 2011, when in the U.S. there was the raging debate over the debt ceiling. 

You could see that there was no political will or ability to ever change [the United States' debt crisis], because it is impossible to either increase taxes or cut expenditures enough to really make a difference. You are not going to grow your way out of it. Nobody is predicting that that is going to happen.

So the only choice left is essentially, in simplified terms, to call it printing. When you look at that, then what you get is that the printing is going to continue, the deficits are going to continue, and, in fact, they are going to increase. And the interesting point is that if you plot U.S. debt versus the gold price, you almost get perfect correlation. So this is just a straight progression. Like, if you keep printing at the rate you are printing, you are going to get to $10,000. $10,000 is by no means the peak, and people have trouble coming to grips with $10,000. But if you hit $10,000, then we are into hyperinflation, and the numbers after that will sound absurd.

In making his price prediction, Nick also takes a historical view of the perfect record of failure of paper-based currencies:

Throughout all of history, there has never been a single instance where a fiat currency did not end in hyperinflation and complete collapse. There is not one example of a successful fiat currency. Because the simple thing is that if you give a printing press, in simplified terms, to a politician, a king, an emperor, a president, a prime minister, you name it, they will overuse it every single time. That is just human nature. And that is what happens.

It is particularly a deficiency in democracy, because democracy will also always have people vote themselves a bunch of benefits that the politicians promise to get elected. And that is how you get this spiral effect that keeps going. So the end result is the same.

This time around, though, we are in unchartered territory, because you have got global fiat currencies and you have got a global reserve currency. So unlike hyperinflations in the past like, everybody knows about Germany, it was restricted to a country this time it is going to be global.

In terms of the short term, there is probably no other choice but to print more, because if the Fed pulled back in its quantitative easing, we would have a massive depression. So for the moment, you print more. But the problem is, what happens down the road?

Click the play button below to listen to Chris' interview with Nick Barisheff (39m:49s):

Transcript: 

Chris Martenson:  Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. As you know, gold and silver have been taking a beating lately. The airwaves and print media, at least in the West, are full of stories about how the gold bull run is over and that it is headed back to the basement, presumably forever. And yet we here at Peak Prosperity remain steadfast in our view that gold’s long, unbroken history of winning battles against mismanaged and overprinted currencies will turn in a repeat performance in the near future.

To understand gold well beyond the simple and distorted views promoted by a financial system that has deep conflicts of interest on the subject, you need to understand its history, what money really is and truly does for a society, and a little bit of human psychology to grasp why fiat money unerringly loses value over time, sometimes catastrophically.

To help us go deeper and understand why gold remains the very best store value, especially in these times, is Nick Barisheff, the President and CEO of Bullion Management Group and author of the newly released book $10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven. Nick Barisheff has focused on the world of precious metals and the advantages of investing in gold, silver, and platinum bullion for over a decade. And in 2002, interestingly, he launched BMG and BMG Bullion Fund, Canada’s only retirement-savings-plan-eligible, open-end mutual-fund trust that invests directly in gold, silver, and platinum bullion, which means he knows how to navigate the sophisticated, complex, and sometimes arcane worlds of financial products and regulations. Welcome, Nick. I know I am going to enjoy this conversation.

Nick Barisheff:  Pleasure to be on your show, Chris, and it is good talking to you again.

Chris Martenson:  Fantastic. Let’s start with a punch line and then go deeper to understand it better. Your book is titled with the idea of gold going to $10,000. Now, of course, you certainly penned that tile before the recent pummeling of gold in April of 2013. Would you change the title if you could pen it today?

Nick Barisheff:  Absolutely not. Normally in the past, I, as you mentioned, have started the fund way back to 2002, and it took four years before then to get regulatory approval. So I have been doing this ever since. And although I knew gold was rising, I was reluctant to put up a number and a timeframe. And when I say $10,000 gold, I do not mean this year, or even next year. It is probably a plus or minus five years scenario. What changed my mind was in 2011, when in the U.S. there was the raging debate over the debt ceiling.

When you listen to that first of all, the gold price went up 30% in the three months preceding and during the debate, because then by having the debate, the deep problems that the debt ceiling represented were debated on the media virtually daily. And when you looked at that, you could see that there was no political will or ability to ever change that, because it is impossible to either increase taxes or cut expenditures enough to really make a difference. You are not going to grow your way out of it. Nobody is predicting that that is going to happen.

So the only choice left is essentially, in simplified terms, to call it printing. When you look at that, then what you get is that the printing is going to continue, the deficits are going to continue, and, in fact, they are going to increase. And the interesting point is that if you plot U.S. debt versus the gold price, you almost get perfect correlation. So this is just a straight progression. Like, if you keep printing at the rate you are printing, you are going to get to $10,000. $10,000 is by no means the peak, and people have trouble coming to grips with $10,000. But if you hit $10,000, then we are into hyperinflation, and the numbers after that will sound absurd.

Chris Martenson:  I want to talk about that history, because you are mentioning something that has happened time and time again, which is, a country gets a little overextended and decides that printing is the way out. And of course, that has happened a lot. Now, in your book you talk about that there are five stages that irredeemable fiat currencies seem to go through, and I think that is a really helpful framework for people to understand. This has happened time and time again, whether the coinage was debased by actually pulling it in and replacing the pressure metal content with copper, or later on, it was actually physical paper printing, or today you punch a few keyboard strokes and the next thing you know you have got extra zeroes showing up on credit balances in various institutions. Walk us through those stages. Stage One, what is that?

Nick Barisheff:  I do not know if we have enough time to go through the stages, but I think the important thing to know is that throughout all of history, there has never been a single instance where a fiat currency did not end in hyperinflation and complete collapse. There is not one example of a successful fiat currency. Because the simple thing is that if you give a printing press, in simplified terms, to a politician, a king, an emperor, a president, a prime minister, you name it, they will overuse it every single time. That is just human nature. And that is what happens. It is partially a deficiency in democracy because democracy will also always have people vote themselves a bunch of benefits that the politicians promise to get elected. And that is how you get this spiral effect that keeps going. So the end result is the same.

This time around, though, we are in unchartered territory, because you have got global fiat currencies and you have got a global reserve currency. So unlike hyperinflations in the past like, everybody knows about Germany, it was restricted to a country this time it is going to be global.

Chris Martenson:  Global, and I noticed in your five stages that it is just basically walking through the process of going from first trying out an unbacked fiat currency and everything seems fine for a while, and then it gets overused and abused. And so today, I would note that there are certain proponents on the monetary side, maybe the Paul Krugman/Ben Bernanke side, who are claiming that not only have we not overprinted and not only are deficits not a big deal, but we actually have not gone far enough. Where do you fall in that story? Could they be right?

Nick Barisheff:  In terms of the short term, there is probably no other choice but to print more, because if the Fed pulled back in its quantitative easing, we would have a massive depression. So for the moment, you print more. But the problem is, what happens down the road? That is the point. So when the results happen, Greenspan is already retired; Ben Bernanke may be retired by then. And then you have the consequences. But for the moment, this keeps the ship afloat and the pain minimized for the time being.

Chris Martenson:  So let’s walk down this road, because I want to understand what happens here. I think it is essential to getting to a $10,000 goal. Ultimately, I guess, in the final moments in a currency finally losing its value, people experience it as inflation and they talk about it as rising prices. But, in fact, what is happening, as I understand it – maybe you could help add some light to this or correct me if I got this wrong the things that have real value retain that value, and what happens is the amount of currency gets reset against that.

Nick Barisheff:  That is right.

Chris Martenson:  So all we are talking about is a great reset, where if there is a trillion dollars outstanding but there is only a billion dollars worth of stuff out there, suddenly it looks like that stuff costs a trillion dollars.

Nick Barisheff:  That is right.

Chris Martenson:  All right.

Nick Barisheff:  So what is happening now in terms of gold – it is not that the gold price is rising because of jewelry demand or something. It is that currencies all over the world are depreciating as measured in gold. So gold looks to be rising, because you cannot tell that currencies are depreciating, because they are all depreciating at plus or minus the same pace, but all against gold. So it looks like gold is rising in all currencies, but all of them are overprinting.

Chris Martenson:  Let’s talk about the recent price action of gold, because, as I mentioned before, there is plenty in the airwaves right now to suggest that the gold bull run is over. There was this extraordinary takedown of gold price in April, which, of course, there has been no investigation of. It has been presented as if that was normal market action, but it was an historic event in the sense that we had not seen a similar swan dive in over 30 years. What was your take on that? You probably had a pretty front-line view of that and I would just be interested to have your observations on what happened there.

Nick Barisheff:  I think the starting point there is that I tend to not think of gold as an investment. I mean, if anything, it is an anti-investment. You are choosing not to invest. But when I talk about that kind of gold, that is bullion in a vault. And whether you have bullion in a vault or a stack of Swiss francs or a stack of euros or whatever, they are not invested. They are just sitting in the vault. And while they are sitting in the vault, you are not going to get any interest or dividends. So that myth about gold does not pay any interest or dividends applies to any currency. You put it in a vault and stack it; you are not getting any interest and dividends.

I do not consider that gold was in a bull market to begin with, because it is not like copper or zinc or the equity markets, where they are investments. Some of the paper proxies and derivatives of gold are investments. But physical bullion in a vault, coins that you hold in your possession, and so on and so forth, that is just money. Everything else is a debt based currency.

