Tag Archives: NYSE

Japan and China start new (bidding) war (for gold)

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Reuters / Tyrone Siu

Citizens of America’s two biggest creditors China and Japan are now fighting each other to buy Gold and Silver. But could they be doing something more intelligent with their time and money?

Mrs. Wang, China’s mythical housewife is buying Gold hand over fist, so is Japan’s mythical housewife Mrs. Watanabe. Unlike during past downturns in the price of Gold, the peasants (anyone not a partner at Goldman Sachs or JP Morgan) are reacting with long queues at the local bullion dealer with fistfuls of fiat, fractional bank reserve notes to swap for the currency of kings: Gold.

Apparently, the emerging world ‘gets it.’ There will never be an exit from the Quantitative Easing by any of the world’s central banks. (The ECB has just reduced rates to ½% to match the UK). The Fed in America is sticking to their ultra-low rates and Japan led the parade decades ago with their Kamikaze ZIRP (Zero Interest Rate Policy) monetary madness.

In private conversations, the world’s central bankers let slip that their plan is to keep interest rates close to zero for 10, 15 years or longer – however long it takes to increase the global population enough to create enough ‘violence growth’ to start retiring some of the $100 trillion in debt on these bank’s books.

In other words, there is no exit. There can be no exit. There will only be more money printing and all fiat currencies around the world will continue to be debased until the sheer size of the global population is so great growth occurs as overpopulated areas start fighting each other for air, water, and food. This is the banker’s plan: everybody fighting everybody with the survivors needing credit (inflation) and the losers dying (deflation).

Citizens of America’s biggest creditors; China and Japan, aren’t waiting around, they are doing the equivalent to picking up their pitchforks and torches and buying gold in record amounts. On the NYSE $16 bn. in ‘paper gold’ was sold via the exchange traded fund GLD while Chinese housewifes (and other members of their households) bought that amount and then some. The wealth that is Gold is being transferred from West to East. Paper gold is being swapped for physical.

And what about the China and Japan saber rattling the disputed Senkaku islands? I implore both the Chinese and the Japanese to see past this silly island dispute and instead focus your combined, massive buying power to take enough physical gold and silver off the market to put the Western paper bugs and market manipulators out of business. Your skirmish over islands is a rear-guard action that will amount to nothing. Instead, fight the real enemy: the US dollar and the bankers who – by virtue of the Dollar as world reserve currency – get your people to finance America’s wars in the Mid-East and Africa.

This is the time to do some deep soul searching and realize the enemy is not each other China and Japan, but the common enemy, the US dollar.

Source: http://rt.com/op-edge/japan-china-war-gold-827/

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Will You Be Buying Groceries With Gold Soon?

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The Arizona legislature last week tried to legalize shopping with gold and silver coins. Thankfully, Gov. Jan Brewer quickly put the kibosh on the idea, vetoing the law on Thursday. But even if she hadn’t, it never would have worked. I’m sorry. Did that statement sound a bit too matter-of-fact? Too dismissive of the gold bugs’ idea of a “sound monetary policy”? Well, let’s consider the evidence. Bugs of a feather flock together Arizona’s proposed law was flawed from the get-go, because it fatally misunderstood the philosophy behind precious-metal investors. Stock investors sometimes buy gold stocks such as Yamana Gold Inc. (USA) (NYSE:AUY) or Goldcorp Inc. (USA) (NYSE:GG) in hopes they will rise in value, so they can cash out at a profit. (Although with Yamana shares down 13% so far this year, and Goldcorp down 21%, there have been precious few profits to cash out lately.) They’re equally willing to trade one gold-mining stock with a high P/E (Goldcorp Inc. (USA) (NYSE:GG) costs 16.5 times earnings for example, and Yamana Gold Inc. (USA) (NYSE:AUY) more than 20) for a gold miner that looks cheaper than the competition — for example, Newmont Mining Corp (NYSE:NEM), which costs only 10 times earnings. People who buy actual precious metal — or invest in it vicariously, through ETFs such as SPDR Gold Trust (ETF) (NYSEARCA:GLD) or iShares Silver Trust (ETF) (NYSEARCA:SLV), which own actual ingots — have a different motivation. They buy gold or silver because they think it’s safer than cash. They’re convinced the metal will hold value over time. More than that, they’re convinced it will gain value over time. Hence, they’re wholly uninterested in converting their gold or silver into cash, or, even worse, converting their gold and silver into orange juice and Oreos at the supermarket, as Arizona’s law would have permitted.

