Why Is the Price of Gold Falling?

The Atlantic ^ | 08/18/2012 | Jordan Weissmann

[SeekAndFind]

China's problems are gold's problems

Investors who love gold tend to think of it as a sort of bomb shelter. It's supposed to be a secure place to park your money when the rest of the financial world is blowing up.

So some may find it surprising that in a year when Europe's troubles have thrown the global economy into fits, gold has been a loser's bet. The price per ounce of everyone's favorite rock is down about 7percent for the year and is off 15 percent from its September peak. According to a report released yesterday by the World Gold Council, total demand for gold fell 7 percent in the second quarter of 2012 compared to the year before.

Let this be a reminder that, no matter how long it's been around, gold just isn't that special. It's a commodity that responds to the laws of supply and demand. Unlike commodities such as wheat or oil, which you can at least eat or burn for fuel, gold pretty much lacks any inherent value beyond what the market assigns to it. And in the past decade, much of the new demand that set gold off on a wild tear from around $300-an-ounce at the turn of the century to almost $1,900-an-ounce last year has come from two places: India and China. Combined, they account for 45 percent of the world's demand for gold jewelry and bars.

[montanajoe]

I've been a gold bug for 40 years. Gold is/has been in a bubble and will crash. There is no where on the planet where the cost of production is greater than about $800.000/oz and is much lower than that in most places.

If folks want an inflation hedge and believe in the long term the economy and western civilization will survive the WOT then acquiring a bit of gold or other precious metals is not a bad idea.

If you are like me and you have little faith we will win the WOT then gold and the precious metals is a foolish investment.

If this country sustains an attack with WMD in multiple locations its over for the USA and precious metals will be denominated in the price of food at the third world subsistence level not what anybody paid for it. In my opinion land, in carefully chosen locations, food, and investments in self reliance are far better investments for the future as I see it.

[E. Pluribus Unum]

All bubbles come to an end.

[notpoliticallycorewrecked]

I concur. Since gold goes up when oil goes up, me thinks that everyone knows that when Romney wins in Nov the oil prices are going to plummet. The gig is up in the foreign oil market.

[montag813]

That is a consolidation chart, after an insane run to the peaks. Nothing is “falling”. This idiot acts like $2,000 is its natural level or something.

[Jet Jaguar]

Gold bug ping.

[Zakeet]

Gold is money, everything else is credit – J.P. Morgan

Several things to consider about gold prices:

• The price of gold isn't exactly falling when measured over a term of, say, the past decade. The worst one can say is that it has been consolidating for the past several months ... as it approaches its long term trend.

• Of course, the above chart shows the price of gold in US dollars. This currency has been extremely strong lately, largely because the fundamentals driving all other currencies are so terribly weak. Priced in euros, gold is close to its all time high.

• The central banks have been known to rig LIBOR, interest rates, currency exchange rates, and (gasp) precious metals prices. Gold reflects the results of their ruinous economic policies of borrowing excessively and repaying debt with printed money. It is therefore essential for them to suppress gold prices.

• The prices shown are for "paper" gold traded on the Comex (among other places). Physical gold trades at a premium and is difficult to find in reasonable quantities.

• The fundamentals driving the world economy are horrible. Most of the people whose economic opinions I respect believe we are heading for a hyperinflationary depression. In this case, the price of precious metals will soar. In his best selling book, Currency Wars, James Rickards predicts that gold as an M2 substitute with only 20 percent of the currency values based on the metal would sell for over $44,000 per ounce. Many believe that his estimate is extremely conservative.

• Gold and silver are the only currency equivalents with no counter-party risk. Compared to dollars, euros, yen, pesos, and any other monetary unit, there is ... no comparison.

In Conclusion: Always remember this old Chinese proverb – Man with silver coins will always eat; man with gold coins will always have friends; man with paper money can always wipe butt!

[Revolting cat!]

It was too high, that’s why!

[BipolarBob]

Darn it! I wanted to buy it in the $1900s, now it’s too cheap.

[Safrguns]

It’s falling because George Soros wants it to... so he can buy it at the bottom right before everyone’s dollars turn to crap.

The only man i’m aware of that can manipulate the market on a daily basis and get away with it.

[Chickensoup]

Now there is a useful target for Seal Team 6.

[Presbyterian Reporter]

“”•The prices shown are for “paper” gold traded on the Comex (among other places). Physical gold trades at a premium and is difficult to find in reasonable quantities.””

—

Apparently you are not aware that you can buy a gold futures contract on Comex and take delivery of physical gold.

You can buy an August 2012 futures contract on Comex today for about $1619 and take delivery of the 100 ounce bar at the end of the month. All you need is $161,900 to do the deal. It is the cheapest way to buy gold.

[SeekAndFind]

RE: There’s a lot of people betting on the Kenyon getting the boot.

So, you seem to be saying that if Obama gets re-elected, Gold will skyrocket and if Romney gets elected, Gold will fall...

[rawcatslyentist]

Soros bought in pretty big a couple of days ago. FWIW

[sten]

of course the price of a commodity will drop...

if you flood the market

it’d be nice to get a count of what we have left

[packrat35]

Its nice to see such a common sense post on gold here on FR. Way too many goldbugs with too much shine in their eyes to see reality.

[SunkenCiv]

Thanks SeekAndFind.

[DeaconBenjamin]

Are you kidding? I’ve read dozens of posts of people whose fathers bought gold at $850/ounce during the 3 minutes it was sold at that rate.

[DeaconBenjamin]

If the dollar becomes like the Icelandic Krona was in 2008, then if you need to import something, like certain medicines or tools, you better have something a foreigner would want.

[scooby321]

The Rothschilds just shorted the EURO for 130 Million Euro's.

Goldman warns of a financial Cliff disaster

Soros, Rothschilds and Goldman have close ties to every Major Government in the free world and more

[Zakeet]

Apparently you are not aware that you can buy a gold futures contract on Comex and take delivery of physical gold.

Of course, you can buy some physical ... a little bit at a time. But, as noted in my original reply, not in reasonable quantities.

Apparently you are not aware that approximately 98-99 percent of all Comex futures paper settle. There simply is not enough physical to meet delivery requirements.

There's nothing like getting fiat (provided your account balance hasn't been stolen by a broker-dealer shades of MF Global and PFG), or even worse GLD shares, when the dollar crashes.