What happens is that people always say, Well, that is ridiculous. Gold is an archaic relic. We have other modern digital stuff. I say, Why don’t you go and read the U.S. Government’s, any other government you choose, and see what they think of that? So if you look under assets, you will have monetary assets. And when you go to the footnotes to see what monetary assets are, there are foreign currency reserves and gold. So, obviously, the governments around the world, the central banks, understand that gold is a monetary asset. They do not call it “jewelry.” They promote it to everyone else as if it is not money, but it is the only thing that is money. Everything else is a debt-based currency.

So when you start from there, then it becomes clear that the currencies are losing value against real money gold. And the paper side, the derivative side, whether it is the Comex futures contracts, the Gold ETFs and options and all the rest of it, those are investment. They are momentum trades and so on. But gold in a vault, that is just money that is not invested.

Chris Martenson:  One of the things that I have observed about lots of markets – gold and silver are included in this, but there are other markets that I have seen this happen in as well: oil, certain equities, all kinds of things – it is that the way the market is structured right now,  insiders or certain participants have different advantages than you or I might. I noted that way back in January, there was already what I would call a psychological campaign to start talking gold down. You had some of the big bullion banks and research houses starting to talk about how gold had topped, and then they all started accumulating these large short positions. And then in the media, this really sort of amplification over time, and then by the time we run from January through to April, we were ripe for a fall at that point in time simply because there was – this is, I believe, how many big traders make their money. This is a wash-rinse-repeat sort of a thing. I have seen these bear raids many times in the past, and they do it because they make money at it.

Nick Barisheff:  Right. But it is also facilitated by the rules. And one of the issues is that essentially a loud, naked shorting on the Comex, which is illegal in the financial markets. Okay, so this is where you get these kind of distortions, because you can create the kind of events that happen in April by selling an unbelievable amount – I think the estimates are up to 400 tons – of futures contracts when you have no gold to begin with. So that is where the flaw comes in, and the Comex has limits in terms of how much you can sell, which is supposed to be restricted to 3,000 contracts. So, although we do not have the data, either 14 traders traded 3,000 contracts at exactly the same time each on exactly the same day, or one trader did 30,000 contracts. That was a Friday.

When you allow that, then you are going to have massive distortions in the paper price as a result, because it is like starting a snowball. You start with that, but then right after that, you are triggering stocks, and following that, you are triggering margin calls. And then the selling continues and the price keeps dropping. In this case, the first time is that the reverse happened in the physical markets. It went the other way. The premiums went up. So if you look at the prices, in many cases, with premiums added in, the price did not change.

Chris Martenson:  For what sorts of products?

Nick Barisheff:  Well, coins, and it did not include the largest bars. But primarily for the coins and in terms of people, actually – there were no lineups at the coin shops with people selling their physical bullion. There were lineups trying to buy, and the coin shops quickly ran out. The mint ran out – both the Canadian and the U.S. Mints got instantly backlogged. So this is where when you have this kind of distorted paper price to the physical price. I have always said that this was going to happen, like in a much bigger way, sooner or later. But it has already happened. Like going back to – I do not know if you remember, in 1998 Ford Motor Company bought a billion dollars worth of palladium.

Chris Martenson:  Yeah.

Nick Barisheff:  In a private transaction at twice the prevailing spot price. Because you cannot build cars or catalytic converters with paper palladium. So there is a difference.

Chris Martenson:  Yep.

Nick Barisheff:  The same thing happened – China bought potash a few years at twice the price, and also China entered into a long-term contract with Russia for oil at $75 bucks a barrel when the price was $37. So that is where you get the examples of the difference between the physical asset and the paper speculation on proxies and derivatives.

Chris Martenson:  So you are saying one of the end-stage events will be divorcing of the paper price that we see at Comex and the physical price required to actually obtain it, if you can. And we certainly saw this – one of the things we observed down here, talking with a variety of dealers at the retail level. Obviously, there were tremendous shortages for both and silver products at the retail level, and it took the mints a while to catch up. They are catching up at this point in time, is our assessment.

Did you see that same behavior in your individual clients? And secondarily, were there any shortages or delays in the large bar markets?

Nick Barisheff:  No, we did not experience any. And it seemed that the shortages, delays, and price increases in the large bar markets were in Southeast Asia and China and so on. But it did not seem to have happened here. It depends on the size. At the time, we did not have any large buyers. We did in our bars program. We had the funds, but we also provide the large bars for sale and storage to high-net-worth investors. So we had some additional buying. We had a number that are in process. People realized that they have precious metals accounts in Switzerland but that they did not own any precious metals, actually. So that is been kind of what has been the evolving change.

Chris Martenson:  All right. So talk me through what you think this final event will look like. And how we will detect it? What I am interested here is painting a picture for listeners that when this final moment comes, my view is that you either have your position in gold and silver, or you do not. If you do not, you will find yourself either priced out of the market or the equivalent of those bidding wars that happened for real estate when things really started to heat up and get tight, where you submit your bid and you get out outbid by somebody else and so you chase.

At any rate, my view is that gold and silver will be difficult to obtain at some point potentially. How do you view that?

Nick Barisheff:  Absolutely. I think that particularly for the larger institutional buyers and the high-net-worth investors, they have the biggest concern and they need to get in as quickly as possible, because then they will not be able to get a decent allocation if they wait too long. I mean, with the retail investory, you will always be able to buy a coin or something like that at a premium. But if you had to buy tens of millions or a hundred million or a billion, they are going to have a big problem. And that, even today, would have to be done carefully and carefully spaced. So it is not something where you just write a check for a billion dollars and you have got your gold. That is not going to happen.

Chris Martenson:  Right. Let’s talk about that for a second the big institutional money and also the large family fund, endowment, pension let’s talk big money pools for a moment. What sort of ownership of gold exists in those at present?

Nick Barisheff:  The statistics I have heard had said it is less than a half a percent of holdings on a retail level. In the institutional level, if you combine mining, stocks, and physical bullion, it is less than one percent. So it is minimal. All the discussions about the gold bubble is burst and it is all over and so on, well, there never was a bubble, and it did not happen. because it is so under-owned still today after being the best performing asset class in the last 11 years. That is a long ways away from any kind of bubble territory. And this is not going to be a bubble. It is not going to be like the high-tech bubble that was based on irrational exuberance and burst. This is going to be more like panic buying to get rid of the worthless paper. That is not a bubble.

Chris Martenson:  Right. Well, if we did have a gold bubble, it would be the first bubble in recorded human history which had fractional percentage participation.

Nick Barisheff:  Exactly.

Chris Martenson:  The gold bubble talk has always been silly to me, because by definition, a bubble has mass participation, and we have not yet seen that in gold, at least not in this country. But I want to talk now real quickly about – so what I am interested in is what the triggers might be that would lead to this next stage of gold revaluation and normalization against currency. I hesitate to call it a big price rise in gold. Instead, it is going to be a sort of a re-marking against existing currency. So one of the trigger points for me is, I know that looking up through the mid-1960s, late 1960s, all of a sudden the Bretton Woods agreement is unraveling, and France and other countries are demanding their gold on August 15, 1971. Nixon has to slam the gold window. And that is because there had been this steady erosion and hemorrhaging of gold over time from U.S. possession.

So fast forward – a slightly analogous situation, I think, is that the entire West, which would include basically all the OECD countries, but primarily it is going to be New York and London – are busy telling us that gold is undervalued. And people in India and China in particular, but also Russia and other countries, seem to be saying Yahoo! and they have been buying massive amounts of gold. I have been stunned at the numbers – hundreds and hundreds of tons per quarter that are just going into these countries. And so it feels analogous to me that there is now this hemorrhaging and erosion of gold away from the West to the East. Is that something that you are observing, and do you think it is significant?

Nick Barisheff:  Well, that is clear, because if you look through the last year’s supply-demand reports, the North American demand is like a fraction of demand in other parts of the world. So it has not registered in North America and particularly in Canada. We have never had a currency crisis. People do not see that Canada has any issues, and we do not have huge unfunded liabilities that the U.S. has, and so on, so we are somewhat complacent here the way things are. But when you look at the rest of the world, they are in varying degrees of dire straits in terms of debts, deficits, unsustainable positions. And that is where, in my book, I tried to distill it down to some macro trends.

We can have all the noise and events and this might happen and that might happen. But there are some major trends that are happening that are not reversible, and one is that, you know, as the baby boomers are retiring, that is going to be a huge shift in terms of the effect on GDP and government revenues because you are shifting from people contributing the economy to people taking away. And that is going to be a massive shift that has started. I believe the numbers are something like 10,000 a day.

So the deficits, as high as they are now, are going to grow exponentially. And, you know, you add Obama’s Medicare to the equation, and that is going to be a giant further rise as people need more and more medical care as they get older. So that is an unstoppable train by itself. The issue of Peak Oil – there was talk of shale, and this, and that, and the other thing, but talking about conventional oil has peaked and is in decline. And the other methods are going to be more expensive oil, one way or another, when it all gets done. The issue there – other than printing money, rising oil prices are the only other thing that creates price inflation across the board and everything.

So you have got that irreversible trend, and the other thing is, the unemployment rate is systemic. The jobs are being outsourced overseas. They are not coming back. And when and if they do come back because of high oil prices, the manufacturers are going to be fully automated with robotics, and it is not going to be a manual assembly line like it was when the people got laid off. So all these things put together just means lower GDP, lower tax revenues, higher deficits by the year. And just that simple correlation will get you to a $10,000 gold price.

