December 22, 2011
By Kevin Michael Grace
Gold was up (at press time) $33.90 (+2.2%) for the week to $1,607.70, and silver was down $0.18 (-0.6%) to $29.10. Gold’s rise was attributed by Reuters to the Euro’s rise against the dollar, following the European Central Bank’s loans of €489 billion at 1% to banks. The euphoria engendered by this largesse was short-lived, but talk of the end of the bull run in gold has been quieted for now.
At the Globe and Mail, David Berman reports December 21, “Bespoke Investment Group pointed out on Tuesday that gold is also struggling with at least one technical issue. It is hovering around its 200-day moving average right now [$1,616] after Tuesday’s rebound, a key threshold that stocks and commodities have had a tough time breaking through.”
And yet, “Despite the technical worries and the recent correlation with the stock market, at least gold investors can look back on 2011 with some amount of satisfaction: Even though gold has retreated about $300 an ounce from its record high, it has risen 13.7% overall this year, far outperforming the 0.4% gain for the S&P 500, after factoring in dividends.”
On January 4, when gold traded at $1,379, Berman wrote, “The argument in favour of rising gold prices—the U.S. is printing money like you wouldn’t believe!—was heard throughout most of 2010, when gold reached its high of more than $1,400 an ounce. But the supply-and-demand picture continues to suggest that gold’s lustre is fading.”
Not yet! At Seeking Alpha, Jeff Clark explains why. “Have the reasons for gold’s bull market changed in any material way such that we should consider exiting? Instead of me providing an answer, ask yourself some basic questions: Is the current support for the US dollar an honest indication of its health? Are the sovereign debt problems in Europe solved? How will the US repay its $15 trillion debt load without some level of currency dilution? Is there likely to be more money printing in the future or less? Are real interest rates positive yet? Has gold really lost its safe haven status as a result of one bad week? And one more: What is the mainstream media’s record on forecasting precious metals prices?”
Can you field that one, Mr Berman? Of course, the bull market will end one day, and he will be proved right eventually. But being a gold bear means never having to say you’re sorry.
2011 was the Year of Gold, and not merely because it continues its reign as king of commodities. This was the year that gold became political. Governments can no longer pass off their massaged figures—GDP growth, unemployment, leading indicators, consumer confidence (whatever that means)—as the only indices of the health of the economy. And the bankers can no longer claim without rebuttal that the relative strengths of the Dow and the S&P 500 demonstrate that everything is going to be all right, real soon, we promise.
The Year of Gold’s Man of the Year is Republican Presidential Candidate Ron Paul, now the favourite to win the Iowa caucus January 3. This is entirely fitting, as Paul is treated by the mainstream media exactly as it treats the goldbugs: mocked when necessary but usually just ignored. (For evidence of the latter, watch this amusing Jon Stewart video.)
Paul is a goldbug, and he doesn’t care who knows it. That is to say, he is an advocate of the Austrian School of sound money and argues for a return to the gold standard. It was on “Black Sunday,” the day Nixon took America off the gold standard, that he decided to enter politics. He explained, “After that day, all money would be political money rather than money of real value. I was astounded.”
Paul is a 13-term congressman and a physician who has delivered over 4,000 children. He has had but one wife and belongs to a mainline religion. He served his country during Vietnam, unlike Newt Gingrich, and has suffered no sexual scandals, also unlike Newt Gingrich. He is undoubtedly intelligent and principled. He doesn’t believe in foreign aid or foreign wars, but these views hardly make him a crank. In any event, Republican primary voters will make the final judgment.
Back in August, in the Telegraph, Tim Stanley considered the question of “Why the American media hate and fear Ron Paul.” He concluded, “I suspect that they take a look at the people chanting his name in the bleachers, and they don’t like what they see. The Paulites are good folk worried about the direction of their country, but their exclusion from the mainstream makes them come off like the vanguard of a Hicksville revolution. Television is a cool medium. Ron Paul and his angry army are too hot for it.”
