STOCKS MAKE HALFHEARTED REBOUND, GOLD TANKS: Here's What You Need To Know

After a turbulent week of trading, 'flat' was the new 'up' on a relatively quiet day for news.

* Last night's Asian market selloff, led by the 5.7% plunge in the Kospi, set the stage for another global market sell off.

* US markets were indicated to open sharply lower as new worries of a Greek debt default freaked out the European stock markets again, which also caused US futures to tumble.

* The G20 pledged to help avert an all out European debt crisis in an unscheduled statement. But that went in one ear and out the other.

* The risk-off trade was kicked into high gear as the dollar gained and the 10-year Treasury note briefly saw a 1.6% handle.

* However, the early sell-off in US stocks quickly evaporated in early trading and stocks oscillated near 0 for most of the day. European markets closed with modest gains.

* Bank stocks were an area of strength today led by Morgan Stanley. Fox's Charlie Gasparino reported that Morgan CEO James Gorman "ordered his traders to buy the firm’s own debt in the market to underscore the firm’s financial strength." Morgan Stanley closed up by around 5%.

* Precious metals on the other hand got absolutely obliterated. Gold plunged by 6%. Silver got absolutely destroyed, falling 16%.

* Markets seemed to gain some confidence after Bloomberg reported that European authorities may be accelerating a permanent European bail out fund.

I bought a stack of kilo gold bars less than three years ago at $778/troy ounce. Think I’m overly upset when a liquidation event briefly drops the price to $1650/oz?

No chance. Leveraged hedge funds and speculators got smashed and had to sell, plus other weak-handed, inexperienced people got spooked and sold this week (and will lose their positions in this long term secular bull gold market), but I’m not losing a moment’s sleep.

All the central banks can do is to keep creating money out of thin air, ultimately diminishing the value of their currencies further.

The aggregate balance sheet for all of Europe’s banks is already insolvent, but the game of pretend will continue for as long as the can make the zombie banks appear to have real life in them.

‘I know there are a lot of “gold bugs” on FR but I can’t get beyond the fact that it really has little intrinsic value.’

No commodity has “intrinsic value”. The characteristics of any commodity determine the subjective value assigned to it by buyers according to their current and prospective future needs. BfloGuy’s list of the characteristics of gold provides a good set of reasons for choosing gold over fiat currency units if the need is to preserve a portion of one’s wealth through a period of severe financial distress and potential communal turbulence, where the authorities who control fiat currency issue are creating new units at a rapid pace.

If I am thirsty and water is in very short supply, a jug of drinkable water will have very high subjective value to me. I might even exchange its weight in gold or diamonds if I had them and were thirsty enough and could not foresee any other means of getting access. If I am not thirsty, and can foresee access to ample supplies of drinkable water, a jug of water may have negative value to me, if I am already weighted down with other things. Similarly with foods of various types. They will have zero to high value to me depending on how well fed I currently am, and the prospects for future access. Again, neither these or any other commodity has “intrinsic value” apart from buyer’s present and future needs.

In an armageddon type situation, large cashes of gold wouldn’t help an individual much...

You don’t buy gold to help YOU survive a crisis, you buy it to help YOUR WEALTH survive a crisis.

No one is suggesting gold is edible, or should be bought instead of food and other critical supplies for surviving a crisis.

We’re talking about what savings vehicle to employ for our spare money. The alternatives aren’t edible either.

(PS: It’s “Caches”)

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