Chris Martenson:  And that is absent any sort of trigger or exogenous event or anything?

Nick Barisheff:  Oh, yeah, that is progressing as-is with all the existing knows. There are many events, and they have not gone away from when gold was $1900. They have all gotten worse. Nothing has been solved; nothing been cured. It is not getting better. There is all this talk about inflation being under control, but that is still simply selective statistics over what reality is. John Williams is more accurate in terms of what real inflation is and it is closer to 10%. And at 10% inflation, you have got huge negative real interest rates. It is totally unsustainable.

Chris Martenson:  Let’s talk about owning gold for a minute, because when you talk about the potential tailwinds for gold on just the fiscal recklessness side, also the monetary printing, we have events like Cyprus, and then all the noise that has come out first across Europe that potentially there are going to be bail-ins of depositor accounts. My personal faith and trust in the banking system has been eroded because they basically said, hey, we are going to gamble with your money, and if we lose, we will take your money.

And then we saw even Canada come out and say that a bail-in was a possible way to deal with a systemic crisis, and the U.S. did it, and also New Zealand. And we are starting to see now lots of reasons to have loss of faith in institutions, MF Global, you name it. Talk to me about how you own gold in that environment where you can have the trust and confidence that your wealth will not be confiscated.

Nick Barisheff:  First of all, you need to understand that I think the Cyprus situation brought things to light, but there are plenty of cases in the U.S. in terms of what a deposit is. When you just have a regular cash account and you deposit money, technically what you have done is you have lent the money to the bank. It is a loan, one that you could ask for repayment, but it is a loan. The money is not being held in trust by the bank for you. It ceased to be your money when you deposited it, and it became the bank’s money.

Chris Martenson:  So you are a general creditor.

Nick Barisheff:  That is right. So you need to understand that in the first place. Secondly, to then avoid bank runs and so on, so then you have deposit insurance that varies by country, but let’s call it $100,000. After $100,000, that was never insured. So if a bank was to fail, everything over $100,000 that was not covered by insurance is potentially lost because you are not a secured creditor. So that is always been the case. This is not particularly new. It just has not been an example where people have woken up to this. But that has always been the case.

If you have a gold account, then fundamentally, that is no different. It does not matter whether it is a foreign currency account, or a gold account, or a silver account. They are all basically the same. So, again, you are just a creditor. They are not confiscating or stealing your gold; you never had any in the first place. In order to have an asset, you have to have a transfer of title. The same process applies whether it is a house, a boat, a car, any tangible asset. The transaction has to describe the asset, and the vendor in the transaction transfers the asset to the purchaser. And that asset is described in detail. So that is how you buy bullion.

In the case of bullion, you need a transfer or title. You need a document that gives you the refiner, the serial number, the exact weight and purity, and says, This bar with these details is now transferred to Chris. Then you own gold. But all these other things that people are worrying about is the issue that I tell people, well, you just have not read the fine print. Banks are not doing anything that they are not allowed to do under their agreements. Just read the agreement. They never owned any gold in the first place. So that is the issue.

Once you own the gold, then you can enter into a custody agreement and put it into allocated storage. But it is your gold that you are putting in storage, and that is being held in trust. If the bank fails, that gold does not; it never was part of the assets of the bank.

Chris Martenson:  Right.

Nick Barisheff:  They are storing it in trust for you. But you have to have clear title. If you cannot show up with documentation to the bank regulator, trustee and bankruptcy, as the case may be, that proves that you actually own the gold, then it is going to get into the unsecured creditor pool. So in order to save money, people have put their money into accounts, into certificates thinking they own gold. But they never did, and they just needed to read the fine print. That is, the Cyprus situation and so on is becoming on the  surface – the difference.

Chris Martenson:  We saw this also with MF Global. I believe there was at least one hedge fund I read about that believed it owned a bunch of gold that was part of its portfolio. And MF Global goes down, and all of a sudden, that gold got sold out from other them as part of a general process. And that money was then pooled, and then they got in line with everybody else to see what proportion of the remaining pool would be divvied back to them. They were outraged because they actually had the warehouse receipts and said, this is ours. And even that was not good enough. Did you follow that story when it broke?

Nick Barisheff:  Well, I looked at the MF Global story, and it is amazing that nobody is getting prosecuted or being charged with anything because there are a lot of issues. But I have not read the fine print in that case. MF Global was a futures trader, and probably when you have your futures account, it allowed the futures dealer to hypothecate your gold, or something of that order.

If you want to really own gold, like I say, it is two-step process. You have to purchase the bullion, have proper documentation that transfers title to specific bars. And then you enter into a custody agreement that stores those bars on an allocated basis and identifies what the custodian can and cannot do. But with those documents properly done, there cannot be any third-party claims or any bankruptcy issues with the custodian.

Chris Martenson:  Right. So to those steps, I think, you would also be looking at an institution that might hold your gold for you. Obviously, you would want them insured, and you would probably want to have third-party independent audits just to be clear on all of that. Is there anything else that you would want to be looking for?

Nick Barisheff:  Exactly. Once you own it – we have set that process up in terms of our bullion bars product to track all these issues. We have various checks and balances to give the clients the transparency, and the assurances that the bullion is there with their name on it, and so on and so forth. We have audits for both our funds and the bars, so that is verified, and so on. But even in our case, like in the mutual fund, we have unallocated accounts and we have allocated storage of the bullion. In our case, we need to have unallocated accounts to facilitate the day-to-day purchases and redemptions of the fund. But when the unallocated accounts build up to the point that they are full bars, we debit the unallocated accounts and move a full bar into the allocated storage. But that is what I am saying. So if you are a hedge fund and you are doing trading, then in a lot of cases, they do not move it into allocated storage. They keep the unallocated accounts as their trading accounts because it is very quick and easy to buy and sell out of an unallocated account and there are no storage fees.

Chris Martenson:  Right, right. Well, and you may or may not own it, with emphasis on not, when push comes to shove.

Nick Barisheff:  In an unallocated account, you have simply got, essentially, an IOU from your bank. But we keep those amounts in our funds like to a very minimal percentage compared to the overall fund holdings.

Chris Martenson:  All right. Well, the title of your book, then, is $10,000 Gold, but can we turn briefly, in the time we have, to silver? What are your views there, and do you happen to have a similar giant price target for silver in your story?

Nick Barisheff:  Well, silver has the potential, obviously, to have a higher percentage rise by all measures. In terms of the gold-silver ratios, it is running at or about plus or minus 50-to-one right now. There have been a lot of precedents and you make a lot of arguments that it should be 16-to-one. So as the gold price goes to $10,000, I think you will have silver get closer to more reasonable gold-to-silver ratio, as well as rise, so it will likely have a higher percentage increase than gold will.

Chris Martenson:  All right. Well, the title of your book is $10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven. We have been talking with Nick Barisheff, President and CEO of Bullion Management Group. Nick, if people want to find out more about your writings beyond the book, how would they do that?

Nick Barisheff:  They can go to our website and just look up BMGBullion.com, and from there we have separated now into two websites – one for the mutual funds and one for the bullion bars. So a lot of the articles and everything are all posted there. And we have a number of reports that people can download. We also have a free newsletter that they can subscribe to. All of that is available on the site.

Chris Martenson:  Absolutely. I would advise anybody listening to get the book, read it and you want the history, you want the context, you want the background, because this is a time when all that context will reassert itself. It always does. The four most dangerous words in investing are This time it’s different. It turns out it is never different, and gold has a very profound story to tell. And really, it is the story of how fiat currencies always seem to follow the same general pattern for very human reasons. Humans are still humans, and we are probably going to see history repeat itself in some fashion. And this will be extraordinary, because this time it is global, and that is a new wrinkle in the story, but it is not really different at heart. So the book is $10,000 Gold. Author is Nick Barisheff. Nick, thank you so much for your time today.

Nick Barisheff:  Oh, my pleasure, Chris. Any time.

About the guest

Nick Barisheff

Nick Barisheff is President and CEO of Bullion Management Group Inc., a bullion investment company that provides investors with a cost-effective, convenient way to purchase and store physical bullion. Widely recognized in North America as a bullion expert, Barisheff is an author, speaker and financial commentator on bullion and current market trends.

His latest book is $10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven.

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »

 

Related content

47 Comments

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Can the PP readership handle unfiltered info?

Adam,

It sounds like you might be wavering on your belief in Gold and Silver. I guess the strong move on Friday gave you courage to publish your interview. 

"This interview was recorded three weeks ago. We've been unsure of how well-received an interview about "$10,000 gold" would be received while the yellow metal experiences its worst quarter, price-wise, in history. But rather than sit on it any longer, we're releasing it now and will trust our readers to look past the current price of gold and focus on the long term macro arguments Nick presents. ~ Adam"

You may be underestimating the resiliency and depth of understanding of your readership. I would bet that not many have capitulated in this downturn. I, for one, welcome an article on $10,000 gold because I believe that will be the outcome. By the way, I called the reversal on Thursday on this blog, and backed up my hunch by buying more shares of CEF. Since PM's are my insurance policy, I am in for the long run.

 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2933
Not waivering

OOG -

Personally, I'm not waivering in the slightest. As outlined in my recent analysis, I believe the fundamentals of owning PMs are stronger than ever, and these artificially low prices are an epic opportunity to acculumate on the cheap.