It is arguable that the Internet has supplanted TV as the main source of political news and comment, and as Marshall McLuhan would agree, the Internet is very much a hot medium. Certainly, the Paulites, like the goldbugs, do not get their information from TV. They are beyond the influence of the MSM—and thus beyond the control of the politicians and the bankers. And this, more than anything else, is why Paul is so detested by the elite.
As it happens, Paul not only talks the talk about gold, he walks the walk. The Wall Street Journal reports, “According to data available through his 2010 ‘Form A’ financial disclosure statement, filed last May, Rep Paul’s portfolio is valued between $2.44 million and $5.46 million. (Congressional disclosures are given in ranges, not precise amounts.)” In comparison, Newt Gingrich is worth $6.7 million, while Mitt Romney is worth up to $250 million.
The Journal is not put out by Rep Paul’s wealth, but when it comes to his investments, well, that’s another story. “Fully 64% of his assets—[are] entirely in gold and silver mining stocks. He owns no Apple, no ExxonMobil, no Procter & Gamble, no General Electric, no Johnson & Johnson, not even a diversified mutual fund that holds a broad basket of stocks. Rep Paul doesn’t own stock in any major companies at all except big precious-metals stocks like Barrick Gold, Goldcorp and Newmont Mining. Rep Paul also owns 23 other miners—many of them smaller, Canadian-based ‘juniors’ whose stocks are highly risky. Ten of these stocks have total market valuations of less than $500 million, a common definition of a ‘microcap’ stock. Mr Paul has between $100,010 and $326,000 (roughly 5% of his assets) invested in these tiny, extremely volatile stocks.”
“Juniors,” how déclassée! Somehow one imagines WSJ editorial writers speaking in the strangled tones of Thurston Howell III: “I’ve never cared for the cut of that man’s jib. Have you seen his portfolio? Shocking, simply shocking.”
And now to cases. The MSM doesn’t inform us which “highly risky” stocks Paul held in 2010, but Auguries goes the extra mile, willing to spend the 10 minutes or so it takes to find them on his “Form A”. Those listed on the TSX are presented below, along with the ranges of his investments in them. Caveat lector: this is not Paul’s current portfolio, which could be completely different.
|Agnico Eagle||TSX:AEM||$100,001 to $250,000|
|Allied Nevada Gold||TSX:ANV||$1,001 to $15,000|
|Barrick Gold||TSX:ABX||$250,001 to $500,000|
|Brigus Gold||TSX:BRD||$1,001 to $15,000|
|Coeur D’Alene Mines||TSX:CDM||$1,001 to $15,000|
|Eldorado Gold||TSX:ELD||$50,001 to $100,000|
|Goldcorp||TSX:G||$500,001 to $1,000,000|
|Golden Star||TSX:GSC||$15,001 to $50,000|
|Great Basin Gold||TSX:GBG||$1,001 to $15,000|
|IAMGOLD||TSX:IMG||$100,001 to $250,000|
|Kinross||TSX:K||$15,001 to $50,000|
(now Lexam VG Gold)
|TSX:LEX||$1,001 to $15,000|
|MAG Silver||TSX:MAG||$50,001 to $100,000|
|Newmont||TSX:NMC||$250,001 to $500,000|
|Pan American Silver||TSX:PAA||$50,001 to $100,000|
|Silver Wheaton||TSX:SLW||$50,001 to $100,000|
|Virginia Mines||TSX:VGQ||$15,001 to $50,000|
|Vista Gold||TSX:VGZ||$1 to $1,000|
|Wesdome Gold||TSX:WDO||$1,001 to $15,000|
Finally, Ron Paul is again bedeviled by a 15-year-old controversy regarding allegedly “racist” materials published in newsletters under his name. One can never be too attentive in these matters, but how can we be sure the other candidates are racism-free? Some sort of test is needed. How about this: candidates are shown a Chris Rock video, say, this one—warning: contains many, many swears—and those that laugh too heartily are disqualified. That oughta do the trick.
A Happy Christmas to all Auguries readers!