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A controversial theory explains why gold is no longer rising
The Daily Crux ^ | January 23, 2013 | Gonzalo Lira

Posted on 01/24/2013 6:29:46 PM PST by arthurus

Why isn't gold higher?

Two of the three reserve currencies of the world – the dollar and the yen – are on a relentless race to the bottom, and only recently have the Europeans figured out that they'd better start kicking the euro down, before they price themselves out of the global markets.

With this general fiat currency devaluation, you would think that gold would be much, much higher than it is now.

But gold isn't higher – it's drifting...

Gold was on a relentless climb after the 2008 Global Financial Crisis – with good reason: The markets collectively deduced that the central banks of the world would devalue their currencies, in order to get out from under the mountain of private, consumer, and sovereign debt.

(Excerpt) Read more at thedailycrux.com ...


TOPICS: Business/Economy
KEYWORDS: crash; gold

1 posted on 01/24/2013 6:29:50 PM PST by arthurus
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To: arthurus

Interesting perspective. And I think it has some validity. But manipulation by central banks is still another significant factor.

Fact is, when the fiat currencies hit the (real) skids, *anything* tangible in commodities will become much more valuable.

If you had a garage full of 22LR and 5.56, you’d have a very barter-able commodity. Assuming you were dumb or desperate enough to trade them.

The real question folks ought to be asking themselves is, is it going to be a severe worldwide depression, or Mad Max scenario? None of the TV pundits are saying it out loud because it WILL be one or the other. And they are either stupid and/or frightened. Don’t talk about it and it will go away on its own.


2 posted on 01/24/2013 6:54:30 PM PST by ChildOfThe60s (If you can remember the 60s.....you weren't really there)
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To: arthurus
or, a much more novel theory ~ that gold, like potatoes, is sold at a price just above the cost to discover new gold.

Thanks to improved work methods and technology, there's almost a perfect balance between near bankruptcy and actual extraction costs on the part of the miners.

Since modern industry has real uses for gold and the national treasuries are never bought and sold publicly, industrial demand ~ though small ~ is matched by new production.

3 posted on 01/24/2013 6:56:17 PM PST by muawiyah
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To: arthurus

We’e still in a deflationary economy and the value of gold is based entirely on psychology and psychiatry, and not on economics or physics. Caveat emptor.....


4 posted on 01/24/2013 6:59:35 PM PST by varmintman
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To: arthurus

I have a simpler explanation. Gold has gone up 5x in a few years. Although the Fed has printed a lot of money in the same time, they haven’t nearly quintupled the number of dollars in circulation. Hence, fundamentally, gold may not “worth” five times as much as it was.


5 posted on 01/24/2013 7:02:57 PM PST by AZLiberty (No tag today.)
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To: arthurus

There are two reasons that the price of gold has stabilized. 1) European governments and the IMF have sold huge amounts over the past year to fund bailouts, provide liquidity for debt ridden European banks and to continue to fund ongoing deficit spending and debt service.2)Supply has increased. Miners are working at almost full capacity in response to near record high prices. Europeans and Americans have melted large amounts of jewelry to obtain cash. Demand especially in China, the Mideast and India remains constant and strong. Would not bet against gold.


6 posted on 01/24/2013 7:04:16 PM PST by allendale
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To: varmintman
In a SHTF scenario these anti gold fools will be dancing like little circus dogs for a little piece of my gold.

I will be using your paper money for toilet paper....

7 posted on 01/24/2013 7:06:27 PM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: ChildOfThe60s

“The real question folks ought to be asking themselves is, is it going to be a severe worldwide depression, or Mad Max scenario?”

Neither.... people have been preaching crash and burn for some time, and you see no indication that it’s going to happen. What is the next bubble? Government debt or Student loans, neither of which I think will cause a meltdown - just alot of pain.

The people who made money off gold did it. If you look at history gold does the same thing stocks, bonds and commodities do - it goes up and it goes down in value. Inflation adjusted, gold was more expensive in 1980 than it is now.


8 posted on 01/24/2013 7:08:27 PM PST by mike_9958
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To: AZLiberty

The Feds can push their paper money onto the banks, but the banks just sit on it EARNING interest from the feds. It is crazy. The Feds haven’t figured out a good way to get the fiat money to the masses - yet. The PPT does a good job but it only goes so far.


9 posted on 01/24/2013 7:08:57 PM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: arthurus
From the article...

But between now and then, gold prices will continue to drift, because the markets don’t really know whose gold is real, and whose is worthless paper.

FWIW.

10 posted on 01/24/2013 7:09:17 PM PST by Jane Long
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To: varmintman
not entirely true ~ a good 90%+ of all known gold in the whole world is in the hands off governments or highly regulated banks of various kinds. It just doesn't get sold in an open market.

That means that demand for the small percentage in private hands as well as the price asked by miners for new quantities gives us the trading price ~ just like everything else.