But, given the big price declines, I know a number of PP readers are smarting right now at how much lower their net worth is now vs the start of the year. I have talked & emailed with many of them over recent weeks as the repeated and relentless selling frayed nerves raw. It is that pain I'm expressing sensitivity to.

I did note your reversal call on Thurs. I don't claim to know whether the bottom is in, but I think we're close if not there. As Charles Hugh Smith and I discussed on Wed, when it is, I think there's a good chance PM prices will recover quickly due to how oversold they are and how many shorts will need to start covering. Let's hope your call was indeed on the mark.

 

gbcm's picture
gbcm
Status: Bronze Member (Offline)
Joined: Sep 3 2009
Posts: 36
Gold is passé ?

Chris & Adam, The gold blogosphere has beem spectacularly wrong, misguided and misleading about the value of PMS and the likely future direction of the variables that are presumed to underpin gold, for the last 2 years.

There's no sign of inflation, the IOUSA economy is strengthening as well as  the US$. The Fed is clearly in control of the agenda, and as they say, there be QE more or less as needed, indefinitely, and interest rates will remain low for the foreseeable future ! If the pundits are correct and Janet Yalen is the next head of the Fed, she is reportedly, even more likely to extend QE and ZIRP, to stimulate and maintain economic growth, and according to Erik Townsend (being interviewed by Jim Puplava last weekend), she has said (to him) that its proper that those with savings subsidise the economy ---- how do you like them eggs ? But to assume this will be good for gold is well, idle speculation ! 

Gold bugs constantly refer to 'physical shortages' - well these simply dont exist as stated by a London Gold merchant in a recent interview with Alister Macleod in a Gold Money podcast, and this somewhat flumoxed poor Alister. Gold merchants are not going to hold much stock in a falling market, as it loses value and when they charge clients what they paid for it, clients comp[alin about 'surcharges' ! So, gold merchants are taking orders which they can fill at current prices, which of course will take time to deliver.

Denis Gartman ( good subject for an "Off the Cuff" ??) in a recent interview with Jeff Candy on the Mineweb site, was very negative on gold, calling it a "broken commodity" and was absolutely scathing about the furility of investing in gold miners, because of their geological problems, cost problems, poor management and an unwillingness or inability to hedge (take out insurance for their number one risk - faling gold prices) !!

 The continual reference to the history of fiat currency is surely invalid, as it always occured as an isolated country event. Nowadays, currency is digital & international,  and all major central banks cooperate to some degree, so that money and credit can be digitally created and warehoused as needed. And while we're at it, when did bullion bankers get to be treated as serious financial experts let alone serious historians ?? These guys have grown rich leasing gold from central banks and then onselling, and reinvesting the procedes for their own profit. If Grant Williams is to be believed (see his YouTube video "Risk - Its not just a board game) then many bullion bankers re-hypothecate their gold creating a virtual fractional lending copy of bankers, for enormous leveraged profits - hence bullion banks have been very active in shorting gold in the futures market. Williams suggests mechanisms which might bring this ponzi scheme undone and hence cause a big increase in gold prices ---- and PIIGS will fly !

 The brutal truth about PMS is that one just doesnt need to be there - high risk, low or no return. The trend is your friend, and if a new trend (bubble) starts in PMS, go for it, but treat it like any other stock or asset class. Have a trading plan, set your stops, take profits, and try not to become captive of conspiracy theories or 'end of the world as we know it' scenarios. ( Jim Puplava refers to them as "doomsters" )

 Many gold blogers are predicting a big reversal in gold, like Sprott's John Embry (based on his expectation of hyperinflation ---- LOL --- same old, same old -- what else does one expect of this old windbag, who runs a gold fund ?) as well as Weiss Research's Larry Edelston, who is currently giving a series of video lectures on the likehood of a major reversal in the PMS space (and if you subscribe to his blog, he'll give you more tips (sic) ) and Jim Puplava, in response to many embittered gold bugs requests, will have a series of gold expert guests over the next couple of weeks, as he too thinks that gold may be 'bottoming', but he adds the big qualifier, that he doesnt see any major factors to support gold yet. Meaning, no inflation, stronger IOUSA growth, stronger US$, rising interest rates, strong US stock market, rebounding housing market, resurgence in US manufacturing, falling energy prices, rising US consumer sentiment, uptrending LEI's --- just to mention a few!                                                                  

 So, by all means, be ready for a reversal in the PMS space, but beware of false breakouts caused by short covering and other Fed-aches.  

 By all means, engage in permaculture, self sufficiency, sustainability and try and keep debt free, but keep your headspace clean and remain sceptical of dogma and extremism --- things revert to the mean, and mankind will likely bumble through, unless 'aliens' or a planet destroying asteroid hits the earth.

Cheers, GBCM

PS:  if and only if China declares it has massive reserves of gold, to underpin its currency and to be a vehicle for trade settlements, do I believe gold will become central in world affairs, and "go to the moon". Then of course, gold ownership would be declared 'illegal' as FDR did in  1933 ---- game over ?

 

 

 

                      

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
the dangers of "$10,000 gold"

So for anyone thinking about listening to the podcast about $10,000 gold, let me summarize it for you:  "hyperinflation ... shadowstats ... money printing ... lying government statistics ... fiat currency ... paper markets ... physical gold ... naked shorting ... $10,000 gold is inevitable!!"  There.  Saved you 39 minutes that I for one will never get back again.

The guest is a charter member of the Church of Gold Will Always Go up.  Those exact same arguments could (and indeed were made) back at gold $1900 so to me, they're uninteresting, and (to my belief) possibly actively harmful to my portfolio.  If I'm trying to figure out whether to buy more now, this guy provides me zero information that I trust, because he was without a doubt telling me to buy at gold $1900 too.

The one new bit of information I heard from him was when he talked about banking, and how you only owned your bank-held gold if you had a document transferring title to you that described a specific bar, serial numbers, and the like.

I'd love to hear from a guest that:

  • correctly called the rise of gold from 300
  • correctly called the top in 2011
  • now has a forecast for what will gold do going forward

Now that person might have a worldview that I'd find credible.  Does such a person exist?

Here's a guy - with a weekly interview spot on King World News - who looks at gold from a somewhat more balanced worldview.  http://traderdannorcini.blogspot.com ... I'm not saying he called gold at $1900, but he's definitely told a cautionary tale about gold prices during this downturn.  Perhaps he's worth some of your time.

Here is what he wrote last Friday:

Let's be clear - all the way down we have had bottom callers and none of them have been correct. Eventually they will get it right but as the old saying goes, even a stopped clock is right twice a day!  Let's monitor the subsequent price action for a while before getting too dogmatic. Remember the trend in gold is now down on the shorter term charts so specs will be looking to sell rallies unless something changes on the QE front or the psychology in the market changes to one of expecting a pickup in inflation. 



There is no need to be a hero and try nailing an exact bottom. It is next to impossible to do that on a consistent basis. Traders do not need to call exact tops or exact bottoms for that matter. All they need to do is to spot the change in trend and position themselves to take 60-70% out of that trend to make money. Remember, Bottom pickers and Top pickers eventually become cotton pickers!

Bold added by me.  Best of luck to everyone.  Apologies if my remarks were ... too straightforward.

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
Just very fine threads and I always keep this in mind...

what goes up

must come down

spinning wheels, got to go round

talking about your troubles is a crying sin

let the painted pony

let the spinning wheel, spin

                                                                 ***********************************

I gathered some wisdom I think in this article. Gordon G.Chang gave a nice presentation I thought.

https://d21uq3hx4esec9.cloudfront.net/images/uploads/world-money-analyst/6639/Jun_2013_WMA.pdf

 

Denny Johnson's picture
Denny Johnson
Status: Gold Member (Offline)
Joined: Aug 13 2008
Posts: 348
Thanks for the summary

Thanks for the straightforward summary, Dave.........I gave up on the same ol same ol after 10 minutes, good to know I didn't miss anything.

Phil Williams's picture
Phil Williams
Status: Gold Member (Offline)
Joined: Oct 14 2009
Posts: 337
Negativity

The negativity surrounding precious metals these days is pretty bad, when even a pro-gold site is getting hammered by its readers. I think some of the comments above are a bit rude. Mr Barisheff is sharing his viewpoint and life's work with us, and we yawn and say, "Whatever, I already heard that." I think these comments have everything to with the current price, not on any fundamental based analysis. If you want to be a contrarian, I couldn't think of a better time.

I don't think anyone knows for sure what the future holds for PM's, and if anyone predicted the rise and fall exactly, they probably got lucky. I'm with Dr M, who says we need to trust ourselves.  

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
Rude?, I don't think so.

I have no issues with opposing points of views and find them most helpful when I make the ultimate decision to move in this market or not.

When trusting my gut it is a personal requirement to have all views expressed because it is I who must ultimately live with the consequences of "trusting my gut".

I understood for instance exactly what Dave was expressing, he cut to the chase and, I like this tact that he took. I just wish I would have read his thread before I listened to the podcast. In reading Dave here I have come to respect his inpartiality/opinions/convictions very much and perhaps I may have passed on this podcast because I no longer are looking for more physical gold at this time.  

If I were going to invest in gold then I would and have listened to the podcast as it is just important to do so, if I were looking to buy gold here. If I were to take Dave's thread and invested or not invested in gold then I probably shouldn't be investing in anything as this is hardly responsible due dilligence. Further, to believe or not to believe the opinions of the person interviewed in this podcast would be irresponsible also as he most certainly is probably talking his book and, maybe just maybe isn't saying all that needs to be said from a risk/reward aspect.

