Wednesday, May 17, 2006

There is No Gold Bubble

These are items the US mass media and financial media do not want you to know about:

The production of gold in the world is substantially less (about 1500 tons per year) than the amount being bought. It has been that way for years. Where is all that extra gold coming from?

There is a huge short position in gold that was slowly put on over years and years to artificially depress the price of gold, to artificially depress interest rates in the US, to artificially keep the US economy going long after it should with out a healthy correction of all the excesses built up in the economy (read massive amounts of debt).

What is currently a big driver of higher gold prices is the gold shorts trying to get out of their short positions. This is going to take years as total short positions are about 10,000 tons worth.

There is no bubble in the gold and silver markets because there is no excess speculation going on in the gold and silver markets. Gold and silver market bubbles are years away from now. Sentiment indicators are very bearish (which is very bullish in reality) for gold, silver and the shares. Most people in the English speaking world can not understand why anybody would want gold and silver because they can not understand what anybody would do with the stuff. That is like sayiing why would anybody want real money (which gold and silver are) because they can not understand what anybody would do with real money. Most people in the English speaking world have been brain washed over a number of generations now into valuing digital token bits on some company's or government's hard drive (which they have little control over) over real gold and silver. Most US dollars, Euros, mutual fund shares, stock shares, bonds are nothing but digital bits on a hard drive in some computer somewhere. The entities that actually own, have real control over, the hard drives actually own all those digital US dollars, Euros, mutual fund shares, pension funds, stock shares, and bonds. Most in the English speaking world have been conned into giving up real ownership of the value they produce every week, conned into putting it into the control (real ownership) of other entities for safe keeping. Conned into believing that they do not have to think or worry about or work at their future retirement and healthcare funds. That those are all being taken care of by entities that they can trust. Well, who takes better care of property? The owner or a non-owner? There are hundreds of millions of people that are in for a rude awakening when they realize they have had massive amounts of value stolen from them. Gold and silver, that you actually own because you actually control it, are the ultimate safe store of value.
Yes, it is a radical idea for most English speaking people to actually go out and buy the actual metal. They are quite uncomfortable with this idea. Which is another reason why there is no bubble in the gold and silver markets. And, there is only a tiny minority of people in the English speaking world that actually take responsibility for themselves and the safe keeping of their own wealth, that are storing a large percentage of their wealth in gold and silver right now. Which means there is no bubble in the gold and silver markets.

There should have been mass liquidation of long gold positions on Tuesday. The open interest only went down a measley 1505 contracts to 342,608. There was no "massive liquidation" as the financial media would have you believe. There is no bubble because there are hardly any new specs to liquidate. What is normal in the past is to see OI rise 100,000 contracts on a $30-$50 up move. This type of thing is not happening any more. This reaction was just another huge short selling wave by the dumb or the market manipulators, riggers, managers.

From the BIS (Bank for International Settlement):
"And last, the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful."

There is no bubble. Gold and silver are about to take off to higher levels **days** from now. This reaction is going to be short, and sweat to those smart enough to be buying weakness.

Are they stupid or are they doing this on purpose:

"The seven large TOCOM gold shorts increased their net short position by a quite substantial 11,563 contracts on May 15 to a total of 201,365 contracts or 6,474,025 troy ounces. Goldman Sachs was the ring leader with an increase of 3,774 contracts to a total of 45,285 contracts or 1,455,944 troy ounces." -

Right now oil is about USD 70, up about 75% from 1980 highs of USD 40.
Gold should be up 75% from its 1980 highs, also, or around USD 1,500.
No way is there any bubble top in the gold and silver markets. Gold and silver have a long long way to go on the upside. And, it's going to take years.

If the gold and silver markets are confusing you, buy the Gold Rush 21 Conference DVD set. Then, what is going on in the markets will make sense to you.


Anonymous said...

why can't we think that the central banks, Governments and bear cartel may again put their best efforts suppress gold and silver?


Bob said...

Well, you can think that, because it is true. They are doing their best right now. Their problem is that they only have so much gold and silver to lease to the bullion banks as they are called (money center/investment banks). They are getting low on actual gold to lease/sell. Central bank/government examples of gold allmost gone: England, Canada, Portugal, Dubia. The US governments hoard of gold has not been audited since the '50s. Hardly anybody actually knows how much physical gold the US government actually has. They have intense pressure on them to conserve what they have left because this game is not over yet. Their objective is to suppress the growth rate of the of the fiat token price of gold and silver. They know that is the best that they can do, that they will ultimately lose the game because of the iron laws of economics. They are playing a game of buying time. The more and longer markets are distorted by governments, the more they will correct when the markets finally get around to finishing their corrections.

The thing to keep in mind is that it is the physical spot markets for gold and silver that governments can not really control. Thus spot (physical) markets where the metals are being bought for cash (fiat tokens) ultimately are setting the price of the metals.

Governments have to have fiat tokens created more and more out of thin air to artificially enfluence the paper (futures, options) markets for gold and silver. This increased supply of fiat tokens end up finding their way into the spot physical markets. Thus governments are involved in a loosing proposition. Since they are incentivised to only care about the short term to hang onto to what ever power they have, they don't care. They are not playing with their own tokens that they actually worked (created value) to earn.

So, just "site tight" like the great Jesse Livermore would say while gold and silver prices go through substantial reactions to the downside on their way to correcting to a much higher fiat token price where they should be considering the massive amounts of tokens that have already been created and will be coming out of paper "assets" and real estate in many counties.


Bob said...

One more point: some governments are actually increasing (buying) their holdings of gold like Russia, China and Argentina. There are probably more that most of us do not know about. Germany's central bank I think has now made it clear that they will not be selling their gold despite big political pressure to do so.