Posts Tagged ‘gold’

A barbarous relic no more (gold)

November 6, 2011

Like little children returning to the safety of home in tears when they had been warned not to stray:

The Frankfurter Allgemeine Sonntagszeitung (FAS) reported that Bundesbank reserves — including foreign currency and gold — would be used to increase Germany’s contribution to the crisis fund, the European Financial Stability Facility (EFSF) by more than 15 billion euros ($20 billion).

Just to be clear. The fund in question is that very pool of dosh that European authorities wish to leverage to 1 Trillion despite being unable to even raise 3 Billion last week in direct bond sales. And, by the way, this is exactly the strategy that lead to the fist derivative crisis in 2007 amongst other things; crisis that is still simmering because instead of deconstructing the derivative pyramid, the authorities actually expanded it;

Be that as it may. So what do you do when your shiny newfangled currency no longer commands a shred of confidence or respect? Why, you return to the only form of true money that has existed for millennia. That very money the authorities have discouraged the public from holding in an attempt at propping up a monetary system that is predatory… but that, thankfully, is limited mathematically…

Trouble is, that when monetary systems fail, war is never too distant in time…

Till today I believed that as democratic tools available to society in order to bring about desirable change were being progressively withdrawn, simply by hindering the expansion of credit markets the people could force  radical political change. As of today, that strategy may no longer suffice. Today, the only peaceful and legal strategy option left for society in order to make its voice heard is to quit our respective countries in the West in favor of alternative countries not directly under the control of the West… and there are precious few.

The fact that public officials should now openly be seeking the acquisition of gold heralds a new chapter for the economy thus for politics, thus for society.

For the rest of us, I hope you are flexible because the best advise I can give comes in the form of that immortal suggestion to: “place your head between your legs and….”





Crazy Dutch – (gold)

October 10, 2011

I am traveling and only have limited internet access… on a foreıgn keyboard…

Some Dutch fınally wonderıng where theır country’s gold might be…

‘ ‘


You have to laugh at the Three Stooges type routine

Gold investments

September 26, 2011

Gold and gold mining shares have taken a shellacking during the last three days of trading. Talk is of a “rout” and the bursting of a bubble.

I will premise that the nominal value of gold and silver can indeed go lower from here. When investing in the markets, volatility is to be expected. Investments in gold and silver necessarily provide much greater volatility still. In a DBFM context, investing in gold is the equivalent of betting against sovereigns. Volatility should be the order of the day especially when you consider that most Western sovereigns and their monetary authorities are currently fighting for survival. Convulsions will become increasingly frequent.

Let me premise too that there are necessarily differences in when someone might have entered the bullion market. For people that bought in last week, this correction is indeed disheartening. For those that got into the bullion market one, three or ten years ago, this recent loss is all in a day’s work. Particularly when compared to the losses of the general market as represented by the S&P over the same period of time

Till the charts below tell me otherwise, gold bullion and the shares of gold miners are still a better investment than the general market. In particular, some miners are now beginning to pay dividends so that as this practice becomes more generalized, there will no longer be any excuse to prefer shares of “industrials” over those of miners.



Not to mention the way gold has safeguarded purchasing power in all major global currencies over the past ten years:

Page 4 – charts 430 to 450 –

Naturally, none of this constitutes investment advise.

Warren Buffet and gold

May 25, 2011

I am unable to post charts so a link will have to do for now.

As so often in the past ten years, Mr. Buffet has once again blurted out to all that would listen that gold is neither a sensible investment nor, indeed, is it something that should form part of a balanced investment strategy.

As I have already pointed out in this blog over the years, Mr. Buffet is the archetype of the inflationary investor. I have gone out on a limb in these pages and have submitted that if indeed we are to enter another inflationary era then you could do worse than invest in Mr. Buffet’s Berkshire and Mr. Buffet should obviously continue to be anointed as the most legendary investor ever…

But when viewed through the proper lens, Mr. Buffets’ Berkshire investment vehicle is teetering on the precipice…$GOLD&p=M&b=4&g=0&id=p56448948924&a=235108746

A bon entendeur…

And for the most recent “WTF!” moment…

February 12, 2011

This is right up there with the strange goings on in Sweden.

The single most popular internet search that leads to my blog is “most civilized country in the world”. This is due to a post I put online some two years ago chiding Sweden for betraying its status as most civilized country in the world when it decided to offer negative interest rates on saving accounts.

For a country of till then high moral standing, that was a decision I found to be out of character. Sweden eventually went on to do other peculiar things as, indeed, did Denmark when it was implicated in a carbon trading credit scandal of rather large proportions and whose instigator eventually went on to become EU Climate Commissioner. Nice work if you can get it.

One wonders what is happening with those beacons of morality and fairness that northern countries are usually known for.

And so it is that today it is Holland’s turn to act out of character. To be sure, Holland has already been acting strange in the recent past as attested by the attempt by two politicians to pass legislation that would criminalize the expression of comments that are deemed to lead to withdrawal of funds from a bank (which is exactly what I am suggesting in order to get out of this crisis and bring about a modicum of democracy again).