Believe but verify.

I will conclude by saying that YES, I have heard all this before (in the podcast about gold) too and Dave frankly would have saved me a terrific amount of time as I could have been interviewed and expressed all that the guest spoke here in this podcast. Easily too. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
negativity about what?

Phil, I couldn't agree with you more, the sentiment on PM is horrible, worst in 5 years.  That's a very good contrarian signal.

However, I'd like to be clear about what I am negative about.  I'm not negative on PM - especially not at these levels.  I'm negative about guest selection, when all of them who comment about gold say virtually the same thing.  I'd like to hear at least one guest talk about how it might have been possible for gold to have dropped from 1900 without resorting to using phrases like "naked shorting", "bullion banks", or "manipulation."

I'm not asking a "gold bear", just a person with some real futures trading experience that has a neutral opinion about gold itself.  My ideal guest of this sort would be happy to go short, or long, depending on what's happening with prices.  And then he could educate us as to what he thinks moves the markets, and what he sees ahead for PM in the short to medium term.

 

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Thumbs up to all the Nick Barishefff's in the World.
davefairtex wrote:

  My ideal guest of this sort would be happy to go short, or long, depending on what's happening with prices.  And then he could educate us as to what he thinks moves the markets, and what he sees ahead for PM in the short to medium term.

Dave. Is it possible that the Gold market is rigged? and that what "moves the markets" is a top down manipulation? If that is the case, then some bullish macro views from the PM cheerleaders might be the exact antidote needed to save those who are drinking the Main Stream Media anti-Gold Kool Aid.

I certainly respect your mathamatical skills, but when you input flawed data the answer may not mean much. Yes....we all know who John Williams is, but we need to be reminded daily that the measuring tools are constantly being changed to obfuscate the data.

My personal opinion is that the PM market is so small (relative to the Equity or Bond Space) that it is being manipulated quite successfully by the Large Banking Interests. My opinion is that there is no price discovery in this space. 

Therefore, the only way I see to chart my course in the PM space is with fundamental analysis. So thumbs up to all the Nick Barishefff's in the world who have the courage to call for higher prices in a market that is getting hammered.

 

Tycer's picture
Tycer
Status: Platinum Member (Offline)
Joined: Apr 26 2009
Posts: 601
SI'd love to hear from a

SI'd love to hear from a guest that:

  • correctly called the rise of gold from 300
  • correctly called the top in 2011
  • now has a forecast for what will gold do going forward

Now that person might have a worldview that I'd find credible.  Does such a person exist?

Jim Puplava or Erik Townsend,, but Jim Puplava would be better because of his dad being a gold bug from the 70s and Jim is not qoite so.

gbcm's picture
gbcm
Status: Bronze Member (Offline)
Joined: Sep 3 2009
Posts: 36
At the risk of being rude

At the risk of being rude again (last time I promise) I have to say, the problem with the 'gold bug' / conspiracy / doomers is that instead of looking at whats going on, as illustrated by the gold chart, which is a snapshot of price action that is determined by the current 'zeitgeist', which since 2011 has been clearly signalling that world 'big boy' investor opinion had changed and gold, and especially gold mining stocks have been trending down since late 2011, but especially mid 2012 when gold again failed to go above $1800/oz. and settled into a steady down trend channel, as sophisticated  investors continued to exit, while gold bulls contined to buy all the way down --- dollar cost averaging (of losses) (LOL) a practice much beloved & preached by the gold bullion sellers. It was obvious the situation was much more dangerous, because many more 'shorts' joined the game in early 2013, and that logically, $1500-1550 would be were many 'stops' would be placed, and would be triggered by any move below $1550 causing an cascade event to much lower supports ---- and so it came to pass, predictably.                     But what were some gold enthusiasts doing, despite professing to have technical analysis skills --- focusing on 'out of hours takedowns' (code for manipulation) and reiterating the rationale for 'owning gold' instead of saying "holy cow, this looks dangerous - get out or protect your postiions ! "

 Sophisticated investors decided that the Fed meant what they said, and that QE would remain as long as needed, that ZIRP would continue indefinitely and that inflation remained subdued, all of which meant, logically, that yield stocks would go up and gold would go down. But what did the prophets of The Church of Precious Metals say and do ---- endless articles about 'manipulation', looming 'hyperinflation' and the US$ becoming worthless (yes, some actually say, "totally worthless").             John Williams typically periodically moves his hyperinfaltion scenario further into the distance, and his 2012 prediction became 2013/14, and now is 2015/16 --- and people mock cults who believe doomsday predictions supposedly revealed by the Mayan calender ! 

 Mark Twain once said that there are 2 types of prophets: those who know they can't predict the future, and those that don't know they can't predict the future. So where does that leave one? Well one has to be a trend follower in the first instance, with an eye to past cyclicality and history, but being aware that history changes irreversibly when quantum leaps occur. Constant use of the supposed lessons of the Roman Empire etc as it supposedly applies to gold, is tiresome, because the Romans didnt have the printing press, let alone the internet, nuclear weapons and world domination as does the IOUSA.       Does anyone think the Roman Empire would have fallen if they discovered nuclear weapons and had the internet surveilance that recently been exposed, let alone General Bernanke and his QE doomsday machine? MarkTwain also said, "history does not repeat, but can rhyme" --- similar is not same !

 Being captured by monetary/gold/economic/societal  theories, especially of the 'doomsday' conspiratorial variety, is dangerous,  if people take their eye off the ball and neglect clear warning signs of danger, and dont act appropiately!   Anyone with a stop loss in their PMS positon or mining stocks would find this discussion somewhat bemusing, tiresome and unnecessary.

 As an anesthesiologist, I was not infrequently, confronted with the dilemma of having a chart ( the patients vitals on the monitor screen) that was (unexpectedly) looking bad, despite being told by his physician ( gold analyst / promoter ) that he was healthy and should be perfectly OK.  If you believe the analyst and ignore the chart and dont react, the patient may die. If you see an unexpected tornado coming, then the weather report is wrong ! Safety first - react, then find out later, what changed, and why things didnt go as expected. Preservation of capital is paramount in investment. Even the average Las Vegas tourists have limits and basic rules to limit losses to inconsequential size, as Kenny Rogers might say.

 Sophisticated gold investment advocates should know they are influential and hence have an oblgation to be open minded, and when the facts change, as Keynes famously said, then one should change their minds -- this they didnt do, in the main, but, puffed up by past success, went into reflex rationalisation mode of their status quo ! ---- thats why those who followed their advice, because they were assured that Titanic was unsinkable, are now feeling foolish, angry and intolerant of contined cant, especially from false prophets like bullion bankers whose sole claim to fame is they cashed in on a fad, bigtime, by being the PMS equivalent of Walmart. Eric Sprott is reputed to be a billionaire !  They are rich from selling PMS not from owning them. To regard these individuals as anything other than retailers trying to protect their business model is being 'too kind'.

 Lets hear Chris talk to Denis Gartman, or some other gold sceptic (other than Jim Puplava) whose reading of the market has been correct. Remember, this is a discussion site, not a choir meeting, and we dont have to sing the same song, in tune and in tandem. 

Cheers, GB.

 

 

 

 

 

 

 

Cheers, GBCM

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
is the gold market rigged?

Wow, gbcm, that was...awesome!

What should I add?  Hmm.  One thing, brought up by OOG.

Is it possible the gold market is rigged?

Let's use logic to answer the question.

If the gold market is rigged, how might we explain the move from $250 to $1900?  Was this massive bull market just something that was cleverly engineered by the bullion banks - who refrained from naked shorting all the way up, only then to spring their evil trap at $1900 just to test the faith of the plucky gold advocates?

Seriously though.  Rather than a convoluted conspiracy where first the evildoers refrain from acting (or they acted in fits and starts 2001-2011, motivated only by periodic desire to do evil, followed by a sustained campaign of evil-ness 2011-2013), how about simple and more market-oriented explanation: namely, after no hyperinflation has occurred after five years of money printing, the long-gold crowd just thinned out, and a healthy percentage of the same people who jumped on board 2008-2011 just decided to bail out because hyperinflation never showed up.

In other words, since 2011 the long gold crowd has gradually thinned, some actors in the gold market sensed this, and took advantage of it by pounding the market in the early hours in asia every so often.  Since the buyers were drying up for fundamental reasons, lower prices didn't drag in many new buyers, so the bounces got lower and lower.   The shorts started making serious money, and so - rinse, repeat until they stop making money.

But again, the story is one of supply & demand.  The fundamental cause of the drop is that buyers dried up because of no hyperinflation.  Naked shorting made it all drop faster than it might have done on its own (think: hyenas dragging down the sickly antelope before it can expire from natural causes), so they appeared to be the cause, but the real cause was that a good chunk of buyers have basically fled, because the story isn't hanging together.

Now one can also blame "lying government statistics" - I believe the government lies too, but - weren't there government lies during 2001-2011 too?  Or did they just suddenly start lying more effectively 2011-2013?

As gbcm suggests, if new facts present themselves, might it not be reasonable to alter one's worldview?

Now then, I'm not saying gold is dead.  Just that money printing, at its current level, with the current economic conditions, isn't causing hyperinflation, and that disappointment caused a bunch of gold longs to gradually bail out.

