August 30, 2012
By Kevin Michael Grace
Next Page 1 | 2
Gold was down (at press time) $14.50 (-0.9%) for the week to $1,657.60, and silver was down $0.08 (-0.3%) to $30.48. According to GoldCore, “Gold is mostly unchanged as investors gear up for the US Fed chairman Ben Bernanke’s speech tomorrow. Bernanke may again obfuscate… However, the smart money, such as PIMCO’s Bill Gross, Jim Rogers, John Paulson and others, believes that further QE and money printing remain inevitable. We would concur and advise investors to fade out the short-term noise.”
Plus ça change, plus c’est la même chose. If a Best of Auguries column were run here this week, could anyone tell the difference? From August 25, 2011: “One is tempted to compare the Ben Bernanke’s power and influence to that of a Roman emperor or a medieval pope, but one doesn’t want to underestimate the man. As Catherine Hollander of the National Journal declares, ‘All eyes will be on [him] when he takes the podium on Friday morning at the central bank’s annual confab in Jackson Hole, Wyoming.’”
Now, as then, the pre-speech verdict is the same. Bernancus Magnus is expected “to keep his options open for future action.” One thing is different, though. Last year, fear of no immediate further quantitative easing send gold plummeting from $1,900. This year, gold barely budged in anticipation of his Wyoming Address.
We heard last week from the enthusiasts: the bug-eyed goldbugs. But as CommodityHQ points out August 29, “It is not just casual investors betting on an uptrend in gold, as a number of significant investors and institutions have been increasing their gold stakes as of late.”
George Soros, the Angel of Death, has increased his holding in the SPDR Gold Trust (GLD) from $52 million to $137.3 million. John Paulson “increased his GLD stake by 26% to hold 21.8 million shares… That means that Paulson has approximately 44% of his company’s assets in this singular fund.” Russia has bought 80 tons and has “more than $47 billion invested in physical bullion.” Turkey has bought “nearly 50 tons this year alone [because of] new legislation that puts gold in reserve requirements for banks, meaning this purchasing will likely continue for some time.” And Mexico bought 110 tons between 4Q 2010 and 1Q 2012.
Gold is no longer infra dig. And the “conspiracy theories” entertained by goldbugs are now getting a respectful hearing, if Peter Hodson’s op-ed in the August 24 Financial Post is any indication.
Hodson examines three such theories. First, “Does the GLD, the world’s largest ETF, actually own the physical gold that it claims it does?” His verdict: “With multiple ‘physical’ gold ETFs out there, why even take the slightest chance that ‘your’ gold is not metal, but a form of paper? We did a lot of work on the GLD over our career, and certain clauses were worrisome. For example, under ‘emergency’ conditions, the GLD in theory could suspend redemptions. To us, an ‘emergency’ is exactly when you might want to have some real, hard, gold.”
Second, “The price of silver is being manipulated downward in order to protect JPMorgan and other big banks. It is well known that US money-centre banks have a giant short position against silver. The short position, it is said, is absolutely huge compared to the amount of physical silver that exists in the world.” Hodson’s verdict: “Maybe. There are certainly enough global players who need the big US money-centre banks to survive, so maybe they ‘help out’ once in a while.”
Third, “The US government is actively involved in financial markets. This theory states that, whenever stock markets plunge, there is active US government intervention to start buying futures and equities in order to turn things around so there is not a panic.” Hodson’s verdict: “If the governments actively support stock markets, where the heck were they during those dark, dark days of 2008-2009?”
Where the heck were they? Ask Warren Buffett. In November 2010, he looked back to the “the darkest of days” when “Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch.” By making sure none of the big boys, AIG, Goldman Sachs, et al, lost a penny. First things first, but those bailout trillions trickled down to the stock markets soon enough.
Hodson concludes, “The world is not out to get you—really.” As you say, but it has been proved time and again that the powerful do not have your best interests at heart and are prepared to lie to get what they want. Nine years ago, the governments of the United States, the United Kingdom and others invaded Iraq based on their certain knowledge that Saddam Hussein possessed “weapons of mass destruction.” No such weapons were found. To this day, Western governments and elites insist that massive Third World immigration will result in significant economic benefits. All empirical evidence demonstrates the opposite.
The more things change, the more they say the same. Our leaders continue to resemble Kevin Bacon in Animal House: “Remain calm! All is well!” Gold took off from $800 an ounce in 2008, and to this day it refuses to roll over and play dead. There’s a lesson here.
Next Page 1 | 2