Another day, in another time, gold had plunged to a 20-year low, plumbing the depths of $250 an ounce at the same time as the Dow was hitting a new all-time high of 11,300, even as astute followers, just like some that I have today, were then following Another and FOA. Some threw in the towel in disgust, some turned on the messenger, and everywhere you could cut the tension in the air with a knife.
I was following the thread of a particular (unrelated) discussion in the old USAGOLD forum archives (I do that occasionally) and I came across a few comments that reminded me of some of the recent comments here. So I picked out a few of them that I thought you might find interesting.
I want to note a couple of things. The first is that I don't think we are seeing quite this level of desperation yet. I think another $100 lower and we might start seeing more of this kind of towel throwing. Also, note that these few days below marked the last time that physical gold would ever be that cheap. So the very time at which some who had been following A/FOA in real time were throwing in the towel was perhaps the best buying opportunity in all of history. If you understand why I, personally, welcome the recent decline, then that's something to keep in mind if the falling price of gold ever starts playing tricks on your mind. If you don't understand, then please feel free to ask in the comments and I'm sure that someone will direct you to some of the posts that explain my view.
All of these comments came from this page, and they are just a few selections that I picked out especially for you today. :D
I've avoided posting for some time because of discouragement. As of right now, I am regretting that I ever invested in gold or gold stocks. Something that is worse than losing hope and cutting your losses is losing hope and capital and then to have someone lift your hopes...only to have those hopes trashed, again and again and again and again and again and...endlessly trashed.
If I think of all the growth I could have had in the stock market rather than the losses in gold and gold stocks, it is almost sickening and totally depressing. Somehow I know that I'm not alone in feeling EXTREMELY depressed at this latest attack against the POG by the rich big boys. Somehow it seems very unholy to keep getting financially bled to death simply for making the right decisions at what SHOULD be the right time. Maybe I'm over-reacting, but I sure hope that GATA can help bring the POG back to at least its 20-year average. This current price level of gold and gold stocks is totally absurd and complete discouraging.
Long have many of us ardent goldbugs waited and waited and waited, witnessing almost every reason possible to trigger an upturn in the price of gold...only to see apparent collusion drive it down further.
I'm in too deep to sell, and too scared to buy anymore. Somehow I can't help but wonder whether I'll someday die in my old age with tens of thousands of worthless gold stocks and many ounces of worthless gold coins. Am I being somewhat paranoid? ...actually, I'm just plain TIRED of losing!!!
Can someone out there provide some GENIUNE hope for us disillusioned gold bugs? I'm so tired of the misinformation that prevails on both the internet and the news media that it's impossible to know WHO OR WHAT to believe anymore. Some of us would love to start overcoming discouragement, and I'm one of them.
Boy, are you going to get a whole wave of responses on this one. I, for one, would be happy to address your predicament in the morning if you like, but, right now, I have to go to bed. For starters, however, let me suggest this: tell us more about what you have been through. Just how bad has it been? What do you own, and how long have you owned it? Don't worry about giving yourself away. Nobody here knows who you are. When I get up tomorrow, I hope to hear more about what you have been through. You will get lots of help here, but first, you need to talk.
Response to FOA
Some people prefer to disregard the fact that the Gold market has spent 20 years coming to this point in time and price--a price that could NEVER exist now except under the special circumstances that have been put forward in many carefully considered posts. Some of these same people might suffer a bruised ego because their own careful and astute choice of Gold as an investment has yet to pay off huge in a timely fashion. Or else they might feel that Gold should be performing for them with obvious gains each and every day. Don't these people ever go home from work and sleep, or must they always be on the job and getting paid? My point is that "productivity" need not be an around-the-clock affair. As ANOTHER has said, "Gold will be repriced once in life, and that will be much more than enough." The bottom line is that you will either HAVE Gold when events turn, or you won't. It's that simple. As Beesting recently reminded us (or was it Turbohawg or ET?), this isn't just a showdown between the dollar and Gold. There's a whole world of currencies that have been suffering at the hands of their national dollar-debts.
