AEIdeas

The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (3 comments)

  1. Darda has no clue about what he is talking about. What we have seen with gold is an orchastrated dump in the futures markets that have set off margin calls and triggered automatic selling by the technicals. When you dump 400-500 tons in one day, mostly during the low volume periods that will happen. The trouble is that the physical market is not going down in the same way. As the paper shorting goes on and prices fall buyers of real bullion step up and pick up supplies. There are probably 3,000 tons that can be used to drive down the price of gold, all of it from failing countries looking to stave off a default. But all of that will be bought by countries that hold surplus dollars and treasuries and are looking for a way to increase their gold reserves. When the extreme oversold conditions run their course the shorts will have to come up with real bullion to sell. But if you look at the COMEX and other exchange warehouses they don’t have the metal to do so.

    My advice Jimmy is to ignore the failed Keynesians and Monetarists and to get a hold of some physical bullion while it is being subsidized.

  2. yeah.. but it sounds like people are converting their gold to something else… what are they trading their gold for?

    1. Paper gold sold in the futures market is not real gold Larry. The central banks will continue to keep printing and try to devalue the currencies. (See Japan for a great example of the new strategy.) In the short run it is possible to get the price of gold to go down by another 20-30% or so if even more bullion is dumped by troubled countries and there is your usual naked shorting going on. But the big problem is the actual supply that would have to be brought to the market if the paper longs take delivery. I think that there will be a default on the COMEX or LME some time in the next year. When that happens the paper gold longs will get whatever price the exchanges pick and there will no longer be a futures market is silver and gold. If you have the stones for it look for an entry position into the gold markets and ride the second leg of this secular bull market to the top. While much more violent, this decline is not all that different than the one in the 1970s. If you know what happened after that decline was over you will figure out what to do next.

Comments are closed.

Sort By:

Refine Content:

Scholar

Additional Keywords:

Refine Results

or to save searches.

Open
Refine Content