Gold can legitimately be too pricey. We just saw an instance of that in the runup gold experienced between June and September, 2011. A pullback to the long-term trendline occurred and scared the bejesus out of some of the weaker hands who panic-sold and might now be priced out by gold's subsequent bounce.
I remain convinced that the long-term trend is in place - rock steady, in fact - until the fundamental problem is solved. What's the fundamental problem? Something that Central Bankers and politicians will never solve. It's that fiat money has NO intrinsic value. For those who care to argue that gold has no intrinsic value either... its worth is only what markets arbitrarily choose to assign it... the fundamental problem can instead be thought of as the quantity of fiat money being under the control of a relative handful of bankers who cannot be trusted to avoid printing infinite amounts more since doing so would benefit them directly. Eventually, they will undoubtedly try to do just that.
Gold does NOT have that problem.
We are now in the curious position of having an economy that has been badly damaged by the overprinting of money... and a government that believes it must print MORE money in order to stimulate the damaged economy.
This, obviously, won't work, though it will cause gyrations in monetary confidence. When those gyrations are favorable, government will claim success and use that as an agument for more printing.
As people figure that out, they will also figure out that the printing is likely to greatly accelerate. The smart ones will exit fiat in favor of things that may preserve their wealth a bit better. You're free to speculate on what those might be, but my guesses include farmable land, gold, silver, guns, ammo, liquor, certain businesses and food... in a trend that is ALSO likely to greatly accelerate.
There are many other choices. MOST things have some value, after all. Energy, for instance, will do very well. I didn't list it because I don't know how to store large amounts (as in years worth) of it.
Oct. 3, 2011, 1:42 a.m. EDT
Battered gold bugs still defying bear raid
Commentary: Bugs say Asian physical demand will prevail
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — Gold bugs have been shaken by the size of what they see as a manipulative bear raid, but they still believe Asian off-take underpins the market.
Gold had been declining for several days, but in the early Asian hours of Monday Sept. 26, it was struck a terrific blow, plunging $130 in a few hours before recovering.
As Australia’s The Privateer noted thoughtfully this weekend: “That plunge … brought the gold price down pretty close to its 40-week (200-day) moving average. Gold hasn’t been below that 200-day moving average by any more than a few [U.S. dollars] since late January 2009.”
The break has provoked a great deal of suspicion. Veteran Ross Norman, now of the U.K. gold-dealing site Sharps Pixley, remarked of the sellers: “Placing such a huge order into the market when the least number of market participants were active tells you that they were out for dramatic effect. Anyone looking to offload significant amounts of metal at the best possible price would have done so when both London and New York were both [open]. … Clearly finessing gold into the market was not their motive — they wanted a statement.“
The plunge has also stimulated some interesting work. Bullion bank HSBC published an essay Thursday saying: “The drop in gold prices last week represented a 3-standard-deviation move, down 8.54%. ... This has occurred only seven times since gold became freely convertible in 1972.”
Taking the rather more calming long view, Bianco Research on Tuesday put out a piece noting that, considering the nine major breaks since gold started rising in 2001 in percentage terms, the break from the Sept. 6 Comex December gold $1,924 high to last Monday was the second shallowest, and was less severe than the previous five.
In gold, a $100 move is not what it was!
As usual, the radical gold bugs to be found around the banner of LeMetropoleCafe turned quite cheerful on the break. The Asian physical markets began to show the high gold premiums to the world market, indicating import demand, upon which this group sets so much store. By the end of the week, India, China, Vietnam and Turkey were reportedly in this mode.
Analysts at two bullion banks concurred. On Tuesday Edel Tully at UBS commented: “To be clear, physical demand right now is not just decent, it is exceptionally strong. And while Friday’s volumes mirrored flows not seen since late January this year, demand yesterday was a good deal more impressive.”
Standard Bank noted on Thursday: “Although buying interest out of India has been particularly strong, support is broad-based throughout Asia, with physical demand in places like Thailand and China also rising. … [On a year-on-year basis], current buying momentum is much stronger than the respective comparable periods in 2009 and 2010.”
On Friday “Dave from Denver,” a regular correspondent at LeMetropoleCafe, ventured: “Hate to say the bottom is in, but it sure feels like, barring a complete market collapse, we may have seen the lows in gold/silver.”
A thought shared by the by-no-means-gold-buggish Gartman Letter on Friday: “It does indeed appear that the worst has been seen in gold, and that the panic lows seen Monday in Asian trading have held. ... We have weathered the storm.”
The Privateer’s conclusion: “Look upon this correction as an enhanced opportunity to add to holdings or, if you haven’t got any gold yet (why not?) to start accumulating.”
Full story: http://www.marketwatch.com/story/battered-gold-bugs-still-defying-bear-raid-2011-10-03
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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