Gold

Discussion in 'Men's Economics' started by Michael Scally MD, Apr 15, 2013.

  1. Michael Scally MD

    Michael Scally MD Doctor of Medicine

    Warren Buffett On Gold
    http://www.berkshirehathaway.com/letters/2011ltr.pdf

    The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

    This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.

    The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

    What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

    Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

    Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

    Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying
    binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

    Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

    A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The
    170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

    Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.
     
  2. tgrusso78

    tgrusso78 Member

    Gold is good, it's better than fiat IMO. Of course I'm one of the lucky ones who has been mining and using bitcoins for a couple of years now.
     
  3. steroidsfax

    steroidsfax Member

    :hijack::(

    Would you be interested in doing a write-up?

    Something of a; "starting bitcoins, for dummies"?

    I would be happy to make a donation if you were interested, and the write-up was thorough.
     
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  4. Alfonso6677

    Alfonso6677 Junior Member

    gold is like a asset in accounting term becoz mostly value of gold always increases like a valuable assets property. The major asset in this category is gold, currently a huge favorite of investors.some investor invest there money in gold.
     
  5. stoneMASON

    stoneMASON Member

    I think Gold is the safest long term investment one can make
     
  6. flenser

    flenser Member AnabolicLab.com Supporter

    Gold isn't an investment, it's a store of value, just like cash. It has one advantage over cash: governments and banks (I repeat myself) can't create or destroy it. They do try, through the use of gold leasing at lower than market interest rates, and through gold futures (which dwarfs the amount of physical gold actually on the market).
     
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  7. flenser

    flenser Member AnabolicLab.com Supporter

    It Wasn't The Swiss: Continuing Plunge In GOFO Means No Easing Of Worst Gold Shortage In Over A Decade

    Yesterday, when we commented on what was largely a pre-determined outcome of the Swiss gold referendum, we said that there still "is the question of what happens to the tension in the gold swap market: as noted last week, the 1 Month GOFO rate had tumbled to the most negative in over a decade. It was not clear if this collateral gold squeeze was the result of Swiss referendum overhang or due to other reasons. The market's reaction on Monday should answer those questions."

    Well, a few hours ago we got the GOFO update for the "day after" and the answer is clear: it wasn't fear of the Swiss referendum after all because the 1 Month GOFO just crashed even deeper into negative territory with the entire curve through 6M now red, and with 12 month GOFO just 0.6 bps away from negative for the first time. At this rate, tomorrow's update will suggest that big institutions expect the gold swap shortage to persist through the end of 2015!

    Also, judging by the gold reaction, which is about $50 from the overnight lows, someone else appears to have noticed that the rather shocking shortage of synthetic gold among institutions, which is finally seeping through into that whole "price discovery" process, where supply and demand actually matter.

    [​IMG]

    Bottom line: whatever caused the record scramble for rehypothecated gold, it wasn't fears about the outcome of the Swiss referendum. Something else spooked the precious metal a month ago, and as seen on the chart above, things have only gotten progressively worse since then.
     
  8. flenser

    flenser Member AnabolicLab.com Supporter

    Texas Launches Gold-backed Bank, Challenging Federal Reserve

    Alex Newman, 15 July 2015

    The State of Texas is setting up a gold-backed bank that will allow depositors to bypass the controversial Federal Reserve System and its fiat currency in banking and commerce, according to the state representative who authored the recently enacted law. Under the measure, passed overwhelmingly by lawmakers and signed in mid-June by Republican Governor Greg Abbott, Lone Star State officials will establish and operate the Texas Bullion Depository for anyone who would like to deposit and trade in precious metals. The implications are as big as Texas.

    While some analysts have said the move may be another sign heralding Texas’ eventual secession from the union, or preparation for financial Armageddon, its advocates say the depository simply makes financial sense. Among other benefits, the institution will provide more options to consumers weary of the increasingly troubled traditional banking and monetary system, which is viewed by the public with growing suspicion. And experts say the effect of making it easier to use sound money in commerce could be far-reaching.

    Among other immediate effects, the law creating the first state-level gold-backed bank in the nation, House Bill 483, will involve repatriating about $1 billion of Texas gold from New York. Conflicting news reports and official statements say the state’s precious metals stockpile is being held either by HSBC in New York, or by the powerful New York Federal Reserve Bank, a privately owned outfit cloaked in secrecy with immense power over the U.S. economy. First, though, officials will need to select a home for the Texas depository.


    “Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals,” said a statement issued by Governor Abbott, a popular conservative governor, after the ceremonial signing. “With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state.” The law protects the assets from seizure by the feds or other forces, too.

    There will be many other benefits as well, according to supporters. While other states have in recent years passed legislation declaring gold and silver to be legal tender, analysts say Texas’ new depository could help supercharge the growing movement for an honest and sensible monetary system founded on real money rather than debt-based paper notes conjured into existence by a private banking cartel. Indeed, one of the chief aims of gold-and-silver-as-currency proponents is to restore sound money — and the Texas law could help pave the way.

    Tenth Amendment Center chief Michael Boldin, whose organization promotes states’ rights to rein in the feds under the 10th Amendment to the U.S. Constitution, called the law “an important first step towards gold and silver as commonly-used legal tender in the state.” He said the move has the potential to open the market to sound money, even in day-to-day transactions. “By making gold and silver available for regular, daily transactions by the general public, the new law has the potential for wide-reaching effect,” Boldin added.

    The Tenth Amendment Center also highlighted the constitutional implications. Noting that Article I, Section 10, of the U.S. Constitution prohibits state governments from making anything other than gold and silver a tender in payment of debts, Boldin said the bill takes Texas a step toward fulfilling that long-ignored constitutional obligation. “Such a tactic would undermine the monopoly the Federal Reserve system by introducing competition into the monetary system,” he said.

    Other experts also highlighted those effects. “Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a ‘reverse Gresham’s Law’ effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes),” explained constitutional-tender expert William Greene in a paper for the market-oriented Ludwig von Mises Institute.

    “As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state — as people in other states carry out their desire to bank with sound money — and an eventual outcry against the use of Federal Reserve notes for any transactions,” added Greene, who also testified in favor of the law in his capacity as a private citizen.

    The new law can also help protect depositors from other downsides of the present monetary regime — the risks inherent in fractional-reserve banking, for example — while still providing many of the conveniences associated with a bank account. Indeed, the depository will engage in many of the functions associated with traditional banking: The ability to store wealth for safe-keeping, the ability to write checks against deposits to transfer funds, and so on.

    But in other respects, the institution will function very differently from a traditional bank. For instance, depository accounts will not pay interest, according to the law, nor will the deposits be loaned out to borrowers under the prevailing fractional-reserve banking regime. In an interview on the popular TruNews radio program, the state lawmaker behind the law celebrated the way in which the institution will operate as a major benefit for potential clients.

    “This is different than your traditional bank — a traditional bank lends money,” said Texas Representative Giovanni Capriglione, who authored and sponsored the legislation. “Especially if you're in Greece right now, you know that if you go to the bank, and everybody went to the bank to try to get their deposits out, there's not enough paper money to cover it. That causes a whole bunch of concerns. What this depository does is, it doesn't allow that — if there are 5,000 bars of gold in there, there will be 5,000 gold bars there, and you'll be able to access your deposits directly upon demand.”

    Depositors will also be able to write checks against their gold deposits to pay others, continued Rep. Capriglione, calling the measure a “big deal.” “You can write checks to individuals who have gold depository accounts, and you’ll also be able to write checks to individuals and corporations who don’t have gold depository accounts,” he explained. “We set up a system of depository agents so you can have any corporation, any group, basically start a depository agent, and they can send and receive through this depository system, outside of the Federal Reserve System.” Public entities will also be able to participate.

    It will not be just Texas citizens, governments, agencies, and businesses taking advantage of the new options, either. “We are not talking Fort Knox,” Capriglione told the Star-Telegram newspaper. “But when I first announced this, I got so many emails and phone calls from people literally all over the world who said they want to store their gold … in a Texas depository. People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold.”

    Some conservative and liberty-minded activists expressed concerns about the law because it creates yet another state agency. However, writing in the market-oriented Ludwig von Mises Institute, economist Ryan McMaken argued that the benefits outweigh the downsides in this case. “While the Texas depository is a government-owned enterprise, it nevertheless is an improvement since it is a case of decentralization (and arguably nullification) which provides alternatives to the federally controlled monetary and banking systems,” he said. “As Hayek and other Austrians noted for decades, a decentralization of the monetary system is a key first step in moving toward more sound money.”

    The depository will be run by an administrator appointed by the Texas Comptroller, whose office will oversee the institution. The chief of the Texas depository will have to be approved by various state executive and legislative officials. Any profits made will be handed to the general revenue fund, potentially benefiting taxpayers beyond the savings associated with repatriating the state’s gold. The full text of the law is available here.

    A similar bill was introduced in 2013 but did not gain traction. This year, though, lawmakers approved it by a landslide margin, with 140 to 4 in the Texas House and 27 to 4 in the state Senate. Now, energized activists in other states are hoping to see similar measures across the country — with the ultimate goal of eventually restoring sound money and an honest economy free from the clutches of the Federal Reserve.
     
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  9. flenser

    flenser Member AnabolicLab.com Supporter

    China Increases Gold Holdings By 57% "In One Month" In First Official Update Since 2009

    Back in April we wrote that "The Mystery Of China's Gold Holdings Is Coming To An End" as a result of China willingness to add the Yuan to the IMF's SDR currency basket which would require the disclosure of China's gold holding ahead of an IMF meeting on SDR composition which may be held in October.

    By way of background, the reason why everyone has been so focused on Chinese official gold holdings is that there has been no official update to the gold inventory of the world's biggest nation, which have been fixed at 33.89 million oz since April 2009, a little over 1000 tons. In other words, the PBOC's gold inventory has been "unchanged" for over 6 years which is in stark contrast to the ravenous buying of physical gold China has been engaging in for the past 5 years.

    As we further noted in April, "with China disclosing so little about its hoard, finding out how much the central bank has in its vaults is of increasing interest to traders. Confirmation of bigger holdings would signal the importance of the metal as a reserve asset and boost market sentiment, TD Securities’ Melek said. At a time when prices are languishing, the buying could give support, said Suki Cooper, director of commodities at Barclays Plc in New York."

    In a rare comment on gold, Yi Gang, the central bank’s deputy governor, said in March 2013 that the country could only invest as much as 2 percent of its foreign-exchange holdings in gold because the market was too small. The press office of the People’s Bank of China in Beijing didn’t respond to a fax seeking comment sent on April 14.

    Well, the long awaited moment has finally arrived and this morning, after a 6 year delay when, China finally admitted that it had been misrepresenting its gold holdings for a very long time, when it announced that its gold holdings had increased from 38.89 million to 53.31 million troy ounces, a 57% increase "in one month."

    [​IMG]



    The amounts to a new grand total of 1658 metric tons, an increase of 604 tons from the 1054 reported last in 2009 and which according to the PBOC was also the May 2015 total.

    What is surprising about this release are three things:

    First, while we welcome some long overdue "transparency", the number is well below official expectations. This is what Bloomberg said previously: "The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures. A stockpile that big would be second only to the 8,133.5 tons in the U.S."

    Second, China has finally admitted that its official gold numbers were fabricated (alongside all other official data released from the communist country) as it is impossible the PBOC could have bought 600 tons of gold in the open market in June when the price of the yellow metal actually dropped by 2%.

    Third, and perhaps most important, is the reasoning behind the increase. While in April it was expected that China will be focused on SDR acceptance of the Yuan, that was subsequently refuted when it became clear that the IMF has no intention of making such a decision any time soon. So why make the disclosure?

    • PBOC SAYS GOLD RESERVE INCREASE AIMS TO ENSURE SECURITY
    And from the PBOC:

    Gold as a special asset, with multiple attributes financial and commodities, together with other assets to help regulate and optimize the overall risk-return characteristics of international reserves portfolio. From the perspective of long-term and strategic perspective, if necessary, dynamically adjusted international reserves portfolio allocation, safety, liquidity and increasing the value of international reserve assets.

    In other words, China had to wait until its stock market was crashing to present the "systemic stability" bazooka: gold.

    full article
     
  10. Michael Scally MD

    Michael Scally MD Doctor of Medicine

    People buy gold when they are afraid of the future. They buy stocks at the opposite time, when they are hopeful.
     
  11. flenser

    flenser Member AnabolicLab.com Supporter

    I mostly buy stocks when people are afraid and gold when they get too hopeful.
     
  12. nickley

    nickley Junior Member

    I have 1million dollars, you think I should invest in gold? I've been doing stock market for years and its fruitful when you have patience.
     
  13. flenser

    flenser Member AnabolicLab.com Supporter

    Gold isn't an investment. It's a hedge against bank runs and similar systemic failures. Gold futures, mining stocks, etc. are investments, but can be so volatile they seem more like gambling. IMO you have to have a special kind of paranoia to be a successful gold investor. I learned the hard way I'm not paranoid enough for that game : )
     
  14. flenser

    flenser Member AnabolicLab.com Supporter

    Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks

    Tyler Durden
    on 04/14/2016

    Back in July of 2014, we reported that in an attempt to obtain if not compensation, then at least confirmation of bank manipulation in the precious metals industry, a group of silver bullion banks including Deutsche Bank, Bank of Nova Scotia and HSBC (later UBS was also added to the defendants) were accused of manipulating prices in the multi-billion dollar market.

    The lawsuit, which was originally filed in a New York district court by veteran litigator J. Scott Nicholson, a resident of Washington DC, alleged that the banks, which oversee the century-old silver fix manipulated the physical and COMEX futures market since January 2007. The lawsuit subsequently received class-action status. It was the first case to target the silver fix.

