This morning, the gold market duplicated its strong move up on Wednesday in the Thursday pre-New York hours. Investors finally come to their senses? I doubt it. Probably just JPMorgan letting up a bit. Above $1,400 is where we want to close by the end of the week. $1,478 will solidify the price even more.
“If the gold and silver market, are rigged and manipulated (which they are), why should I bother owning gold or silver?” Some of our readers ask that question. My answer is that the market has been suppressed and manipulated all the way up since the beginning of the bull market in 2001, with gold at $252 and silver around $4.50. Without the manipulation, you would most likely be paying multiples of what it costs you now, to acquire this timeless, real “wealth.” Would you rather pay $3,500 an ounce – or $1,400 for your gold? Gold will find its “real” supply/demand value at some point (in the next few years), so why not take advantage of a price structure that cannot last.
Let the hedge funds and bullion banks knock each other around in the name of leveraged, short-term profits. They can all take a flying leap, as far as I’m concerned. The winners in this comedy are the Chinese, the Russians, the Indians, and our clients. Cheap gold and silver is like “a dead man walking.” It doesn’t know that its days are numbered. You can’t fight the central bank buying of physical metal, not if you want to win. Gold started to rise rapidly when the Western central banks stopped SELLING their gold (up to 500 tonnes a year, plus what they leased out and swapped). Now the big central banks are buyers.
Monetization of debt (QE) is inflation! And if you believe the Fed will stop, you are betting on the wrong horse in the race. They can’t stop. Japan, the US and even the EU are all inflating their currencies – against each other, so it is hard to see the immediate result. But they are also inflating their currencies against gold and silver and once the bottom is in and this turns around, the good times will be back, with a vengeance.
Today Bernanke says they won’t stop the QE now, but a “step down” COULD come soon, more jawboning. Even Goldman Sachs says it will continue at least to 2015 (what they say is the stock market will continue to rise until then, but it can’t rise if the Fed cuts off QE). As to be expected, the hedge funds sold gold and silver on Bernanke’s comments. Can they really be that stupid? How can anyone honestly expect that the Fed will cut back their bond purchases? Talk, talk, talk – that’s all we get. And it works, for a short while. Why would anyone TRADE gold and silver? They whipsaw up and down every day. They move in counter-intuitive ways. It’s a rigged game. But that is no reason to avoid the physical metals. It is this very manipulation that allows us to buy gold for far less than its (monetary) value would other wise be.
Do not let the manipulation worry you. For now, it is your friend. Do not sell at these prices unless you absolutely need the money and have no other alternative. Hold tight or if you are able to fight your “emotions,” this is the time to buy. As Lord Rothschild said, “Buy when there is blood in the streets.”
Mr. Schectman, you make some very valid points. But I wish to correct your statement “Would you rather pay $3,500 an ounce – or $1,400 for your gold?” Here’s the problem: I wish to start selling my gold, and having bought it at $1,000-$1,800 an ounce, I find $1,400 distasteful. Gold is too expensive to buy, not expensive enough to sell. Especially if you are part of America that got laid off, had their hours cut back, forcibly retired early, or find inflation going up much faster than your paycheck.
If you have waited from 2001 to now to sell, buying all the way, or even started buying back in the 1980s…you are still told to wait. Even as your Social Security paycheck has more Medicare taken out of it, and you might need that inflation-proof money now. What are you going to tell all the retirees? To wait another 3-10 years for the black swan event? How much longer do they have left?
All my earning career time, precious metals have gone up more than my paycheck. They were “cheap” when I couldn’t afford them just starting out, and they’ve never gone up to where they would supplement or replace my (downsized) income. So I want to see $3,500 gold. I want to see $10,000 or even $20,000 gold. And in my lifetime, not the lifetime of my progeny.
Right now I tell people to buy cans of food and fix up their houses, not buy gold or silver until they have all the preliminaries done. Like having zero debt.