Reckoning

Gold dropped 100 dollars on Friday - as anyone holding gold is well aware. A lot of silence from the boisterous gold gurus.

But remember, during the banking crisis of 2008 the exact same thing happened. Not as drastic, but gold hadn't run up so drastically. Things turned when George Bush handed over 8 trillion dollars of tax payer money to the banks. My guess is Obama the socialist - not quite the socialist George Bush was - but still, he'll opt for the same. And if he doesn't the republican socialist who follows him into the White House certainly will.

But wait - where are all those central banks who are supposed to be supporting the gold market?

The central banks don't play in the Futures market - and it's the paper gold market that gets hit when funds delever. And, of course, the little guys like us buying a few ounces lose value - on paper. But that's why it's very dangerous to trade gold. And all the traders out there will be wondering if the bull market it over or if gold isn't too volatile to trade - or whatever. But if you're holding bullion you have to know why you're holding it:

You hold bullion because one day - whenever that day happens to come - the vast American and European public are going to lose confidence in the American and European banks and governments - which everyone is beginning to realize are one in the same. And One day - maybe soon - the vast American and European public will lose confidence that the banks and the governments are able and willing to preserve the value of the printed money that they control as a vast and unregulated monopoly. And one day all those people will realize they're working harder and harder to buy less and less just so that all those zombie bank/governments can keep paying themselves huge bonuses/salaries. And when that day comes there will be a sudden rush to convert the paper moneyu into the commodities with intrinsic value: food, water, oil, minerals, farm land, and of course - gold.

The central banks are already doing this. Especially the central banks in Asia. But when the vast public finally gets what's going on and they race to convert their paper into hard assets it won't make any difference any more what the gold futures price reads on your computer screen. There will be no more gold available. And you'll be glad for all that you bought.

And if that day never comes?

That day always comes. Over and over throughout history. It's just a question of when.