Markets move in cycles.  This is a down-cycle.  If more money printing happens, or if inflation starts to show, the cycle may change.  Or it may change for a different reason.  But a down-cycle is explanainable without resorting to evil-doers actions as the proximate cause for the gold downturn.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
trader observation: buy signal at gold 1230

So a trader I greatly respect has suggested given the current collection of price charts (he watches bonds, stocks, the US dollar, as well as PM and all of that goes into his calculus as to when a trade is more likely to work out), gold was a "buy" yesterday as gold broke above 1230, with a stop below 1179.  Stops are used to control risk - so that if the buyers decide not to show up, you only take a small loss.  Risk control is required, since outcomes are uncertain - not because of "rigging" but because its all about people: fear and greed, and the uncertainty of which one will win out this time around.

This is not a recommendation, but rather just an example of how real traders approach their craft.  He made no mention of market-rigging, manipulators, naked shorts - he just talked about volume and price action; the possible short-term top in the dollar, analysis of both daily and weekly timeframes, and the almost-vertical nature of the recent decline in gold most likely leading to a bounce.

Its all about odds; making a trade when the odds are more in your favor, all the while taking precautions against things not working out.

 

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
These are great threads...

I have gold, and while it was easier to purchase the physical before and after the crash I have my core position. I will hold my core position until this economy clears itself and that will be a long, long, time. I am still ahead of the game but I didn't buy gold to make money, I bought gold as a catastrophic coverage and to protect myself from rear end and blind side collisions. I have no psychological feelings one way or another except to know that I am covered my accidents. Return of capital frankly. That's it.

Dave and gbcm have provided good points here that all should heed. If you want to put all your cash in gold and make it your sole bank for the protection of your wealth then have at it. No big deal and I wish you well. Me, I  can live quite well for the rest of my life by preservation and preparations. We all seek the truth and is why we are here I presume so, all viewpoints are necessary. IMHO

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
this guy called it, get him as a guest

Please.  Read this post.  Trader's name is Peter Brandt.  He was bullish on silver in 2005-2006, through 2011, when he turned bearish.  Then he's been bearish since 2011 through...now.  He does have some good news for the PM crowd (which includes me) but - its critical to really understand his whole story, so we don't end up repeating history once PM starts to bounce.  I for one want to continue owning PM, but I will never again be a "faith-based investor."  Never.  Again.  These things need to remain nothing more than pieces on a monetary chessboard. 

The rest of you all have a choice to make.  Would you prefer to make money (i.e. retain your purchasing power), or do you want to "be right" (i.e. stay true to your "faith" in the face of contrary evidence) - effectively telling yourself a lie as to why your trade isn't working out, or as a certain doctor might say, ignoring the patient's poor chart because "you know he's healthy and there couldn't possibly be a problem."

Of course you can relieve yourself of the burden of self-examination by saying "oh, this guy was just lucky" and remain a faith-based investor sure "the market is just rigged", or you might possibly consider another course of action.  If you start understanding how the market functions, it would allow you could go short in the paper market when PM looks ill, and remove the short positions when PM looks to be recovering.  Or - simply figuring out where the bottom might be more likely to happen.  That would be nice, wouldn't it?

http://peterlbrandt.com/some-hopefully-final-comments-on-silver-bulls/

Perhaps there have been other traders as adamantly bearish on Silver, but if so I am not aware of them. I have been unapologetic in my opinion and openly in the face of Silver bulls.

Then, late last week I Tweeted that “We are in the final portion of this phase of the bear market [in Silver and Gold]. At the time Silver was trading at 18.63. On Friday I Tweeted that if I were a bottom picker I would buy Gold with a tight stop. Gold was at 1213 at the time. It has not traded below 1209 since.  Also on Friday I announced I had bought some bullion for my safety deposit box.

I think the vast majority of the bear market in metals is over. I have no desire to be short — at least at present levels and at this time. Should metals put in a good rally, then I would likely be looking for a short trade. But I am in no hurry. The metals have dropped a very long way. Now is not the right time to become a metals’ bear. What kind of a rally might interest me in shorting — a big enough rally to blow all the late shorts out of their losing positions. I have no idea what the price levels would be. I have not turned constructive on metals. In fact, I am 50% sure the low prices are not in place. But, I have no desire to be short.

I bought bullion because I do believe in holding some insurance against fiat currencies. But, I will not campaign for or be married to this idea. I put a small amount of cash into the bullion purchase. If I do not need the Gold as insurance in my lifetime I will pass it along to my grand kids. Perhaps they can make some jewlery out of it.

Bold added by me.

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3124
Question, GBCM and Dave

I'm not disputing any of your points, but note that your analyses appear to be relevant to western markets, largely centered somewhere between London and NYC.  How do you take into account the massive flow of gold from west to east?  It is clear that the east, centered between India and China, at the personal and governmental levels are buying and hoarding gold as fast as they can.

That says to me that the selling we've seen in the west is depleting gold stores to the advantage of the east.  Of course, that's physical gold, not the futures markets where you guys are apparently focusing your attention.  Do you think that the futures and physical markets will at some point diverge and what happens as western gold stocks continue to diminish?

Maybe a better question would be how much the bull market of the 1st decade of the 21st century and the current bear market are just phenomena of the futures markets rather than physical ownership?

Doug

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
"paper" vs "physical"

Doug -

As long as you can still get physical gold via the paper market price, the paper price will drive the physical price.  So, in other words, there's only a marginal difference between paper and physical except in times of great dislocation, which as we've seen, correct themselves in time.  Remember back on April 12th everyone was talking about how "paper prices" and "physical prices" have diverged?  Many articles, a flurry of posts.  And now?  Not so much.

Certainly if/when a COMEX default occurs, then that breaks.  This is a much-spoken-of event, and it may actually occur someday.  Until it does, it would seem to be most prudent to focus on the structure that is in place today that actually drives prices of all that physical PM.  "If we had ham, we could have ham and eggs.  If we had eggs."  Or to put it another way, things are as they are.  To paraphrase Don Rumsfeld, we must trade in the markets that we have, not the ones we might want or wish to have at a later time.

If you put real money on a trade that depends on a market system working in a way that does not yet exist, how well will this work out for you?  How has it worked for you from $1800 gold down to $1200?  I know how its worked for me.  But perhaps you are made of sterner stuff.  Perhaps these things don't bother you because you have faith.  Yet as I pointed out, without hyperinflation appearing as "the inevitable result of money printing", even if all we had were physical markets, the price likely still would have declined because of course there is no hyperinflation.  The decline might not have been as rapid (and it wouldn't have happened overnight in asia), but it still would have happened.  Or so I hypothesize.

As for gold moving from west to east - I can believe it.  How long can that continue?  I have no idea.  Russia now has 10% of their reserves in gold, they've been buying steadily since mid-2007.  How much gold remains in the US?  I have no idea.  How long can this transfer continue?  I don't know.  Perhaps - "markets can remain irrational longer than you can remain solvent."  Perhaps it can continue longer than we all expect.  Or maybe not.  Call it a known-unknown.  We know that we don't know.

Last point.  My conjecture is that signs of any upcoming dislocation will be visible in futures-market pricing.  Or in premiums.  I'm watching for that.  If a default is going to happen, my worldview is that the well-connected will know about it beforehand, and they'll set themselves up in order to either insulate themselves, or to profit from it.  They won't be able to resist.  Signs will be visible to those watching for them to occur.

Easy trade for that one: short one Silver futures contract, long the appropriate shares of PSLV.

I don't think the global markets will just disappear in a flash of EMP.  If they leave, it will be in fits and starts.  I dont believe a big switch will be flipped and things will all just suddenly go dark.  And I believe that Asia will have their own futures markets tied to physical, simply because hedging is just such a valuable thing to have for (say) people that own gold shops.  Just that the asians will take delivery far more often.  I've seen that in practice.

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Magic and Money.

Forget the dollar. It is an illusion.

Concentrate on the gold/silver ratio. When a unit of gold will buy many units of silver, convert your gold into silver and vise versa; if you must.

The only argument that I have seen for this facination with gold and silver is the historical one. The Limits to Growth curves tell me that things are going to be different this time.

The Gold is within you. Everything else is a shadowplay.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
the dollar is an illusion?

Arthur: I encourage you to lead by example.  You can very effectively show your faith in your own words by sending me a large number of these dollars you find so illusory.

Mighty persistent illusion, isn't it?  In this case, its the illusion of artificial scarcity.

Talk is cheap, as they say, but sending me all your dollars?

PRICELESS!!!  :-)

ScottT's picture
ScottT
Status: Bronze Member (Offline)
Joined: Nov 2 2009
Posts: 48
Frantic and Stressed - Not!

A little less than 4% of my assets are in gold and silver (~70% gold / 30% Silver).  I bought the gold at an average price of about $1,500/oz, silver at about $30/oz.  I was lying in bed reading PP stuff the other night and contemplating the recent PM price crash and said to my wife, "honey it looks like the value of our gold and silver is plummeting and may go even further down based on various opinions out there".  She looked over and said, "that's Ok we're in it for the long term, right?" then she turned off her light and went to sleep.  We all should do the same.  I did not invest with the idea I would sell in a year or five.  I will sell it opportunistically in 20 years from now or give it to my kids.  Store of value over the long term right?

http://www.macrotrends.net/1300/gold-at-3000-only-if-bubbles-repeat

Markets are manipulated, always were, always will be, and the rules can and will change to suit those who make them.  I'm long PM's cause at some point the manipulators will try to repeat what we saw in 1980. 

