Notice I am have silent about Gold ?
Because I am long and wrong ! (not yet)
Just to expose the facade of the entire global central banking system. Bitcoins rallied to a high of 260 before crashing on a purported DDOS attack which caused the exchange to close down for several hours.
Bitcoins – A decentralised digital currency created in 2009.
Gold – The first gold coins of the Grecian age were struck in Lydia around 700 BC.
Fiat Money – that derives its value from government regulation or law. [Pssst, its made in China….” Fiat money originated in 11th century China, and its use became widespread during the Yuan and Ming dynasties.”] Source : Wikipedia
As of 31 Dec 2012, Gold has fallen against every single currency of the world, including the Argentine Peso, except for 1. Silver, 2. JPY, 3. Malawian Kwacha and 4. Venezuelan Bolivar.
Safe haven no more because …..
There is no central bank backing Gold !
Largest Dutch Bank Defaults On Gold Deliveries
ABN AMRO, the largest Dutch bank in the Eurozone, issued a letter to their gold contract customers of failure of delivery, and instead will pay account holders in a paper currency equivalent to the current spot value of the metal.
“reports of shortages of bullion coins and bars in Thailand and in Singapore where premiums on certain bullion coins which are legal tender and have favourable tax treatment, such as American gold and silver eagles, have risen due to tightness in the market and delays of three to four weeks for delivery” Zerohedge
Comex Gold Inventories Collapse By Largest Amount Ever On Record – Seeking Alpha
Gold/S&P 500 is below 1.0 for the first time in 3 years.
A wonderful test of resolve since I started on this piece last Thursday, that we have officially entered BEAR territory on Friday, on a sudden and swift drop in gold that has all the central bankers heartily gloating away.
“Gold is down some 4% today, in the biggest one-day sell-off for a year and a
half after ECB president Draghi stated that any gold sales by the Cypriot
central bank must be used to cover losses from the ECB’s emergency lending
to Cypriot banks. Based on data from the World Gold Council at the end of
2012, Cyprus only has around €500mn of gold reserves at current prices, so
this by itself is not enough to materially impact the gold market or to
materially help Cypriot banks.
* However, this does set a precedent and other peripheral countries do have
significant gold reserves (Table 1). Italy for example has holdings equivalent
to €90bn or 6% of their GDP. €90bn is the equivalent of all physical gold held
by ETFs globally. Portugal also has significant holdings, both relative to the
size of its economy and in terms of the potential impact on the gold market.
Any hint of sales by these larger gold holders to help deal with crisis related
issues would likely see gold correct even lower.” – JPM Flow Commentary
Yes. Central bankers hate gold because it is the No.1 underminer of their currencies and certainly 1 asset they have no control over as with bitcoins. Almost everything else they wield some power over, and Gold too for a certain extent that it is an inflation hedge.
Now that the major central banks are all conceding the battle with inflation, BoJ on a warpath to revive inflation, and the rest, fighting battles with unemployment and growth, Gold has lost its status as an inflation hedge ?
That leaves the other face of Gold, the safe haven hedge, except that is is no more because it is all but paper and banks can choose not to honour delivery. This is what is the world has become.
With bank deposits and bonds being confiscated and taxed on the whim of a central bank, Gold shall not be spared. That leaves everyone running scared and running for real estate.
This is an interesting chart I managed to drag out. Note the Gold vs the UBS Global Residential Index is showing a huge gap the other way.
It looks like real estate is the new hedge and the new gold. It is an even better gold because you can leverage for 20-30 years for them.
Better a borrower than a lender be. Market abundant with liquidity.
And they are doing their level best to make Gold look like the Banana Currency in the same league as Bitcoins.
Arguments are arguably valid, if you ask me. The average cost of producing Gold is about 800 per ounce which makes its current price a huge premium. Bitcoins, like Gold, has to be mined too. And it takes smart people to mine them, by writing powerful algorithms and using huge amounts of server space to solve complex algorithmic equations which increases in complexity with more miners (or so I understand).
There are currencies and there is Gold, Silver and bitcoins that are universal these days. Real estate is not universal. An apartment in Toronto is not an apartment in the UK.
I am not smart enough to mine for bitcoins. In fact, I am like the average chinese or indian farmer who do not trust the banks all that much.
Take away the central banks and politicians, we will have instability. And Obama’s popularity ratings have plummeted for a 4th month running to 47%.
I am still long Gold and am looking to allocate more.
Take a look at the chart above. A similar move happened in Sep 2011.
To the central banks.
You can try, but you cannot make me believe in you.
PS : S/L 1385 T/P 1626