Gold — Who Needs It?

ss-7853536-potOfGoldRumors that the US has leased out much of its gold have been rampant for several years. Whether that is true or not I have no definitive information although it does seem plausible. There is enough smoke around this issue to suggest that a fire exists somewhere.

This behavior would be consistent with the dying-empire behavior that prevails in the management of this country. Excessive spending on bread and circuses is evident everywhere. Core government functions like maintenance of infra-structure, provision for promises made in the future (Social Security, Medicare, Obamacare) and virtually everything else has been sacrificed to maintain the appearance of normalcy and to attract votes. 

The idea that government would not "cheat" on its gold holdings is not consistent with behavior in virtually every other area. Simon Black recounted his journey to this conclusion: 

The fraud of the Iraq War soon led to the frauds of previous wars, our monetary system, taxes, the global banking system, the national balance sheet, the police state, etc.

Denials mean nothing when an institution and government is known to regularly lie. 

Tom Cloud, in an interview with John Rubino, believes that to be the case and suggests that the alleged scheme is coming unravelled:

Germany’s gold repatriation is obviously a game changer. They got all their gold back from France right away. But the US government put them off for 7 years, probably by offering them some kind of premium to take their gold back slowly. More gold, Treasuries, no one knows what exactly but clearly it was a big inducement. It’s also clear that Germany won’t be the last country to bring its gold home. The Netherlands is next and then probably Switzerland. It’s become a game of musical chairs. No one wants to be caught when the music stops. And make no mistake, it will stop. Everybody in the industry knows the US doesn’t have the gold and can’t deliver it. They’ve leased it all out.

If this is so, the gold market should be in for some volatile upside action. Got Gold?

Another view, by Greg Guenther, is that gold's luster is gone:

Famed technician John Murphy explained in a weekend blog post that “…stocks should become the most favored asset class in the years ahead… Treasuries will probably be the biggest losers. Gold may benefit from a falling dollar to some extent, but probably won’t do nearly as well as it did over the last decade because of rising stock values.”

Now, before you come after me with a pitchfork, you should know that gold is not heading for a nasty collapse. It will hold its ground. And it will continue to wander through intermediate highs and lows.

However, speculators who have played gold and helped push it higher in recent years won’t be around anymore. If you buy gold now, treat it as a safe haven. If you jump into a gold position this year expecting explosive gains, you’ll find nothing but disappointment…

If this is so, gold should be in for lackluster performance ahead. Got Stocks?

Market opinions are easy to come by. Mine is that gold should be a required portion of any investor's portfolio. I tend to favor Tom Cloud over Greg Guenther, but that is why we have markets.

In my opinion, Guenther may be correct in the short-term but not the long-term. By providing you my opinion, I have become a one-armed economist and they never should define time frames in any more detail than I already have.

1 Comment

  1. The guy is 100% wrong about the stock market.   The Dow when measured by gold is at 25% of its value compared to a mere decade ago.   It is being propped up SOLELY by Federal Reserve printing.  It might be the biggest bubble ever created.   When it crashes to actual value, that means a 75% drop.   That's astronomical.   I guess the argument FOR the market is the fact that the Fed has no intention of EVER stopping but the printing presses, but the laws of economics will take hold at some point.

Post a Comment