One more time ~ gold has two markets ~ government and they ain't selling, and private sector, where there's actually an industrial need for it.

The private market is tiny compared to the total quantity held or controlled by governments (or their proxies). There's no there there!

11 posted on 01/24/2013 7:12:35 PM PST by muawiyah
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To: varmintman

Both Chinese and Indians are big personal buyers of gold.

Are they both in a bit of a slump recently? Add the increased effeciency of microscopic gold mining, often tied in with other metals like copper and the “cost” contimues to be relatively low.

Miners are unlikely to slow down production just to bump the price as they all are also interested in recovering mine development and infastructure costs, even at lowered margins.


12 posted on 01/24/2013 7:12:45 PM PST by X-spurt (Republic of Texas, Come and Take It!)
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To: arthurus

I hope prices stay low - I’m buying


13 posted on 01/24/2013 7:44:58 PM PST by aMorePerfectUnion (Gone rogue, gone Galt, gone international. Gone Independent. Gone.)
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To: arthurus

You really have to be thinking that ETFs are operating more like fractional reserve bankers; inventing gold paper out of thin air.


14 posted on 01/24/2013 7:50:21 PM PST by grumpygresh (Democrats delenda est.)
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To: arthurus
LINK
~snips~

Please do not fall for this classic manipulation. Please do not make the gold banks happy by giving away your physical. Please do not throw away gold shares because the hedge fund have worked black PR so well that they even have convinced some well known community physical gold merchants of their bear position of shares.

How many times have you seen this not to recognize what it is? Well, this is the big one and last play to denude you of your position. Remember, for every seller there is a buyer. Has not every reaction in gold since $248 attempted to do just that? This big one is no different.

Fundamentally we are approaching the period in gold when it will move up the most points in the shortest period of time. The paper gold market is being used to shake the bullish tree harder this time than any time before because of what is to come. Fear is the most powerful emotion in markets and it is being used perfectly to enrich the grand names of finance at your expense.
15 posted on 01/24/2013 8:07:30 PM PST by onyx (FREE REPUBLIC IS HERE TO STAY! DONATE MONTHLY! IF YOU WANT ON SARAH PALIN''S PING LIST, LET ME KNOW)
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To: arthurus; jiggyboy; PA Engineer; blam; TigerLikesRooster; Cheap_Hessian; CJinVA; Jet Jaguar; ...

Goldbug ping.


16 posted on 01/24/2013 8:09:05 PM PST by Jet Jaguar
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To: arthurus; humblegunner

Why do I need to wade through TWO click thru sites to get to the rather sophomoric theory being touted here?

Really?


17 posted on 01/24/2013 8:13:03 PM PST by narses
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To: AZLiberty
Hence, fundamentally, gold may not “worth” five times as much as it was.

Except that gold was probably undervalued in the first place, plus, gold prices are often reactionary (to market expectations) and that can cause a lag time in price fluctuations, especially upswings.

18 posted on 01/24/2013 8:16:21 PM PST by Lancey Howard
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To: central_va

If I’m going to be into metals, it’s going to be brass, copper, and lead, not gold.


19 posted on 01/24/2013 8:26:18 PM PST by varmintman
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To: mike_9958
Neither.... people have been preaching crash and burn for some time, and you see no indication that it’s going to happen.

Three days a week I think that too. Three days I think major economic depression. And one day a week Mad Max.

Making me crazy.

20 posted on 01/24/2013 8:40:13 PM PST by ChildOfThe60s (If you can remember the 60s.....you weren't really there)
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To: arthurus

I can’t figure out gold. I bought 20 ounces of gold right after 9/11—I’d been watching the spot price for a few years and it was below the cost of extraction. 9/11 goaded me into buying.

So I got in at the right time. Today, I don’t know. Is gold a store of value? When I took my first job out of college in 1967, I was paid three ounces of gold a week. That translated to $105 a week back then, entry-level salary. Gold was $35/oz.

I’d sure settle for three ounces of gold per week today—let’s see, that’s about $5,000 a week at today’s spot price.

Something is out of whack.


21 posted on 01/24/2013 8:47:00 PM PST by Colinsky
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To: arthurus

I think my theory is sound. Gold isn’t rising as all disposable income is being spent on lead right now.


22 posted on 01/24/2013 8:48:46 PM PST by DocRock (All they that TAKE the sword shall perish with the sword. Matthew 26:52 Gun grabbers beware.)
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To: central_va

I think you’re making a mistake in thinking that the Fed or the PPT gives a crap about getting fiat to the people. They both exist solely to advance their own interests - “too big to fail” banks. The Fed would be an illegal banking cartel if the law applied to them. The SEC prosecutes small-time frauds but lets the perpetrators of the 2008 collapse, and Jon Corzine, walk free without any sanctions whatsoever. To think they act in your best interest is to take the blue pill.