Gold. Get you some. ---Aristotle
PS. for Skip: I don't know if this will help you out. Maybe it'll make you smile if nothing else. I had a chat with a friend the other day who was second guessing his Gold bullion investments after watching the price fall while the DOW powered upward in half frustration. He asked "What if I die with a drawer full of coins before the price of Gold goes higher?" (He's under 50 years) I laughed and said, "Then, congratulations!" I suggested to him that anyone who checks out with Gold coins remaining in his drawers (at any price) obviously had adequate means with which to meet his life's needs. Only a deathbed ego would consider any distinction between the remaining Gold weight and the Gold price during one's last breath. He laughed loud and hard and said that was for sure.
Skip, another thought for some additional perspective
You said, "If I think of all the growth I could have had in the stock market rather than the losses in gold and gold stocks, it is almost sickening and totally depressing."
I don't believe a particularly infamous trader who was actively IN the markets had a single Gold investment. His name was Mark Barton, he lost half a million, and killed a dozen people. Just because you see the DOW index climb is no guarantee that your particular choice of stocks will be gaining too (unless you bought into an index fund.) I can't even begin to recall the vast number of times that I've heard the financial reporters announce decliners outnumbering advancing issues despite a higher DOW on the day.
Further, try to recall your original rationale for choosing your current suite of Judy's. (As in "Punch and Judy" shows...taking a beating. A term-use I coined to lighten my own dismay over a mistaken purchase of a mining stock years ago that went south and now vies with postage stamps in value.) Chances are that whatever compelled you to make those decisions would constantly act to sway you to do so again, and are probably more compelling now than they were then. If you couldn't resist Gold or Gold stock purchases before, could you resist them now? Hopefully, as time has passed, you've come to see a distinction between owning a world class asset (Gold) versus stock in companies that try to earn a paper profit by mining for this world class asset. Don't get me wrong...I love mines (I have a professional attachment to them), but I'll never again make the mistake of investing in a paper generator when there is real money (Gold) to be claimed. As a productive person, I invest in myself and make (earn) my paper directly. Then I cash it in for Gold, month after month. It's a One Way Street for an enjoyable life. I never did enjoy fretting over whether IBM or AT&T would be the better performer. I AM the performer, and all that I ask of my money is that it really be money--payment-in-full.
Unlike some people that are fully invested in stocks, with Gold you actually have real savings. You are a sovereign individual, immune to the fiscal mismanagement of your nation's leaders. Also, think of the sector of the population that lives paycheck to paycheck, unable to dabble in the stock market, and unable to save either paper or Gold. Is their life for naught because they aren't "in" the stock market? Wouldn't they be thrilled to have an all-Gold savings? Travel to some other countries and your perspective will change in a hurry. Adopt the larger view, my friend.
Gold. Don't work for anything less. ---Aristotle
From my standpoint, most of the gold paper market will revert to forced cash settlement at the last trade! That's for long investors only because it's the inability of the shorts to deliver that will precipitate this. They will be taken out and shot because the CBs will be clearing the deals. If it's dropped to $100 and established trading markets halted worldwide because of sudden delivery demands, everyone will settle at $100 cash and walk away! People that are waiting to sell their hedged gold into their counterparties (mines included ABX?? to the BBs) would have to sell their gold at the new settlement price. Remember, when big international bankers are in trouble on this grand of a scale, the rules are changed into the banks favor. Always has been, always will be.
Understand, that the BIS clears all trade in CB gold. If that gold is tied up in private Bullion Bank deals, it will come under their rule. The BIS tells the Government what needs to be done and the Governments tell the mines. In perspective, this will be happening in every industry, worldwide, not just gold. Everyone will lose some skin…
---CoBra(too) (8/24/99; 9:08:34MDT - Msg ID:11936)
Endgame among not so clearcut adversaries?!?---
Good point. I have one view for what you write:
-----So why hold on to bad debt paper scrip if the endgame between $/IMF and Euro/Bis was so clear-cut policy as FOA feels, all along.---------
There is no possible way that the CBs could ever sell or unload all of those dollars. Presently they are held in the form of US treasury debt. It's owned by the CBs not their public / private interest. So, the CBs would not be looking to "spend" these reserves in the usual sense. They obtained these reserves as their local economy generated excess sales to the US (for them a trade surplus) and their private citizens wanted to hold local currency assets, not dollars. The Cbs printed Marks (example) and traded with their citizens for these excess dollars. Then they traded these dollars for US debt so as to earn interest.
