Wednesday, August 21, 2013
Gold Price Fallacies
Mine supply blah blah blah, Gold Coin Demand, blah, blah, blah, US Mint figures, blah blah blah, Rising interest Rates, Tapering, India import controls, BLAH BLAH BLAH.
All this is absolutely irrelevant to the gold price. Yet it makes up the lion's share of the drivel in thousands of gold posts and essays every day.
There are two basic factors controlling the gold price: A) Central Bank and Bullion Bank (the bullion banks own the Fed - literally) activities and B) Vast public sentiment regarding the efficacy of Central Bank activities.
In the short run the gold market - like every other traded market - is dominated by a few traders at the biggest banks - the ones that own and control the Central Banks.
That's life in the Bank Run Socialism - which is the only economic system on earth.
In the long run the only thing that affects the price of gold is Monetary Stability of Reserve Currencies. In other words how Central Banks are managing their paper currencies. And the perception of how Central Banks are managing their paper currencies.
That means principally the US dollar, the Euro and the Yen. And to some degree the Chinese Yuan, as China is settling commodity transactions in the Yuan in may places.
Central Banks, Bullion Banks, and certain Hedge Funds are not trading - but are accumulating positions - they are buying Real Physical Gold to Hedge against the Monetary Instability they know exists.
They will say that Gold is a mysterious barbarous relic, with no real place in a modern economy. This line will be parroted by everyone in all political parties - which are all owned by the banks - and everyone at all of the news outlets - which are all owned by Banks or Finance Companies or Billionaire Financiers.
But all these Central Banks and Bullion Banks and many huge hedge funds - have enormous physical gold positions. Because they know full well the paper currency system is a giant Ponzy Scheme that can unravel at any moment. It is entirely dependent on the Greater Fool Theory. Those at the top reap all the benefits. The rest of us are the Greater Fools.
The second we Great Fools stop believing - everything unravels.
In the short run, gold can fluctuate based on the patterns of big traders - mostly at these same institutions. But the fluctuations that seem huge to small traders are meaningless to these big traders. They're just taking your trading money.
But over the long term, gold is still the only Reserve currency that is stable. And until the perception of that changes within Central Banks and large Bullion Banks that control the paper currency scheme, the price will continue to be in a long term bull market.
And none of the other crap matters.