Is gold still golden?

Turn on the cable business shows, read the financial papers, listen to the media’s prized “experts,” hear it from billionaires, and most of all, pay attention when Mr. Big speaks. The message is essentially the same: Gold is a loser’s game.

We begin with media favorite Nouriel Roubini, New York University’s own and a member of the White Shoe Boyz Club. Forbes referred to Roubini as “a very elite public intellectual” as he made global business news in June with this prediction: “Gold prices are likely to move much lower, toward $1,000 by 2015.”

Ridiculing “gold bugs — a combination of paranoid investors and others with a fear-based political agenda — (who) were happily predicting gold prices going to $2,000, $3,000, and even to $5,000 in a matter of years,” the Presstitute media conveniently ignored the fact that in 2009, when it was trading at $1,122 per troy ounce, Roubini was “happily predicting” that “gold at $1,500 is utter nonsense.”

Roubini also stated back then that “since gold has no intrinsic value … there are significant risks of a downward correction rather than a rapid rise towards $2,000, as today’s gold bugs claim.” He added gold “looks suspiciously like a bubble.” Yet, although Roubini “looks suspiciously” ignorant when it comes to forecasting gold prices, the Presstitutes keep quoting him despite his failed track record.

Yes, I was one of those “gold bugs” who predicted “Gold $2,000.” And as it turned out, gold hit $1,923 in September 2011, falling shy of the mark by less than $80. And, unlike Roubini (and just about everyone else that I know of), only I forecast the beginning of the Gold Bull Run in 2001 when gold was trading at $275 an ounce.

Roubini isn’t alone when it comes to the prevailing wisdom among the Wall Street gang that gold has no intrinsic value. Warren Buffet, America’s favorite billionaire, has made a sport of laughing off gold as nothing more than something that “… gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Anyone watching from Earth “would be scratching their head,” wondering how could Buffett, who devotes his entire life to making money, could forget gold’s 5,000-year history as money?

As gold prices began to plummet this past spring, Buffet was asked if he’d buy some if prices fell to $1,000 or $800 an ounce. He replied, “No. Gold’s not reproduced or anything since I wrote about it a year or two ago. It just sits there, and you hope somebody pays you more for it.”

Yes, “it just sits there.” And gold has been sitting around since recorded history as a measure of wealth and value. Empires fall, nations evaporate, fiat currencies disappear, but gold has forever stayed golden.

Is it arrogance, ignorance or just the White Shoe Boyz’ intent to whitewash history, erasing from it the cultural, religious, intrinsic and monetary magic that shines on gold? Or is it the bankers’ and governments’ grand plan to con the common folks into believing their paper and paperless cash is more valuable than gold? After all, you don’t dig cash out of the ground and it can always be printed and digitally manufactured in America, Europe, China, Brazil, India or “… in Africa or someplace.”

From Buffett we go to Federal Reserve Chief Ben Bernanke. “The Banksters’ Mr. Big” should have been the headline splashed across the front pages of newspapers around the world and the lead story of every news broadcast after Bernanke’s testimony in front of the House Financial Services Committee hearing on July 17. Bernanke, in just one simple sentence, not only explained why gold is and will remain a very precious metal, but more importantly, why central bank monetary policies have failed, are failing and will continue to fail to reignite economic growth: “If we were to tighten policy, the economy would tank,” Bernanke admitted to the committee.

Aside from Agence France-Presse (AFP), that one sentence that summed up the failure and futility of Fed policy was not reported by The Associated Press, The Financial Times, The Wall Street Journal, The New York Times or any major media.

However, what didn’t make the mainstream news was old news to Trends Journal subscribers. In my September 2009 Trend Alert®, “Cover up, not Recovery,” I wrote: “What is ballyhooed as ‘recovery’ is nothing more than a cover-up; papering over historically unprecedented financial losses with historically unprecedented trillions of dollars spun out of thin air, backed by nothing, and producing practically nothing.”

And while the president and the Presstitutes back then were declaring their policy of flooding markets with phantom money would kick off another borrowing and spending spree, it in fact kicked off a gold buying frenzy, pushing the precious metal above the psychologically important $1,000 an ounce. And that should have been read as a “no confidence” vote against the government’s policy.

Whether 2009 or 2013, the correlation between rising gold prices and cheap money policy was both officially denied and officially misunderstood. Following the July hearing, Bernanke, in response to a question about why gold prices have been volatile, told the Senate Banking Committee that “nobody really understands gold prices and I don’t pretend to understand them either.”

In the world of subservient behavior to Commanders in Chief, higher authorities, elected officials and bureaucratic higher-ups, it made perfect sense that if “he,” the esteemed Federal Reserve chief didn’t understand gold prices, then “nobody really understands gold prices.”

Shortly following Bernanke’s testimony, at which he essentially reassured the financial markets that the Fed would continue its $85 billion per-month bond buying spree and would keep interest rates near zero, the “nobodies” of the world who really don’t understand gold prices were back on a gold buying binge:

Gold Bulls Bet Right as Prices Rally Most Since ’11

Hedge funds raised bets on a gold rally before prices capped the biggest two-week gain in 20 months as Federal Reserve Chairman Ben S. Bernanke damped speculation that a cut in stimulus is imminent.