Now, exactly what good are these debt holdings as long as their country continues to carry a trade dollar surplus? Not much, if the locals don't want to hold dollar assets. In the end, if the CBs were to sell these treasury holdings it would crater the US debt markets long before any value was received. And, to add further, that value could only come from using the dollars to buy something. Now what does a Cb use its reserves to buy, cars, TVs, other currencies??
No, the only avenue to balance currency value is through the age old asset of gold. Indeed, if you already hold enough gold, one just uses the dollars to bid for gold until the dollars become worthless (price of gold spikes to the sky). Usually only the intention to bid is enough?
Yes, No? FOA
---- Al Fulchino (8/24/99; 9:12:26MDT - Msg ID:11939)----
------what I was grasping for is the connection with this analogy to the gold industry is how the industry wasn't wary like OPEC with their own product. This manipulation could have been prevented had they OPEC'ed themselves. Do you agree?------
Al, it's true that the mining industry could have done a better job of managing their product. But, would they have been allowed to? Just prior to OPEC and the 1971 gold window close, all the major nations were still trying to work out a common ground with respect to gold. The price was so low that few mines were making anything more than subsistence. The governments were finding that they could no longer use gold as money because they needed to cheat on the currency. The US wanted the price of gold to run up so as to spike the oil price and obtain more local production. Something they couldn't do competing against the nickel a barrel ME producers. As gold rose, the mines didn't need any production agreements so no one sought one. Throughout the 80s everyone was expecting gold to regain its trend, so again , no need for collusion. It's only been in the 90s, especially during and right after the gulf war that the industry began to smell a rat. Hell, even two years ago, Another's Thoughts about manipulation were dismissed as crazy. Now, the industry sees they are in a battle for their lives as their asset is at the center of a realignment of world currencies.
Truly, if gold is repriced high enough, as a competing currency, the falloff in jewelry demand will negate the need for any additional supply. At extreme prices, the CBs could supply the market for years to come without impairing their asset reserves. Production curbs on the mines could again restrict them to minimal profits even if gold was in the tens of thousands. A mess indeed.
Sorry to all, I quit.
Sorry to all, FOA, Aristotle, Aragorn, ET, Steve H., Gandalf, Peter A., The Scot, canamami. I'm done.
We talk of an upward swing that I don't think is going to happen. We endless surmise on the possibilities, Sachs is 'working' 15 mt. and BOE is selling 25 mt. in 4 weeks, yadda,yadda. The USA gas 7,500 mt., BOE still has 680 mt., the IMF, the Swiss, many other CB's. The 'overhang' is monstrous compared to this 15mt. and 25mt here and there. Who is really going to control gold?? I don't understand the 'paper' end of it but I will take your word for it that it will blow up, and then 'physical' will rule. So then, you controls the 'physical', the holders with thousands of onzes or the one with thousands of tons? Did the 59 page article not allude to the fact that CB's WILL sell down the price of physical. Gold has been dropping for 20 years, if I am a country in need of quality, value-oriented reserves, given that it is 1999, do I want gold or do I want the currency of choice. Fifty years ago, gold was a 'reserve currency', today it is not. With today's global infrastructure I can 'switch' my reserves very quickly. Investors are 'switching' investments into Japanese equities, and tomorrow it might be England or Germany. Tell me why a federal bank needs to hold gold? Why does a central bank hold gold? For a few years now CB's WANTED USD as reserves because it represented stability and wealth.
And it is as plain as day that CB's want out.
In regards to the message above, I have read it 10 times and two phrases stand out, "all that I ask of my money is that it really be money--payment-in-full." I'm investing in gold and I'm not getting paid in full, I feel brutally sorry for for the folks who have been investing in golds for years and years. I wish gold a turnaround for their sake. Secondly," Adopt the larger view, my friend" confuses me. I think the CB 'overhang' is the larger view.
Again, I apologize to all, I am throwing in the towel, I wish all gold investors multitudes of luck and fortunes, I won't be there; perhaps I am scared, short of time, impatient, 'fiat' hungry, I don't know. But again best of luck, sincerely.
You will be missed. We all feel your pain. I would offer that the pain is most always the greatest before change, but we all live our own lives to our own rythm.