Rector's picture
Rector
Status: Gold Member (Offline)
Joined: Feb 7 2010
Posts: 490
Perfect.

I for one appreciate the continued campaign against Gold and Gold ownership.  Keep it up.  It improves my ability to buy with reckless abandon.  We all have to place a bet somewhere, and I'm betting that this time is NOT different.  No One Knows The Future.  Good luck and keep badmouthing Gold!

Rector

Rector's picture
Rector
Status: Gold Member (Offline)
Joined: Feb 7 2010
Posts: 490
Which "Actor" has 500 tonnes to dump into the market?

Why would someone who was not manipulating the price dump so many contracts at the same time?

Rector

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
Arthur

... what!!!

LOL

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
why dump so many contracts?

Rector, that same actor who dropped 500 tons of gold has had that same power - to dump that many contracts, all at the same time, at any point during the last 13 years.  Why choose now to do it?  Because the market was vulnerable, that's why.

This power has always been in place.  The only reason it happened is (I believe) because the bids underneath the market had dried up, the actor figured it out, took the risk, and made a lot of money as a result.

The question I'd like you to answer is, why hasn't that actor used this power before?  Did they just now get around to trying it out?  Perhaps, they didn't think it would work before?

My suggestion: don't blame the hyena for choosing a sick and aged antelope to take down.  The poor thing would have eventually expired of natural causes.  The hyena just made it happen a bit quicker.

If we imagine we need to rid the world of hyenas, or perhaps shrink them in size, I guess thats ok.  Fewer antelopes will die from hyena attacks - instead they'll die from natural causes - a lack of bids.  Getting rid of short sellers means you have nobody to buy at the bottoms.  Shorts buy at the bottoms because they are covering, and that's where you get those nice bounces.  Nobody else has the courage to buy at that time.

As far as bad-mouthing gold - I admit it, I was - for a moment - being disrespectul of the central item of worship in the Church of Gold-Will-Always-Go-Up.  My apologies.  I should never suggest the price of gold could drop.  Except, of course, under the assault from the sneaky, evil, dastardly manipulators.

Uh, did you notice I posted an article on a gold buy signal at 1230?

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Gold buying

Man.. I take a break from posting and DaveFairtex is right back to his subtle ways of making the current Gold price seem like it's somehow "real" or reflective of supply and demand where the buy side are defenseless antelopes waiting to be slaughtered.  While there may indeed be times where there are a lack of bids on the Comex paper buy side, we should never mistake that for being representative of the broader supply vs. demand situation.  It is not.

1)  Unlike stocks, where price is discovered in a supply vs. demand market place, and where shorters are at least supposed to borrow the stocks before they can short them, and where the futures (or options) markets action is determined by prices from the stock market... Gold is completely backwards;

-  price determined in futures market, where naked shorting is acceptable.

2)  Just remember this chart when DaveF plants his little negative thoughts like;

   Fewer antelopes will die from hyena attacks - instead they'll die from natural causes - a lack of bids.  Getting rid of short sellers means you have nobody to buy at the bottoms.  Shorts buy at the bottoms because they are covering, and that's where you get those nice bounces.  Nobody else has the courage to buy at that time.

Lack of bids?  Lack of courage to take a chance on Gold?  The physical delivery market shows nothing of the sort - the Eastern block countries are sucking up Gold faster than it can be mined;

  The Gold price is manipulated.  That does not mean it cannot go down farther.. it can.  Never though listen to people like Dave when they try to help you believe that today's price is somehow the natural workings of the marketplace, reflecting a lack of bids.

To learn more.. this is a great piece to read IMO;

http://www.gekkosblog.com/2013/06/the-great-comex-paper-gold-dump-online...

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1754
Thanks Jim H

Nice to have you back.  And hope you enjoyed your break from the blog world.  :-)

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 572
davefairtex wrote: Arthur: I
davefairtex wrote:

Arthur: I encourage you to lead by example.  You can very effectively show your faith in your own words by sending me a large number of these dollars you find so illusory.

Mighty persistent illusion, isn't it?  In this case, its the illusion of artificial scarcity.

Talk is cheap, as they say, but sending me all your dollars?

PRICELESS!!!  :-)

Several years ago I visited my parents and discovered a wooden box containing 3 notes from the Weimar Republic.  The collective value in Marks was indeed impressive. I shipped all three notes (at no cost) to a friend who wanted to frame them and keep them as a reminder about paper currencies returning to their intrinsic value.   FWIW, the box also contained 3 US gold coins.  I decided to keep them for myself as a reminder about gold retaining it's value.

We can take any slice to time in history and find periods of time when the masses prefer paper or gold. We are in that thin slice of time when it appears paper is winning the battle.  My money is on gold winning the war.

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Time is also an Asset
davefairtex wrote:

 

As far as bad-mouthing gold - I admit it, I was - for a moment - being disrespectul of the central item of worship in the Church of Gold-Will-Always-Go-Up.  

Dave, 

My point is not that Gold will always go up. My point is that Gold will eventually go up (or hold a constant value) and therefore I don't have to spend my precious days on Earth making short term trades in a high beta space.  All I need to do is own some, and sleep well at night.

If you know of a safer currency to be in, please let me know.     

 

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Log-Periodic Oscillation and Possible Burst of the “Gold Bubble"
davefairtex wrote:

I'd love to hear from a guest that:

  • correctly called the rise of gold from 300
  • correctly called the top in 2011
  • now has a forecast for what will gold do going forward

How about 1 out of 3? 

http://arxiv.org/pdf/1012.4118.pdf

The content in that PDF is above my pay grade but maybe just what you are looking for Mr. Fairtex.

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
This newbie learned a whole lot today.

I learned that Hyenas eat antelope.

Arthur has Gold inside of him.

Jim H. was gone, and the bid was never caught and gold goes down and up based on the manipulation of some rich guys who rule the world.

Some were rude, some admitted to it.

Everyone seems to get a good nights sleep, especially the wives.

Some buy gold at $1500 even though gold is at $1250 because gold is going to $10,000. Maybe.

Gold could still go down from here even though the demand for gold is at extremely high levels which should cause gold to go up but paper in some Comex market dictates price.

Frankly, I now understand why I own gold because nothing in this market can possibly be for real and anything can happen so you better have insurance (physical gold) and is why I can sleep at night. My wife, she don't care what I do so long as I don't wake her. :-) Happy Holidays, I am gone.

gillbilly's picture
gillbilly
Status: Gold Member (Offline)
Joined: Oct 22 2012
Posts: 423
Oh Good, Jim and Dave

Get to go at it over gold again. Here's how I picture Dave in my head:

 

 

Here's how I picture Jim H. in my head:

Hope you had a good laugh!

Welcome back Jim.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Gillbilly

Damn.. I hate the internet!  That picture of me came from a photo modelling session that was never supposed to go public.. I was young and needed the money.  You never think about the future when you sign those damn release forms.  You do know what they say though about the size of a man's sword ......       

 

 

 

gillbilly's picture
gillbilly
Status: Gold Member (Offline)
Joined: Oct 22 2012
Posts: 423
Thumbs up Jim

All I had to do was google your name and that picture came up. I just like all the goldcheeky, it suits you.

Nice to have you back. It was getting a little boring.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
gold pricing: its really not that complicated

Well sure Jim if you just look at one part of what I wrote, I really do sound a little silly.

My point, which nobody yet has had the ability to even challenge, is that all during the 11 year bull market the naked shorts had the magic power, and yet for some odd reason, they never used it.  Why might that be?

1) a complex conspiracy which has never been fully explained by rational argument

2) supply & demand

I choose #2.  Most of the buying during that 11 year bull market was paper buying.  And then of course it follows that a good chunk of the selling in the 2 year bear move/correction is paper selling.

The reason why the shorts didn't dare drop 500 tons of paper supply during the bull move is - it would have simply been viewed as a sale, and bought up almost immediately.  In other words, they'd have lost money, because the paper bids underlying the market were quite strong.

After no hyperinflation occurred, the paper bids that drove the market to its 1900 heights evaporated slowly.  And yes, then the shorts pounced.  And had their day.  Like in every market everywhere.  Things move up slowly, and then go down really quickly.

Come on guys.  Its really not that complicated.  Why make it into some conspiracy?  Occam's razor, anyone?

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
didier sornette

JAG -

Thanks for the article.  Fascinating stuff.  I've seen the work of Didier Sornette before, and I was intrigued.  It offers us the tantalizing possibility of actually selling at or near the top in these hyperbolic blowoffs.  [Of course with anything like this, once it becomes widely used, it likely won't work quite so well anymore, but in the meantime...].  I hadn't seen his techniques applied to gold, nor did I really get how it worked until this article.  Perhaps its time to manufacture some charts...really, thanks!

The reason why these "magic chart things" tend to work is because the markets are an expression of people and their emotions - a mixture of fear and greed, alternating in cycles.  Fear of being left out of the breakout, greed about making seemingly easy money, and then fear of losing everything after the drop has been too great, wanting to sell out when you get back to even, etc.

Of course if someone believes its all about virtuous physical buying going up, and dastardly naked-short-selling manipulation on the way down, they won't be interested in such material.  That's the downside to faith-based approaches - no new information or techniques accepted, thanks, my worldview is already complete.

-----

Buy and hold gold just in case we have a monetary problem - a fantastic idea.  But, diversify.  Gold is just a price, nothing more.