23 posted on 01/24/2013 9:30:36 PM PST by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: arthurus

The reason that gold is not climbing is that those intelligent enough to want to buy gold recognize the parallel danger of a rapid deflation when reality kicks in and all the low/no information zombies go non-monetary (violent).


24 posted on 01/24/2013 9:43:38 PM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: AZLiberty

>> “ in the same time, they haven’t nearly quintupled the number of dollars in circulation.” <<

.
Really?

I think that you’re mistaken on that. Lots of the dollars in circulation were not “printed,” they were loaned into existence by China and Japan buying our worthless debt.


25 posted on 01/24/2013 9:48:34 PM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: DocRock

>> “Gold isn’t rising as all disposable income is being spent on lead right now.” <<

.
That certainly is a factor, and China has taken to mining much of the gold they are adding.


26 posted on 01/24/2013 9:52:25 PM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: onyx

Right on Onyx!

People do have the jitters right now, but this phony “economy” makes a house of cards look stable.


27 posted on 01/24/2013 10:04:04 PM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: varmintman
You lead, copper and gold to survive.
28 posted on 01/25/2013 4:36:42 AM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: grumpygresh

Something like that.


29 posted on 01/25/2013 5:18:24 AM PST by arthurus (Read Hazlitt's Economics In One Lesson ONLINE www.fee.org/library/books/economics-in-one-lesson)
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To: arthurus

Like many, the writer is Amerocentric. He places the force driving the price of gold on American market devices and forces.

In so doing, he failed to consider a major force driving the market, people in Asia, be they traders or just people. That component is apparently now missing. Why? I have no clue.

There is a fallacy or perhaps fallacies present in Free Republic gold threads.

The first is that lead and brass are superior to gold. The fallacy is single mindedness. A wise investor would diversify into both or even better into a mix of hard assets.

The second is the SHTF mentality, the thought that hyperinflation will destroy the world. While the hyperinflation is possible, it is not likely. A far more likely condition is inflation at an elevated rate but never approaching the hyper level.

Finally, I must tell you that when I hit 70, the onset of true wisdom occurred. The above is a manifestation of that phenomena,


30 posted on 01/25/2013 5:25:36 AM PST by bert ((K.E. N.P. N.C. +12 .....The fairest Deduction to be reduced is the Standard Deduction)
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To: arthurus

Preppers, a word of warning:

I have a friend who, apparently, took physical possession of PMs. I’m not sure how much since my friend keeps her mouth shut.

One fine morning, her hubby walked out of his front door and was met by a man with a ski mask and a pistol.

She and he would be DEAD except that hubby is an incredibly brave and incredibly strong old man. After the struggle, both she and hubby were bloodied but alive as the robber escaped.

Who talked? The gold seller? The UPS driver who delivered the PMs? A close friend?

All I know is that if you have PMs or cash or a lot of firearms, you need to live your life in constant awareness of danger.

BTW, hubby did NOT have a weapon on his person. He SHOULD have been armed!


31 posted on 01/25/2013 5:31:07 AM PST by darth
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To: bert

>> “Finally, I must tell you that when I hit 70, the onset of true wisdom occurred. The above is a manifestation of that phenomena (sic)” <<

.
Perhaps you’d do well to wait for the the big dose at 80, judging by your post.


32 posted on 01/25/2013 7:50:52 AM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: darth

That’s awful...you have to keep your mouth shut. Maybe FedEx, or UPS or USPS knows when PM are the package due to sky high insurances? You have some POS working *inside* at one of these places and he tips off a thieving friend to rob that place


33 posted on 01/25/2013 8:05:13 AM PST by dennisw (The first principle is to find out who you are then you can achieve anything -- Buddhist monk)
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To: central_va

They could mint trillion dollar platinum coins and hand them out at political rallies.


34 posted on 01/25/2013 8:30:04 AM PST by listenhillary (Courts, law enforcement, roads and national defense should be the extent of government)
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To: ChildOfThe60s

“Making me crazy.”

LOL - I limit my news to about 1/2hr, and drink spiced rum.

And remember all these media streams just want your eyes and ears so they can money.... which they can’t do if they tell you everything was alright.


35 posted on 01/25/2013 9:00:25 AM PST by mike_9958
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To: grumpygresh
You really have to be thinking that ETFs are operating more like fractional reserve bankers; inventing gold paper out of thin air.

There is no doubt that they are. In many cases they are leasing gold from the central banks. Its difficult to understand why someone who wants to be long gold would buy a gold ETF, essentially they are investing against themselves.

36 posted on 01/25/2013 1:31:29 PM PST by Timocrat (Ingnorantia non excusat)
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BOOKMARK


37 posted on 02/06/2013 10:55:38 AM PST by RebelTex (Soli Deo Gloria, "To God alone the glory")
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bookmark2


38 posted on 02/06/2013 11:35:33 AM PST by RebelTex (Soli Deo Gloria, "To God alone the glory")
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