So now, for the most recent WTF moment,  Holland is at it again as the Dutch central bank orders a tiny pension fund to sell its gold holdings.

NB: On May 10th, 2011 I have updated the link to the press article. The original link I provided is no longer active. This is the new link:

Excerpt emphasis added:

The Vereenigde Glasfabrieken pension fund said Thursday it wants to keep the gold but a Rotterdam court sided with the bank in a ruling Tuesday.”

If you understand the implications of any of the above, you have to wonder what is going on with these countries that till recently were unmatched examples of tolerance, social justice, personal freedom and morality.

More specifically, in a presumed open and capitalist economy, economic actors are ostensibly free to operate as they see fit provided they operate within the bounds of the law. Moreover, in a debt based fiat monetary system where the authorities are hell bent on conveying the idea that gold is a barbarous relic, buying, holding or selling gold is not an activity that should be subject to state approval and, certainly, is not an activity that represents a particular threat to anyone thus should not be subjected to legislation.

If the central bank or the Rotterdam court feel that gold represents a particular investment risk I can only conclude that the head of the central bank and the judge of the court have taken a look at the performance of their own pension funds over the past ten years and threw an issy fit when they realized that this little pension fund did rather well for itself as compared to the average pension fund that has shunned gold.

But, seriously, at a time when the performance of traditional investment vehicles that are stocks or bonds has been disastrous for the past ten years, why condemn a little fund that has done well by blazing a trail in alternative investments? Indeed, innovation is the essence of capitalism. So, what’s going on? Why beat-up a small pension fund? And why is all this happening in these economically marginal countries? And why now? And, anyway; this pension fund’s investment in the precious metal is equivalent to only 10% of total money under management so that even if the price of gold went to zero, the fund would still survive and eventual losses do not even approximate what the fund has lost in bonds and stocks since the year 2000.

Here are some charts that tell the real story of what has happened to various investments during the past ten years.

The only thing I can think of is that small economies are being used as test ground by the monetary authorities like the ECB and the Fed to see what would happen if they were to push such aberrant legislation on larger countries.

These are likely tests for last ditch attempts to keep the current monetary system alive short of opting for the nuclear option of converting to a global currency.

In line with the spirit of this blog and as I have done so far, I am inclined to act in a manner that is contrary to what the authorities suggest and dictate.

A bon entendeur…

Gold, stock market, investing

September 10, 2010

Nothing confirmed yet however, the ratio charts of the general market compared to the action in the price of bullion (page 6 and 7 at link below) are exhibiting bottoming characteristics. Along with other charts at the same link, I am now inclined to bide my time on investments in gold and related mining companies.

Once again. Nothing confirmed so hedge your bets. Unless we get a convincing breakout above 1300 for the price of bullion, gold may be due for a rest.

I am acutely aware of the real possibility of sovereign bankruptcy in any number of countries. So I am not divesting my bullion holdings. I have nonetheless significantly curtailed my exposure to mining stocks and may cut more. Eventually, I’ll consider reducing my exposure to paper gold too.

The main stream media as investment timing tool (or contrary indicator)

September 1, 2010

You all know I am invested in gold and have advised friends and clients over the past eight years to invest in gold too if only a part of their savings.

You all know that for the first time in 8 years I became very cautious on gold investments about two weeks ago when Goldman Sachs produced a nine page piece of “research” exhorting all and sundry to invest in gold.

Today, Business Week front page leads with gold:

And then there is also this:

…… things that make you go “hmmmm”!!!

In the above chart you can see the gold bull market began around 2000. In the two smaller charts below the main chart, you can see the evolution of the S&P 500 and of the 30 year US Treasury Bond priced in gold bullion.

The main stream media coming out at this juncture to tell everyone that gold is a good investment is not at all timely. Not by a country mile.

I am, generally speaking, still bullish on gold for the long term; that would be for the next five to ten years. But I am also mindful that when a mainstream publication finally catches on to an investment trend and talks about it, it is usually time to start taking some profits and bide your time. The clincher, in my humble opinion, is of course the fact that Goldman Sachs should be waxing lyrical about investing in gold. The rationale here is that generally speaking, since banks have been allowed to run proprietary trading desks, trading can only be profitable if someone buys an investment from you at a higher price than what you paid for it. And since banks’ trading desks have been fabulously profitable for the past few years,  that tells me that in the short term (the short term could be some weeks and/or months) GS needs to unload a bunch of positions and they will be unloading them on the people their report was aimed at.

The moral of the story is this. I am still long bullion and some mining company shares. However, I have significantly cut back on mining company shares in the past ten days and have a good chunk of cash on hand.

If I am right, I think I will be doing what Goldman Sachs is planning on doing. That is, sell a bunch of positions at the high, run them down to lower levels and get back in.

Then again, I may just be outsmarting myself here… time will tell….

More charts here:

The ultimate inflation play

August 25, 2010

In the ongoing inflation/deflation debate as to which will imminently befall us, it appears to me that the ultimate inflation play would be Warren Buffet’s Berkshire Hataway stock. So that if you were convinced that either inflation or, God forbid, hyperinflation will shortly follow, this is the stock you should have owned till now and should certainly own for the foreseeable future.

For my part, I have been a proponent of the theory that we’ve reached the limit of this inflationary cycle. Granted, till recently my conviction was more based on gut feeling than anything else. But as I become more apt at creating charts, I gradually uncovered evidence that leads me to believe my gut feeling was right.

What I and many of my interlocutors found hard to explain was why, if we are in deflation, is the purchasing power of currencies not appreciating. It is only a few years ago that I began to think that in a world of floating exchange rates, financial value has become un-anchored from intrinsic value. If this was the case, then how could we measure intrinsic value and, if I am right, would not this measure also evidence the onset of deflation?

That’s when I began to plot the purchasing power of all major currencies against the purchasing power of gold bullion (charts 430 to 450 from page 3):

In the above charts, you will notice that all major global sovereign currencies have been losing purchasing power when compared to gold. In other words, gold is once again taking-on the role of currency.

If that is the case, then it can be argued that an increase in the purchasing power of gold to the detriment of sovereign currencies, is evidence of deflation in the wider economy.

Below you can see how Warren Buffet’s Berkshire Hathaway stock has performed when compared to the value of gold bullion:

Of course, we cannot know if this trend will continue one month, one year or ten more years. Nonetheless what is clearly and empirically visible is that when measured in the value of gold, we have been in deflation since about 2000.
By extension, the fact that most people having noticed an increase in their cost of living are fretting about inflation is not because prices have risen, but rather because sovereign currencies have lost value due to aberrant monetary and economic policies.
You can see more household name corporations stock prices compared to the value of gold on page 5 and 6 of the above charts.


August 13, 2010

You guys know how I’ve been a staunch advocate for investing at least part of your savings if not your wealth in gold for the past nine years right?

If you’ve listened to my ravings, I have to tell you that I have a few warning lights going on here. Nothing confirmed yet but we may well be reaching an intermediate top in the price of bullion. An intermediate top that may give way to a 50% decline from around $1250/$1300 for as long as two years maybe.

I as yet have no solid evidence. Just a feeling for the time being. I freely admit that I myself am conflicted. On one hand fundamental and sentiment analysis tells me this cannot be the end of this run in gold. On the other hand, recent moves by notable players and populist pundits make me uncomfortable.

If you follow the charts I maintain and if you decide to bail out of your investments, do not do so all at once. Monitor my charts and exit progressively as support levels are broken to the downside… if they should be broken to the down side.

Whither sovereign currencies?

August 7, 2010

August 18,2010 – Title change. Previous title: Are we comfortable holding our respective national currencies?

Since about 2000, the Swiss seem to prefer gold to the Swiss Franc

What about the Europeans?

And the Canadians?

How about the Australians?

Surely the ultra fiercely nationalistic Japanese prefer holding their own sovereign currency?

So, where does that leave us?

The charts above tell us that since about 2000, individuals and investors world wide, are gradually abandoning the sovereign currencies of developed industrialized countries for gold.

Historically, gold is the only true money. Gold has been around as a store of value and a medium of exchange for the entirety of human existence. Fiat currencies, i.e. the variety of currencies that all countries have gradually moved to since 1913, are only a medium of exchange. Gold is not only a medium of exchange but also a store of value.

The fact that economic actors prefer to hold gold rather than sovereign currencies is indicative of diminishing trust in the monetary system. But in a fiat monetary system, because fiat money is a political construct, diminishing trust in money is unequivocally and necessarily indicative of diminishing trust in government.

Naturally, there is a select number of officials that are aware of this and are aware of the ramifications of this trend. Hence the strenuous efforts to discredit the role of gold and discourage the use of it. To wit, other than strident press articles exhorting the public to steer clear of gold and gold investments (see Willem Buiter as one example amongst many) very little is reported about the ten year run in the price of gold bullion. In fact, despite empirical evidence to the contrary, your banker, your broker, Wall Street “professionals” and government officials in general, are still telling you porkies about the presumed “long term” returns of the stock market. What is not clear is what “long term” is. Is two years long term? Is five? How about ten?

For now gold is a sound investment to protect your wealth. This will be so for as long as a number of trends do not reverse (quantitative easing and bailouts for example but there are many other aberrant trends that must be halted in order for the public to regain faith in currencies). This is so now till it will no longer be the case.

A bon entendeur…

You can see more of the charts I maintain for the public at:

August 8th

No doubt moved by unwavering national pride and a sense that God will surely save the Queen, one of the rare readers of this blog points out that I didn’t include the Pound Sterling in the above charts. Indeed it was an omission so let’s see whether after no longer ruling the waves Britain may at least rule the currencies…

Hmmm! This is not completely a surprise. After all, Gordon Brown was the man that pin-pointed the bottom of the price of bullion when he sold a chunk of the nation’s reserves way back-when around the turn of the new century thus, in one fell swoop short-changing the British treasury and public.

Sic transit gloria mundi or some such.