Good luck. Keep in touch.
I'll be back later.
----Cavan Man (08/24/99; 20:06:51MDT - Msg ID:11996)
I see there are a couple of posts here this evening that are not pro-gold and perhaps for good reason(s). Do you have a repartee?-----
Yes, it is sad when someone gets hit without a clear knowledge of why. Unfortunately there will be more of this because investors are unprepared for the times ahead. We could see gold go through tremendous swings as this is unwound.
Long term booms (20 years +??) always die with major losses inflicted on the most leveraged positions. Add to this a once in a century destruction in the most popular currency, and we produce an economic earthquake the likes of which no one has ever seen.
Most investors retain their life savings in a fully invested mode and would not get off these train tracks if they saw two engines coming. They will stay there because it's impossible for them to believe they occupy the wrong position! Who can lay blame or call them fools? These typical western savers have been educated to believe in a money system that serves no purpose, except a medium of exchange. Yet, they perceive that all of their assets are correctly valued by this system.
The gold market suffers the same fate. The same ideals that hold us in bank accounts, using credits to indicate what is on deposit, also drive us to invest in gold assets that must be sold to realize a profit. Modern gold bugs travel from bank accounts into paper gold and back into the same bank accounts. All the while pointing out the weakness of the system, yet needing the same system to keep score. Without the modern paper gold market, gold bugs, as we know them are lost to place a value on their holdings. That is why they gravitate into familiar gold holdings. Ones that still retain some connection to their paper currency. Mine stocks (and various option / futures) are a likely choice as they sit squarely upon the financial system we know most.
Great swings in asset preference always bring monumental profits. However, these profits will be shared by only a very few. And those few will have to endure gut wrenching blows to their assets when this storm hits. Gold will by no means be safe and it will not be secure. But in comparison to every other form of wealth, it will be the most well-known and sought after asset on the planet.
I think, many will be weeded out from this market as events unfold. Most of them never expected the fluctuations occurring now and they would be horrified at what may come. However, what they retreat into will be completely cleaned out. Completely! As for those that are sharp enough to buy when the proverbial blood is running in the streets? Time and events will prove that they were not as smart or quick as they thought.
Having said that, paper gold may rally, gold stocks could storm up and physical could just sit there. But that won't be the end of it and such an action would simply draw more into the fire. I remain steadfast to what Another once said:
"when a thousand hungry lions fight over one scrap of food small dogs should hide with what's in their belly"
This dog is well fed with gold and hidden deep in its history. Thanks FOA
The Post With No Name
Last night, somebody calling himself Skip posted a sad commentary of his experience in the gold market and issued a plaintiff call for reassurance from this Forum. Tonight, Canuck, in an act hardly anybody could fault him for, suddenly jumped up and made a run for the exits. The last time we were at these price levels (and after years of pie-in-the-sky forecasts) ANOTHER and FOA suddenly reversed themselves and announced that the POG was very likely to collapse. And now, just to be sure we are all scared as hell, Farfel shows up tonight to remind us that the world economy is about to slip down a blackhole, taking gold with it, of course. (Needless to say, I think such pronouncements are as looney as they are facile.) But there must be something about $250/oz. that brings out the fear in even gold's most devoted enthusiasts.
Forgive me for being presumptuous, but I think times like these are apt to be hardest on those who have the least confidence in their own research. I doubt anybody here has a higher proportion of his own assets in gold or gold-related investments than I do. Yet, I have absolute confidence in my position. There is a worldwide reinflation taking place. It is quantifiable here in the U.S. It is, in fact, quantifiable in many countries around the globe. It is the very reason, in fact, the FOMC raised rates today (despite having committed three coupon passes in the last month). One doesn't need to be a PhD. in economics to understand the meaning of these things. But, because it takes time for the masses to come around, one needs to have patience.
I think it was Ben Franklin who advised never putting all of one's eggs in the same basket. But somebody else must have said, if you ever want to get rich, putting most of your eggs in one basket is just about what you're going to have to do. The trick is to watch the basket. I don't know who might have said that, but, whoever he was, he convinced me. Apparently, he also convinced Bill Gates, Aristotle Onassis, Michael Dell, J. Paul Getty, etc., etc. etc... None of those guys ever gave a darn about classic portfolio theory, and, frankly, neither do I.
I have always been a "plunger". When I find the right thing to do, I just can't bring myself to do much of anything else. But, over the years, my efforts have paid off handsomely. That's why, as much empathy as I feel for someone like Skip, I also feel respect. No, I don't know what he owns or when he bought it. I also don't know how much homework he did before he risked his money. But I know this: Skip had a dream once that I can relate to. He wanted to be rich and he had the courage it takes to get there. Now, that's my kind of guy.
Skip, if you are still out there, remember these simple words: If at first you don't succeed, try, try again. You may be having a low moment, buddy, but the future belongs to people like you. You will learn from this and go on to do great things with your investments. Believe me.
And as for you, Canuck, get a good night's sleep, my friend. Tomorrow is another day!
(08/24/99; 21:34:29MDT - Msg ID:12005)
I'm still out here, and have frequently lurked on this forum although I rarely post.
True, gold approaching the low $250 range struck fear in my heart, as I've been bleeding financially all the way from the high $300 range down to the present pits of despair. Nonetheless, my concern is how much lower gold will go before it finally turns, and whether or not I can hang onto what stocks and coins I currently own before the POG returns to at least normal levels. I'm building a cash account through working two jobs and very long hours in case such a slush fund is needed to get me through the next few months without having to liquidate at great loss.
I'm sorry for Canuck that he threw in the towel. Also, I do appreciate your praise of my courage... and I once heard that the TRUE test of courage is having the ability to do the right thing during a time of fear. Right now, I believe that keeping my gold and gold stocks IS THE RIGHT THING TO DO.
My thanks to all who have responded to my posting from last night.
---------The Stranger (08/24/99; 21:34:29MDT - Msg ID:12005)
The Post With No Name
Last night, somebody calling himself Skip posted a sad commentary of his experience in the gold market and issued a plaintiff call for reassurance from this Forum. Tonight, Canuck, in an act hardly anybody could fault him for, suddenly jumped up and made a run for the exits. The last time we were at these price levels (and after years of pie-in-the-sky forecasts) ANOTHER and FOA suddenly reversed themselves and announced that the POG was very likely to collapse. And now, just to be sure we are all scared as hell, Farfel shows up tonight to remind us that the world economy is about to slip down a black hole, taking gold with it, of course. (Needless to say, I think such pronouncements are as looney as they are facile.) -------------
(to see the rest, read his post)
What do we conclude from the above post? Stranger, I appreciate your presenting your thoughts and perceptions. They validate my own perceptions of how westerners feel about gold. I also used to read Another's Thoughts as an observer when they were presented by someone else. The one common thread in all of them was his council to buy only gold, physical gold. Yet, it never failed to impress me that every time those considerations were given, all discussion immediately turned to buying gold options, futures and mine stocks. It was like an automatic response that was ingrained in investor psychology from years of indoctrination. Your conclusions fit the same pattern.
Why is it that professional brokers and investment councilors in this country lead the public to this end? Is it because they have no depth of history to draw from or is it that they have "no fear" of losing others' money? Mention that gold may rise and could become a bedrock for your life savings and not one paper pusher tells his clients to buy real gold. Yet, we let the facts speak for themselves. The gold price having fallen from manipulation has literally destroyed a large percentage of portfolios invested primarily in gold stocks. Some of these mine stocks have gone to zero and are in bankruptcy, never to return.
All the way down Another (and later myself from association) said to buy gold for the long haul because in the long term it may go very high. Then in typical like form, traders said buy gold stocks for the long term also. Don't listen to Another, it will never go that high and with these paper items you will get rich if it only goes up $100 bucks! Indeed, leverage ruled the day all the way down with little regard to the fact that the "little guy" could lose it all with no hope to run for the final payoff. Now, here at $250 gold, Another presents a case for the destruction of the pricing market mechanism and still says, buy gold for the long haul. A concept, I might add that fundamentally offers the most bullish case for physical gold, while posing a worst case scenario for mine stocks. Yet, intelligent thinkers and admitted white collar investment professionals, such as yourself, lay the blame of loses to mine stock investors at the doorstep of physical gold advocates.
The whole philosophical reasoning for buying physical gold was always to negate the possible total loses to ones assets from a breakdown of the world's modern derivatives pricing system. A system that spans our entire financial structure, not just gold. Even with this risk in mind, I submit that it is still the current system advocates that present a "pie in the sky" council to new, unseasoned savers. Just as you use Bill Gates and other "risk takers" to portray an "American Spirit" of "plunging in", it hides the hideous failure rate inherent such accomplishments. Had Skip not listened to the sirens song of great wealth, he would still have had a chance today to benefit from a centuries old investment, real gold. So consider this, the next time you drum the march for the average person's savings to the tune of "paint your wagon and come along". For myself and many others, long term playback and asset safety are more important to our family than the bragging rights of day traders.
Please continue. (frown) FOA
I didn't make the point to offend you. My intent was merely to share my confidence in the gold market at a time when people were obviously getting nervous.
As to your comments about white collar professionals and "westerners", I suppose you mean well. I would emphasize, however, that, out of respect for our host, I have specifically avoided discussing the merits of stocks vs. coins. I intend to keep it that way.
Finally, as to who is misleading whom, all of our (your's and mine) posts are a matter of record. I hope I need say no more.
Five Lessons I Have Learned Late in Life as a FORMER Goldbug
1) With the exception of Barrick Gold, ALL gold mining companies are run today by maleducated, sub-moronic, good ol'boys from Hicksville. After all, just take a look at all the formerly unhedged gold producers who finally decided to hedge today some $200 an ounce below Barrick's hedges. True idiots! Talk about shooting yourself in the golden foot! Oh, well, what the hell, might as well tank the gold price another 100 bucks or so.
2) Unlike other commodity producers (like OPEC), there is ZERO co-operation amongst gold producers... and so they are doomed to die their own individual respective, deaths (except for Barrick Gold).
These guys couldn't get together to throw a birthday party, let alone figure out how to coordinate a de facto cartel designed to curtail gold production and enhance the gold price...
3) All Gold mining company managements operate on automatic pilot, following a pre-determined path to oblivion (excepting Barrick Gold)…
4) There is NO notable difference between South African golds or North American golds or Antarctica golds, for that matter. They all share one thing in common: a plunging gold price below 200 will ultimately bankrupt the entire lot of them (except for Barrick Gold)…
5) There are NO gurus in the gold market (except Peter Munk). It is impossible for any single technician, chartist, fundamental analyst, astrologer, etc. to predict the arbitrary path of gold in the short-term with any scintilla of success, although it is a usually a pretty safe bet to say "It's going down!"
Gold's arbitrary behavior stems from its oligopolistic control by the Central Banks. Upon any given day, there is at least a 50% chance that some Central Bank will pre-announce its decision to dump its entire gold reserves in order to MINIMIZE its profits on the sale.
------The Stranger (8/25/99; 13:46:23MDT - Msg ID:12068)
Sorry, FOA I didn't make the point to offend you. My intent was merely to share my confidence in the gold market at a time when people were obviously getting nervous.------
no need to be sorry and your post did not offend me. I felt the offense was directed towards intelligent physical gold advocates. When you publicly interpret my posts as a reversal of thinking, you are wrong and send a false signal. To say that I expect the (physical) price of gold to tumble, is a misleading statement that subordinates my reasoning by talking out of context.
I understand how our gold market presently trades as a paper derivative and in physical form. Every day, new evidence comes out to confirm this concept. TownC offered the excellent work of John Hathaway to further explain this evolution. When Another pointed out that the derivative side could fail and be discounted in price from the effects of that failure, you obviously did not grasp it. Others did. If you had then you would have noted that I expect the physical gold price in the dealer community to explode as its supply falls. A process of rejecting the current price setting methods.
--------As to your comments about white collar professionals and "westerners", I suppose you mean well. I would emphasize, however, that, out of respect for our host, I have specifically avoided discussing the merits of stocks vs. coins. I intend to keep it that way.-----
Again, I present a balanced observation that helps to account for the much larger percentage losses to investors that have followed the "established paper rout". Nervous people have a more pressing need to learn why their strategy has failed. Without balanced input, we often repeat our mistakes. I learn from my mistakes also.
As for merits of stocks vs. coins? There is no valid comparison. Apples and oranges have never had the same taste. The percentage of loss for one or the other is but a function of the risk one takes when placing savings into that vehicle. Coins will never be as risky as stocks of any kind. Nor will gold bullion in one's hand. The very simple laws of nature dictate that gold cannot fall to zero as stocks have and often do.
-------Finally, as to who is misleading whom, all of our (your's and mine) posts are a matter of record. I hope I need say no more. ------
I believe we come to this forum to offer our Thoughts for everyone to view and discuss. No one is right, wrong or misleading as only events can and do prove all things. To date, cash invested in gold bullion has lost value much less than if it was placed in mine stocks. All of us can grasp that fact. Indeed, no more need be said.
ha ha ha
did anyone catch the unintended double entendre in FOAs latest? --- "... the much larger percentage losses to investors that have followed the "established paper rout"
i.e. rout, or route?
Come what may?
I do thank everyone that have voiced support for the continued sharing of my insights. Anyone of you that have been alive for a while must also understand the frustration of explaining a difficult topic. Truly, I (like all of you) am not a machine and the process of walking a fine line between two worlds of thought is a major energy drain. This unique forum gives all readers an opportunity to expand their viewpoints by observing the "real world of money" through different eyes. As such, I deplore any direction that takes us into the ego world of "traders calling the market". It is an accepted fact that many aspire to make that role their life's work as there are plenty of other net sites and forums to confirm it. As popular as this may be, it offers little in the way of gaining insights to the perspectives that drive world investments. As a group, the trading society often loses the concept that feelings and viewpoints are the driving forces that shape those little chart patterns so many follow. Because many give up in trying to decipher the meaning of these forces they degrade themselves to a level of "follow the leader investing". True, it works sometimes, but one's spirit of understanding develops little from the process. As a result, when a major change does impact world thought, people are lost to grasp why the trend reversed, and more importantly, cannot change their strategy with it. Perhaps, something we have seen in the gold market these last many years? So, "let the world have its way, come what may", I will try to present my insights as seen through others. I hope many will join us on this journey.
I completely understand (as do you) that many people become upset when someone attacks the validity and purpose of their favourite investment strategy. Indeed, if most of your savings are installed in said discussed vehicle, the urge to find a flaw in the reasoning becomes overwhelming. Often one does not have a factual explanation, but we do have the ability to "think out loud" in the form of a rambling discussion. Perhaps, this is how many view my posts? I offer that this form of "rebuttal" is preferable to just stating "he/she is faceless and doesn't have the facts"??? If I do this, I apologize and will try to change. I think Mr. "PH in LA" had it very right when he observed how some internet writers, "come wading in with both barrels blazing" as they present their thoughts! I add that this could be an offshoot of our modern society. Hope we can get past this, soon! Thanks PH.
Most investors that have assets in this broad arena called the gold market, have also come to appreciate just how large an "impact area" gold has had. Not only throughout history, but right up to today. The ongoing battle over the "gold concept" has won and lost fortunes, built and destroyed empires and in general has warped the human senses about what money and savings should be. This conflict continues today, even onto the pages of this forum. As the stress builds on our world financial system, the lines of thought concerning gold are becoming more clear. Let's examine some of what I perceive to be some of those lines.
Of course there are those that do not even consider gold as a viable contender on the world money / investment scene. The have lately been a major vocal class that have prospered in the realm of the current financial system. Myself nor anyone else should blame them, as they follow their reality in a world that presently benefits their ideals. I think few of them have given themselves a full study of how world currencies have come and gone throughout the years. If they had, the fact that they "have lived in a period of little change" should hold for them that things can reverse without notice. History is full of recounts that describe the rise and fall of entire social groups at the hands of a sudden rethinking of what has economic value and what doesn't. In any event, ingrain monetary ideals usually do not change during one's lifetime, so the past lessons may be worthless for some. As a result, a large mass of society must always return a great portion of their wealth into the hands of some "historical event".
Also included in the "gold perspective" are the true "physical gold advocates". They have seen through history how the destruction of various "money systems" always leads to the destruction of the "economic system" built upon the fiat concept. The efficient money system present in those fiat times, help to create the need (and therefore increase the value) for many real assets. The ensuing breakdown of the money always destroys the "efficiency" factor that society used to up-value the assets. Usually, any enterprise built upon the current functioning money contract system is impacted as it cannot change quickly enough to the evolving money system. It's hard to grasp that even real assets like houses, land, equipment, vital necessities and even food, can lose value as their trading pipeline is disrupted because no medium exists to fairly create "market value"! We have seen, time and time again, that real gold can gain value against "everything" during true money destruction. During these times, the human spirit need for using a familiar process is all consuming. The exchange of goods and services continues, with or without a valid medium of exchange to express it. Still, values become so conflicted and lost during this process that the marketplace reaches out for the most tradable of things that can act as a medium. In that need to replace "efficiency", lost with the medium value of paper money, it upvalues any store of value thing as the new "medium of exchange". Yes, within a large marketplace, the human need for trade gives any "efficiently" attribute more valuable than food.
This is why I smile when someone says, "how will anyone be able to know if the gold is real and what will they value it as"? I say, that the marketplace dynamic will ram this education home very quickly. The above question is asked by someone that accepts and uses paper dollars every day. Yet, these dollars are paper (how do you know they are real? as often they are counterfeit) and hold value only because the marketplace is using them. During a money breakdown, you will observe trading in the marketplace and quickly come to accept anything, ANYTHING, that even could be gold. Believe it!
Finally, we also have the "in-between gold advocates" in the "gold perspective". Usually, their view of the market is such that it is an industry built within the confines of the present monetary system. They do not hold an extreme view about paper money, and believe that today is different and our currency will only fail "somewhat"! So far, in concept they have been right for many years. Yet, in investment practice, their "gold perspective strategy" is failing. I say this in contrast, in that by holding physical gold, the "physical in your hand money insurance factor" is never lost, even as the quoted gold price falls. Especially, in today's new market dynamics we require the question:
"does the paper security in your hand give you an absolute claim to physical gold, or does it more so give you a "right" to receive dollars that match the increased value of gold?"
This "in between gold perspective" strategy, calls for placing money in various forms of paper gold. All based on the convenient factor of holding paper that gains in price as the demand for gold increases during a controlled slow burn of the world money systems. These paper investments are expected to all gain because their value is "derived" from the quoted price of gold on established major exchanged, London, Comex, etc. Whether you hold "gold certificates" , mining stocks, gold options or gold loans, an observer can readily correlate their increase and decrease in value to the world quoted gold price. They are derivatives by nature, because their very worth requires the observation of another price setting market.
It is here, in this "in-between market" that I believe most gold investors will first see the breakdown in the world money system. Yet, for them, this breakdown will bring the loss of performance to their paper holdings, because, from necessity, our financial structure cannot allow the established quoted price of gold to rise. To honour the present contracts, would require the supply of millions upon millions of ounces of gold that simply does not exist. In as much as these players expect a huge payoff on their holdings as the gold market must run skyward to balance delivery, the opposite action will most likely be delivered. Because all of their holdings are valued upon a marketplace that establishes a price with even more derivative trading, the expected failure of those contracts will crush the quoted price. Just as most men will not hang themselves with a rope, the shorts that actually create the quoted price of gold today, will not trade it higher. In fact, I believe they are trying to gather physical gold (taking delivery everywhere) while it still trades in relation to the low derivatives price. Unless you are a major entity in world affairs, holding something the world must have, I doubt any form of gold paper securities will escape the burn. Indeed, over time, in a up and down fashion, most of the paper gold holdings will be destroyed first, then the physical gold price will zoom in a matter of days if not hours!
How will mining shares respond to this "POSSIBLE" event?
More (sometime?) later. FOA
I included portions of Farfel's comment above because I thought it was funny. In fact, gold mining stocks were sucking so horribly on 8/25/99 that I thought it would be interesting to take a look at how some of them are doing today after having almost 14 years to recover alongside a gold price that has risen 550%. Barrick (ABX) appears to be the worst of the bunch (at least of the ones that I looked up). It is one of the largest gold mining companies in the world, yet its share price is the same today as it was at gold's lowest bottom in 34 years. Barrick was $18.52 on the day that Farfel wrote that comment, and today it's $18.90. Why's that, you ask? Well, for one thing, in 2009 Barrick diluted its shares in order to essentially spend $5B of its shareholders' money to buy back those hedges that Farfel was raving about. ;D