Gold: A (not so) protracted climbdown – Pace yourself wisely

Vreneli finally !

This is a strange bullride, you know. It’s like a conventional bullride in that the beast wants you to get off its back – but it does not limit itself to twisting and bucking. On the contrary: Right now it seems to be done with bucking. It is using other tactics to get you dismounted: by stalling, it wants to lull you and make you become disinterested. It creates a notion of futility by climbing down over a period of several months.

Like the Borgs used to say: “Resistance is futile !”   :lol:   But as you know, you will get assimilated in the blink of an eye, as soon as you give up.

To be serious: It will not be easy like saying:”Follow in the footsteps of giants.” One will need a lot of … let’s say: stubbornness to get through this thing. A lot of frustration tolerance.

But there are two thoughts to cling to. First: TINA, there is no alternative, even when a lot of know nothings suggest, there is. In order to preserve yours in the long run, you’ll have to forfeit short term opportunities, supposedly golden ones. You just have to to decline a lot of invitations to speculation. ;-)

And two: Low (no) interest rates are a good thing, at least in this respect. They decrease (nullify) the opportunity costs of holding physical. It will nevertheless be a hard thing to stomach the sight of “vanishing savings”, even if you know the plot of this play. The thing is, you can never be sure about it. And not only has the house infinitely more money than you, but also a lot more time.

Or so it seems. This might not be true. Yes – unlike you, they might engage in super longterm, sort of dynastic thinking, but this does not mean that they have all the time in the world. There are other considerations, you are not aware of. Other considerations that might prompt da house to act sooner rather than later.

So when I assumed on April, 30, that it would be too early to get engaged, I think that I was right in hindsight.  Then we hovered around 1.200 USD, a place where we have been since the end of June 2013.  You can regard the whole year of 2014 as an exercise in tying the POG to 1200 USD.

But in the third week of June 2015 something changed significantly. First, the POG came down to 1.180 and then started to descent  to 1160, very, very slowly. Then over the last week, the climbdown gathered steam, with 1.134 USD going into the weekend. And today, on monday, markets opened with a discount of 40 USD and this was a huge move (of course there was an immediate retracement in their downside parody of a bull market).

I looks as if somebody had a bout of impatience or as if this somebody is running out of time.

If you are aware, that gold prices are derivative prices you know, that the POG can be lead to wherever it is supposed to go – provided there are entities, which guarantee the flow of physical (think for example: european CBs). The game will have ended only after this flow has ground to a halt. Then everybody will see: the POG is not the price for an ounce of this shiny metal, not at all.

I do not know, when this point will be reached. But I am quite confident, that it will not be 200 years into the future. 

Foto: Ron the Con

Edit, 07-20, 3.00 pm: Sigh,  no I don’t suggest buying small coins in order to buy a loaf of bread and some bottles of water in the future. And, yes, I know, that this would be a huge overpayment even in an emergency.

I don’t think of gold as a crash currency. I think, it will be the building block of a new international currency system and this role is probably already baked in the cake. On the level of CBs, realistically priced Au can substitute treasuries and other USD denominated bonds.And on an individual level it can act as a savings account, one, that can keep pace with “inflation” in consumer prices (as well as in other assets).

And, yes, there is a possibility, that the state(s) will go after the property of their subjects, as they have done since time immemorial (especially european welfare states amd their apparatchiks seem to be prone to this kind of confiscation). Unfortunately gold does not have to be remonetized to awaken this kind of desire. It would be veryshortsighted, because it would chase away capital in its purest form - but hey, has this ever stopped a politician from doing the wrong thing ?

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