Speculators increased their net-long position by 56 percent to 55,535 futures and options by July 16, the highest since June 4, U.S. Commodity Futures Trading Commission data show. Short contracts fell the most since November after reaching a record the previous week. Net-bullish wagers across 18 U.S.-traded commodities jumped 28 percent, the biggest gain since March.

Gold surged 6.7 percent in two weeks, the most since November 2011, as Bernanke signaled that decreases to bond purchases aren’t imminent. It’s “way too early to make any judgment” as to whether the Fed will start winding down its stimulus program in September, he said while testifying before the Senate July 18. Bullion fell into a bear market in April as some investors lost faith in the metal as store of value.

“We are seeing some support for gold as Bernanke’s statements tell us that the Fed wants to see a visible improvement in economic conditions before they begin tapering,” said Michael Cuggino, who manages $12 billion of assets at Permanent Portfolio (PRPFX) Family of Funds Inc. in San Francisco. “The longer-term reasons for owning gold, like capital preservation, remain as easy money will continue to flow into the system.”

Gold Survey

Futures gained 1.3 percent to $1,294 an ounce on the Comex last week, and extended that rally
today, rising as much as 3.2 percent to $1,335.70, the highest since June 20. Traders are bullish for a fourth week, the longest run since the bear market began in April, with 15 analysts surveyed by Bloomberg expecting prices to rise this week. Nine were bearish and five neutral.

Bernanke’s remarks come after he said June 19 that the central bank may start paring the pace of bond buying this year and end the purchases around the middle of next year if the economy improves. The Fed purchases $85 billion of debt each month. Bullion more than doubled from 2008 to a record $1,923.70 in September 2011 as the central bank bought more than $2 trillion of debt.

Japan Buying

Gold rebounded 13 percent since reaching a 34-month low on June 28 as the declines spurred physical demand. Tanaka Kikinzoku Kogyo K.K., Japan’s biggest gold retailer, said July 18 that its sales tripled in the second quarter from the previous three months. Imports by India may climb to more than 900 metric tons in 2013 from 860 tons last year, and China’s purchases may top 1,000 tons, up from 817 tons, the London-based World Gold Council said July 17.

Most of the gain in the net-long position last week was attributable to a retreat in short holdings, which slumped to 61,002 contracts from 80,147. Long contracts increased 0.6 percent. The record-large bearish position had left prices vulnerable to a “short squeeze,” which can magnify any rally as speculators close out bets on a decline by buying back contracts, UniCredit SpA (UCG) said in a report July 17.
(Bloomberg News, July 21, 2013)

Wrong Again Ben was wrong again. “Gold is an unusual asset,” Bernanke said at the July hearing. “It’s an asset that people hold as disaster insurance. A lot of people hold gold as an inflation hedge. But movements of gold prices don’t predict inflation very well, actually.”

Well, “actually,” since he “didn’t pretend to understand gold prices,” it made sense that his assessment on “movements of gold prices” was, in part, nonsense. Yes, people buy gold as both disaster insurance and as an inflation hedge. But what “Helicopter Ben” (a nickname earned for his willingness to dump endless supplies of money into the faltering economy) doesn’t get is that people like me also buy gold as a hedge against currency devaluations.

Even former Fed Chairman, Alan Greenspan, the cheap money chief engineer and mastermind behind the ruinous policies that culminated in the Great Recession, acknowledged what we and other gold buyers have been saying for years: flooding the marketplace with massive amounts of money devalues paper currencies:

Fed’s Massive Stimulus Had Little Impact: Greenspan

The Federal Reserve’s massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping US exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.

In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantitative easing over the past two years had done little to loosen credit and boost the economy.

“There is no evidence that huge inflow of money into the system basically worked,” Greenspan said in a live interview.

Greenspan said he “would be surprised if there was a QE3” because it would “continue erosion of the dollar.”
(CNBC, 30 June 2011)

Greenspan was surprised! QE3 arrived. Yet, two years later, when asked by Congress, “Are you printing,” Bernanke answered, “Not literally.”

Just days before gold shot up some $40, Bernanke also speculated that “one reason gold prices are lower is that people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords.” So he reasoned, “Gold price going down is not necessarily a bad thing from that perspective. It suggests people have somewhat more confidence, and are less concerned about really bad outcomes.”

By mid July, the world and nation were becoming more concerned about “really bad outcomes.”

Economic Trouble Puzzles Fed Chief Too

The economy’s continuing struggles aren’t just confounding ordinary Americans. They’ve also stumped the head of the Federal Reserve.

Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said. He said the weak housing market and problems in the banking system might be “more persistent than we thought.”

It was the Fed chief’s most explicit warning yet that the economy will face serious challenges next year. For several months, he had said the factors working against economic growth appeared to be “transitory.”

The Fed’s statement Wednesday stood in contrast to the Fed’s more upbeat view when officials last met, eight weeks  ago. At that time, the central bank said the job market was gradually improving.
(Associated Press June 22, 2013)

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