Ok, it is pretty.  But thats as far as I'll go.  :-)

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
time is an asset

OOG -

You make great points.  I agree - mostly.  And for the record, I wasn't actually speaking to you with the "bad-mouthing", I was speaking to Rector.  :-)

However there are times not to buy gold.  Buying at a hyperbolic peak virtually guarantees you'll have an unpleasant gold experience, at least for a time anyway.

As to which currency is safer - if you mean "less volatile" well then historically that's USD.  If you mean "holds its value over the long haul" (40 years, lets say) then its quite clearly gold.  But that's rear-view-mirror stuff.

Going forward, which one will be safer?  Depends on the outcome of our predicament.  If we have a deflationary crash, the safer currency will be the USD.  If we don't, then the safer currency should be gold.  Jim knows the answer for sure, but I'm not as smart as he is, which is why I have one foot in each camp.

My odds-on favorite scenario is a deflationary crash first (which will trash gold), followed by a reflationary move.  If I am nimble enough, I will be able to exchange all that USD I have for Even More Gold.  But if not, no worries.  Those who, like you, don't care to play this game (which I think is a perfectly reasonable position to take) buying gold, holding it, and forgetting about it makes a great deal of sense.

But just to be safe, its probably also a good idea to diversify.  Eggs, baskets, etc.

 

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
A man's sword Jim H.?

Funny pictures.

Great site.

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Yes to Diversification
davefairtex wrote:

OOG -

You make great points.  I agree - mostly.  

 Those who, like you, don't care to play this game (which I think is a perfectly reasonable position to take) buying gold, holding it, and forgetting about it makes a great deal of sense.

But just to be safe, its probably also a good idea to diversify.  Eggs, baskets, etc.

 

Yes to diversification. Much to my chagrin, I have a heavy position in USD and treasuries.

countzero's picture
countzero
Status: Member (Offline)
Joined: Apr 13 2009
Posts: 2
An Educational Experience

 

You cannot possibly appreciate what it feels like to sit quietly among reader/posters who know that they know what they know.

Although I have been a reader and finally a subscriber of Peak Prosperity for several years, today was my first foray into the Discussion/Comments Section. It was not only a highly educational experience, but it was also a 'conversational' delight.

The exchange of thoughts and ideas, while certainly not always in agreement, was done with great cordiality and good manners - something all-too-seldom unseen these days in Internet commentary sections. I am deeply grateful to see both sides of an argument being explored in a manner that is thought-provoking rather dogmatic or ideological cant. No flames, no all CAPS.

I'm here to learn; eyes and ears wide open, mouth (usually) firmly shut. Thanks to one and all for your input on one of my favorite subjects - the precious metal markets.

ScottT's picture
ScottT
Status: Bronze Member (Offline)
Joined: Nov 2 2009
Posts: 48
Analysis worth its weight in gold !

yogi - Thanks for bringing some fun to the discussion! Enjoy the holiday...

 

 

ScottT's picture
ScottT
Status: Bronze Member (Offline)
Joined: Nov 2 2009
Posts: 48
Pot of Gold at the End of the Rainbow

Ooops!  I don't think I will wake my wife tonight to reveal this:

"Gold has a tendency to be very volatile in the short-term, but is a good store of value in the long-term, with “long-term” defined by centuries." Source

If our predicament can be defined as floating down the river and headed over Niagara Falls and we have a chance to do this with a barrel (PMs) or without I think I'll grab that barrel and hope for the best!

 

 

Hooleyman's picture
Hooleyman
Status: Member (Offline)
Joined: Oct 7 2008
Posts: 6
Hedges or Investments need management

There seems to be two diverse perspectives represented here:

  1. Hedge: Gold and some precious metals are a long term place to protect wealth against equity market crashes and fiat currency irresponsibility. As such worrying about the Comex price everyday is irrelevant as long as people will always value the physical bullion at somewhere near the value you do.
  2. Investment: Gold and PMs are not immune to market forces, independent or manipulated, so to manage these you need to use all the tools at your disposal. Paying attention to things like supply, demand, price and volume is important.

With the same knowledge of the future as Dave and Jim (0%) I think both perspectives are rationale and must be respected. I really appreciate the discussion here and realize that even though I want Gold as hedge I won't be able to sell it when I need to if its value is manipulated or it becomes illiquid. Paying attention to the market for your hedge or investment is not optional.

Please forgive the deviation (link below), but here's one thing that might break the Comex and the planet well before Gold hits $10,000 / oz. Imagine the value of Gold or Cash when there is less Oxygen and half the food on the planet. 16 years is not that long from now. I thought it fit with the Peak Prosperity theme.

  • Article (Rolling Stone) here.
  • Video
davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
climate change & gold; more unknowns

Hooleyman -

Interesting post.  Respect for the known-unknown future (and perhaps some unknown-unknown outcomes too) is required if you are to avoid a possibly catastrophic over-commitment of resources to one basket or the other.

I don't have any special knowledge about climate change, so I can't comment other than on the mechanics.  A carbon tax would seem to drive prices of every extractive commodity higher, including food prices, since they all use reasonably large amounts of energy.  And from a 30,000 ft view, if you're a "carbon is pollution" believer, it would seem to be unfortunate spending all that carbon to mine gold, since its major use is monetary and/or jewelry.

And strictly from an "fossil energy is a limited resource" viewpoint, it would also seem that spending that energy to mine gold is also...an unfortunate use of society's resources.

Naturally, any attempts to restrict gold mining will drive the price higher.  And of course the higher the price of gold goes, the more of our energy/carbon budget society will want to spend mining it.  That makes for an interesting paradox.

My guess: climate change mitigation will increase the price of gold.  Unless of course the response of climage change control efforts is to make private gold ownership (above a few ounces of jewelry) illegal, kind of like they did with ivory & elephant tusks.  Gotta love those unknowns.

 

Hooleyman's picture
Hooleyman
Status: Member (Offline)
Joined: Oct 7 2008
Posts: 6
@ davefairtex I appreciate

@ davefairtex

I appreciate your point about how taxing carbon would change the playing field. Food, transportation and earth element/mineral extraction will become much more expensive. Some estimates would suggest double to triple. This flows nicely from my original point. With prosperity as a goal we need to pay attention to what is changing in the world (economy and environment) and recalibrate our actions to bring prosperity. That unchecked CO2 pollution will kill us is a very different kind of prediction than Gold prices. There is no reset on a human incompatible climate disaster. There is no financial hedge, only a policy one.

So getting back to prosperity and your points, if we tax carbon pollution then the costs of our current society go up in the areas you stated and others. As an exercise, what might that do? Short term this would raise costs, slow economies and frustrate the usury class. I would guess at least some of them are aware of this. Longer term new leaders would eclipse the established industries with alternative energy, food networks and dense energy storage. Coal, Oil and Natural Gas would not disappear as energy options. To be prosperous you would do and invest in different things than you do today. Gold may or may not be as important or useful as a hedge.

Our investments, including PMs, are a tool to prosperity and not actual prosperity. We need an environment to prosper so I constantly wonder if in 16-20 years I will witness human greed actually kill the vast majority of us in a non-nuclear event. I am sorry this may seem hyperbolic, but do your own research. The actions necessary to improve our situation would suck for the 0.1% WAY more than they would for us.

mazanda's picture
mazanda
Status: Bronze Member (Offline)
Joined: Jun 1 2011
Posts: 78
It is very fundamental

I just came back from vacation and found this debate helpful and hope to make a contribution below.

At times of rapid devaluation of fiat currencies as trust in the purchasing power of such currencies declines , people gravitate to assets with real/tangible value, such as productive land, stuff in the ground that has useful value like iron, potash(fertilizer), wood, copper, aluminum, etc, all things that we use to make life and living possible...gold is not such an asset. However at such times, especially as the trust in the value of fiat currencies is declining rapidly in proportion to their purchasing power, the same people gravitate to use of a medium of exchange they perceive as trustworthy especially if it can't physically and/or digitally be diluted and it is reasonably liquid. Gold has historically served this purpose for obvious reasons. If we assume, or agree that the world has and is going through a period of unprecedented debt expansion that can not possibly be payable, then the scenario of reaching the inflection point of loss of trust is inevitable and should ultimately lead to a much larger demand for gold. Manipulation or not, smart money and smart traders( I excluded) attempt to take advantage of rapidly shifting currents at points of inflection such as the current one to make unusual moves back and forth into various assets and currencies to 'maximize' their profits, without materially affecting the end result . That is why we have trends and counter trends in all markets whether in secular bull or secular bear regimes. The fact that gold has suffered such sharp price decline suggests that smart money expects a serious deflationary period with all assets suffering large price declines and perhaps gold as a currency is leading this decline and with possibly even more declines before it is all over. To hold on to one's gold at this point one has to assume that following the recognition and the spreading of the global recession underway , central banks everywhere will unleash massive QE's that will dwarf the current ones. This will undoubtedly lead to very large gold price escalation and possibly to a gold "bubble" as the trust in fiat currencies may very well be completely lost.

I own gold and I'm holding on to it as I think that the above scenario is reasonably likely and I need to hedge against it.

 

 

yogiismyhero's picture
yogiismyhero
Status: Silver Member (Offline)
Joined: Jun 28 2013
Posts: 173
"As an exercise, what might that do?"

Inflation and even higher gold prices, so forth and so on. Which of course just slams every working person in the United States and we become deeper and deeper indebted to the Over Lords. Isn't life grand. Personally, I love it, I really do, until, I don't.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments