Gold and systemic crisis

A bearish article on the US monetary system and the role of gold past and present.

Is gold too expensive at the moment? That's an important question. Is gold at the top of a small bubble getting ready to drop; or is it about to explode upwards into a much larger bubble? Not even precious metals dealers seem to know, though would they say if they did know.

It's possible that gold could crash next week, though the current situation seems different to usual. A dealer I spoke to last week mentioned that one refiner in Birmingham is melting down a million quid of scrap gold (scrap sold by the public) into bars every day. These bars are being shipped abroad, with the likely recipients being foreign governments, most probably China, Singapore, and Dubai. However, it will be several months before this information becomes publicly known. Perhaps these governmental purchases explain why gold hasn't dropped in price from the $990 - $1000 upper resistance level, as it usually does. Though perhaps China is playing a risky game in buying near the non-inflationary adjusted high. Time will tell.

It's unlikely that the British Treasury or Bank of England will begin buying gold anytime soon. Britain holds over $200 billion of US Treasuries (the third largest holder of American debt after China and Japan) as well as having billions of euro foreign reserves. Britain holds plenty of paper. China aims to rid itself of foreign paper, especially US paper.

China remains very bearish on the future status of the US dollar and is converting its dollar holdings into IMF bonds ($50 billion so far), gold and other tangible assets. On the other hand, some, like Hugh Hendry, are bullish on the dollar due to the massive deflationary pressures in the US economy. Hendry believes that only a fiscal stimulus massively larger than the current one could lead to a fundamental devaluation of the dollar. Hendry believes that the dollar will appreciate in purchasing power, whilst gold will crash to join the ranks of other commodities in a deflation driven bear market. Again, time will tell.

Sadly, Britain's private gold is leaving the country, and this leaves us weakened. I say, don't sell your gold to those scrap gold sharks. Hold onto it for dear life. Consider your gold and silver jewellery a perpetual insurance policy that's already been paid for with no future premiums to pay.
I hope it does crash.Maybe then the idiotic advertisments on the telly will stop.

Why a piccie of that man as your avatar?
I don't watch much telly, if at all, so haven't seen the ads. I doubt whether gold will see a 'crash', that is, a complete collapse that gives investors shaven heads. At least not in near future.

The spot price is over a thousand dollars as we speak, though in pounds it's still less than its recent high due to a strengthening of the pound versus the dollar. I do, however, feel that the price could retrace to the mid 900s sometime soon with institutional investors selling to take profits. Saying that, there is unprecedented supply at the moment (from scrap purchases), so there must be unprecedented demand. If supply outstrips demand then the price must fall. I understand that the current price is being driven not by private investors but by governmental purchases. ANd also by the fact that mining output is in decline.

A further weakening of the dollar would affect the price upwards, though strangely a strengthening of the dollar may not bring the price down. And then there's the issue of backwardation, though I won't bore people with that. These are highly unusual times. As with the wider markets, technical analysis (such as Elliot Wave) is now next to useless, though perhaps that's indicative of poor technical analysis skills on my part.

The pic? Well, they say a picture says a thousand words. Just look at it (him). The pic says it all. This toupee wearing former Marxist trade unionist blob of lard, who can hardly string two coherent sentences together, is responsible for the nation's defence. FFS what a state of affairs.

Edited for grammar and to add bits to post.
jonwilly said:
Gold will never lose it's PLACE in the Orient or Mid East.
Still keep a one once bar for that rainy day.
Unfortunately for some that rainy day is now, hence the proliferation of scrap gold buyers.

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