Well, as cynical as I was yesterday about central bank jawboning, not one but a bunch of bonehead central bankers came out and shot their mouths off about currencies and stuff. And what do you know, gold gets crushed. Again the sell-off is way harder than for any other measure of the value of the U.S. dollar. Another -$12 day from high to low (and it may not yet have finished as the close looks very weak). Gold is off 2.5% and silver is currently some 4% off its highs of the day. The Euro is off 1.5% and the Aussie dollar is off 1.1%. People must be pretty keen to get out of the gold game. It is my contention that the game is still in the first quarter.
Indian premiums are way good for legal import even with the London fixes over $403. They'll be pretty bloody happy at $395 and maybe they'll get a few more gifts thrown their way in the next couple of days.
The reference to snakes and ladders board game yesterday drew a lot of comment. Gold effectively just landed on number 87. Interestingly enough, continuing with the board game analogy, after landing on the big snake, there isn't that much further lower that one can go. I think we are not dissimilar in position with gold. Currently, the $395 price is some $40 off gold's intraday high and we know what the real gold buyers of the world are doing down at these levels. The paper gold market will not control the physical market for much longer. The disconnect is apparent to many, and the physical buyers are being accommodated by the speculative crowd.
And so, we come to see what actually drove the price down in such a short time. Greenspan talking about the threat of Fannie and Freddie certainly shouldn't have been dollar bullish and his comments regarding the deficit shouldn't be construed as dollar positive from where I'm perched either. Vigorous growth in the U.S. economy, he mentions. Yeah, right. The Japanese "authorities" haven't done a thing right in 15 years, so why would now be any different? The ECB reckons interest rates could be lowered and the Euro weakened ... who cares? Let's all load up a bit more debt, right? Hmmm.
The race for competitive devaluation is on and it is my opinion that the only safe place to protect one's wealth and ensure value retention is in "borderless/ungovernable money"...gold and silver. An ounce will be worth an ounce in 5 years, 100 years or a thousand years and no central banker or fiat can change it. But what will one U.S. dollar be worth in 10 years? What color will it be? What size? I dunno, but I know what an ounce of gold will be. Sure, governments can change the ownership rules for gold, like in 1933 when Roosevelt outlawed the ownership of gold by private citizens of the USA (under threat of massive fines and incarceration). Gold ownership was then only made legal in the U.S. in 1974 by Nixon after the collapse of the U.S. dollar. I'm not saying that is going to happen again, but people should be aware of history and never discount anything.
Gold is the antithesis of central banking. Central bankers hate gold, but they can't hate it more than the 2.5 billion Indians and Chinese love it...(and guess who's got all the dollars to pay for it?).. It may appear that I am in a bad mood today (well it is 5am and there is no coffee) but, quite frankly, I can't wait to see what Mrs. Singh and Mrs. Wong do today in the "real" gold market.
Note - both gold and silver equities have pretty much yawned at today's developments.
Have a nice evening.
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