    Many expected that this case would never go anywhere and that the defendant banks would stonewall indefinitely: after all their legal budgets were far greater than the plaintiffs.

    Which is why we were surprised to read overnight that not only has this lawsuit against precious metals manipulation not been swept away, but that the lead defendant, troulbed German bank Deutsche Bank agreed to settle the litigation over allegations it illegally conspired with Bank of Nova Scotia and HSBC Holdings Plc to fix silver prices at the expense of investors, Reuters reported citing a court filing by law firm Lowey.

    Terms were not disclosed, but the accord will include a monetary payment by the German bank.

    It goes without saying, that there would have been neither a settlement nor a payment if the banks had done nothing wrong.

    According to Reuters, Deutsche Bank has signed a binding settlement term sheet, and is negotiating a formal settlement agreement to be submitted for approval by U.S. District Judge Valerie Caproni, who oversees the litigation. A Deutsche Bank spokeswoman declined to comment. Lawyers for the investors did not immediately respond to requests for comment.

    As noted above, investors had accused Deutsche Bank, HSBC and ScotiaBank of abusing their power as three of the world's largest silver bullion banks to dictate the price of silver through a secret, once-a-day meeting known as the Silver Fix.

    None of this will come as a big surprise to readers, most of whom have been aware that this took place for years.

    But wait there's more.

    In a curious twist, the settlement letter reveals a stunning development, namely that the former members of the manipulation cartel have turned on each other. To wit:

    “In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants.”

    The full shocking letter can be read here:

    [​IMG]

    Since this is just one of many lawsuits filed over the past two years in Manhattan federal court in which investors accused banks of conspiring to rig rates or prices in financial and commodities markets, we expect that now that DB has "turned" that much more curious information about precious metals rigging will emerge, and will confirm what the "bugs" had said all along: that the precious metals market has been rigged all along.

    Finally, we'll just remind readers that the US commodity "regulator", the CFTC in 2013 closed its five year investigation concerning allegations that the biggest bullion banks manipulate silver markets and prices. It proudly reported in September 2013 that it found no evidence of wrongdoing and dropped the probe. This is what it said:

    The Commodity Futures Trading Commission (CFTC or Commission) Division of Enforcement has closed the investigation that was publicly confirmed in September 2008 concerning silver markets. The Division of Enforcement is not recommending charges to the Commission in that investigation. For law enforcement and confidentiality reasons, the CFTC only rarely comments publicly on whether it has opened or closed any particular investigation. Nonetheless, given that this particular investigation was confirmed in September 2008, the CFTC deemed it appropriate to inform the public that the investigation is no longer ongoing. Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets.​

    In light of this confirmation that the CFTC's probe was "lacking" perhaps it is perhaps time for the so-called regulator who at the time was headed by ex-Goldmanite Gary Gensler, to reopen its investigation?
     
  15. flenser

    flenser Member AnabolicLab.com Supporter

    China Launches Yuan Gold Fix To "Exert More Control Over Price Of Gold"

    Overnight a historic event took place when China, the world's top gold consumer, launched a yuan-denominated gold benchmark as had been previewed here previously, in what Reuters dubbed "an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market." Considering the now officially-confirmed rigging of the gold and silver fix courtesy of last week's Deutsche Bank settlement, this is hardly bad news and may finally lead to some rigging cartel and central bank-free price discovery. Or it may not, because China would enjoy nothing more than continuing to accumulate gold at lower prices.

    full article
     
  16. JLino

    JLino Member AnabolicLab.com Supporter

    Very good read brother!
     
  17. flenser

    flenser Member AnabolicLab.com Supporter

    Deutsche Bank Refuses Delivery Of Physical Gold Upon Demand
    Tyler Durden
    Sep 1, 2016 7:18 AM

    While the trading world was focused on the latest news involving Deutsche Bank, namely that the troubled German bank had been contemplating a merger with Germany's other mega-bank, Commerzbank as part of a strategy to sell all or part of a key business to speed up its flagging overhaul, a more troubling report emerged in a German gold analysis website, according to which Deutsche Bank was unable to satisfy a gold delivery request when asked to do so by a client of Germany's Xetra-Gold service.

    full article
     
  18. Sworder

    Sworder Member

    Wow, I would have expected it to be a lot larger than that...
     
  19. Michael Scally MD

    Michael Scally MD Doctor of Medicine

    Just a hunch, but I think AU goes higher, much higher. Maybe, by 2019 a doubling.
     
  20. mands

    mands Member AnabolicLab.com Supporter

    Isn't that like around 11 trillion dollars worth?

    mands