ZeroHedge posted earlier today on a piece put out by PIMCO regarding Gold. Their take is that Gold is a good “diversifier” and in fact a good hedge against inflation. They say that sentiment runs from those who despise Gold to those who see it as a “religion”. Before I go any further, I will say that if “saving your own and family’s financial @$# is considered a ‘religion,’ I would like to be the Pope!”
PIMCO points out that the Fed’s practices of QE are inflationary and that Gold should act to protect portfolios. They mention “TIPS” (inflation protected bonds which are less volatile than Gold and are only at risk if the US government should default). But, but,…isn’t THAT exactly what is happening? …And isn’t the government the one who decides what the “inflation rate” is? I don’t know about you but I don’t have much faith in ANY government reported statistics, especially the inflation rate as it affects so many other reports (and benefits) such as GDP, Social Security benefits etc..
I could argue with a few of the points that PIMCO makes but all in all, from what had until recently been a “mainstream voice”, PIMCO did a good job on this piece…EXCEPT for one minor detail. Let me explain. PIMCO manages something like $1 trillion or more, have they forgotten that they are the elephant in the room? What do you suppose would happen if they took their own advice? What if they took a 10% position of their own assets under management and bought Gold? There more or less would not be even 1 single ounce left over for anyone else out of the world’s total production, THAT’S WHAT! Did they forget the math on THIS MINOR DETAIL?
The U.S. government just on its own, borrows nearly this amount every single month. That’s right, the U.S. borrows roughly 10 times the amount of total global Gold production EVERY YEAR! Don’t get me wrong, it is not that 2,500 tonnes of Gold is “not big enough”, the problem, or flaw if you will is that Gold is underpriced by multiples upon multiples! There is just no possible way for the world to “hedge itself” financially against all of the Frankenstein like paper which has been created and will be created. No way, no how. Just the act of “hedging”, would in itself blow the top off of the price of Gold. This is not even to mention the amounts of shorts that would need to be covered, buried, defaulted and destroyed.
The point is this, PIMCO as well as other mainstream entities have and are figuring out the merits of Gold as money versus fiat. What is only just now dawning on them is that “they” are so big that they cannot effectively hedge themselves in the physical markets. They must use the “paper” markets but…when all is said and done, paper will never…ever…be Gold! THIS is very meaningful to you as a holder of physical metal, we know that the music mathematically is going to stop and we also know that there are very few “chairs” made out of the real stuff. So, you just sit tight while watching chairs evaporate and collapse while you sit firmly in yours, patience is all that you now need!