Had Gov. Brewer signed Arizona’s bill into law, Arizona would have joined Utah as the second state in the Union to permit use of gold and silver coins as currency. Colorado tried to follow suit last year, but the bill died in the state Senate, and several other states are said to be contemplating, or actually working on, similar legislation. But for now, the sole state in the nation that permits use of gold and silver as legal tender is Utah. So how’s that working out? Recognizing that even with the law’s passage, few Utahns would feel comfortable walking down the street, their pockets a-jingling full of gold and silver coins (muggers being one risk, holey pockets another), Utah came up with an alternative. Rather than literally paying for goods and services in gold coins, the state permitted the establishment of a depository — the Utah Gold and Silver Depository — where folks could deposit their precious-metal coinage, and bullion as well. Deposits would be linked electronically to debit cards at UGSD, which account holders could then use to pay for goods and services with funds backed by their gold and silver — funds that automatically translated the day’s price for an ounce of gold, for example, times the amount of gold in an account, into a current gold-backed balance that could be paid out of the card.

Source: http://www.insidermonkey.com/blog/yamana-gold-inc-usa-auy-goldcorp-inc-usa-gg-newmont-mining-corp-nem-will-you-be-buying-groceries-with-gold-soon-134858/

Gold: The fear bubble bursts

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The total amount of gold in the world, according to Thomson Reuters, is 171,300 metric tonnes, or 5.5 billion troy ounces. What that means is that every time the price of gold falls by $100 an ounce, as it did on Friday and it has done again today, the value of the world’s gold falls by more than $500 billion.

That doesn’t mean investors have lost $1 trillion in the space of two trading days. Some gold is used in industry or jewelry, and there’s a huge amount in central banks, which don’t mark to market and therefore aren’t really investors as we normally understand the term. Still, with a “market capitalization” at the end of 2012 of about $9 trillion, the gold market is not much smaller than the NYSE, is twice the size of the Nasdaq, and is almost three times the size of the Tokyo and London stock exchanges.

As a result, the falling price of gold is more important than simply being an opportunity for schadenfreude around the likes of Glenn Beck or John Paulson or Zero Hedge. At the end of 2012, for instance, Paulson owned 21.8 million shares of GLD. Those have sunk some 19%, or $30 per share, since then — a total loss of more than $650 million, for Paulson and his investors. But that’s just a drop in the bucket compared to the $1.6 trillion wiped off the value of gold more generally during the same period.

To put that number in context, the NYSE has risen 6.6% since the end of 2012, a rise in value of some $930 billion. Which means that the value of gold has been falling faster than the value of stocks has been rising. But gold is held in much more concentrated hands: most people have very little exposure to it, while a relatively small number of investors have huge allocations. As a result, the wealth effect from the fall in gold prices is likely to be felt quite acutely.

Gold is the classic zero-coupon perpetual bond: an asset whose industrial value is a tiny fraction of its cash value, and which represents, as Joe Weisenthal says, a costly failure of markets to efficiently allocate capital to where it is best invested. Goldbugs are by their nature defeatist and pessimistic; get enough of them together at the same time and they become self-fulfilling. (That’s why they tend to be so evangelical about their beliefs.)

So what does the fall of the gold price mean for the rest of us? The first thing to worry about is the wealth effect: if people have suddenly lost a trillion dollars, does that mean they’re going to spend less, and hurt the broader economy as a result?

I doubt that, somehow. About 2,500 tonnes of gold is tied up in gold ETFs. That’s about 80 million ounces, which translates to investor losses of about $16 billion in the past couple of days. On top of that, there have probably been about $3 billion of losses in the futures market. Those numbers — a proxy for the gold positions which are marked to market regularly — are relatively modest: they’re much smaller than the $100 billion or so that has been wiped off the valuation of Apple this year alone.

What’s more, very few investors have leveraged positions in gold, and when asset bubbles burst, it’s normally the leverage, more than the bursting bubble itself, which does the most damage.

Still, there will be pain — pain which is necessary to break the gold fever. It’s important that goldbugs are seen to not only have silly beliefs, but also to have lost a substantial amount of money. Gold is a fear trade rather than a greed trade — it’s defensive, and defensive investors are always particularly loss-averse. If you lose money betting on high-flying tech stocks, that’s much more likely to be money you can afford to lose than if you lose money after putting your life savings into precious metals. (Silver, as befits its status as the “B” share of gold, is also being hit badly today.)

The biggest problem in the markets right now is that they’re still far too risk-averse. Fear-based assets like gold, Treasury bonds, and cash are in high demand, while there isn’t enough money flowing through greed-based assets like stocks and bank loans and into the economy as a whole. Even if the stock market is expensive, the number of primary and secondary offerings remains low; similarly, banks are not expanding their loan books nearly fast enough.

What the system needs, then, is a stark reminder that fear-based assets can be just as risky as greed-based assets. Rising interest rates can eat away the value of your bond portfolio, inflation can erode your cash, and as for gold (or bitcoins, for that matter), well, it can plunge in value literally overnight.

My hope is that the price of gold will continue to fall, that goldbugs will look increasingly silly, and that as a result Americans with savings will conclude that the best thing to do with those savings is to put them to work in a productive manner, rather than self-defeatingly trying to protect what they have.

At the end of the 1990s, and again in the mid-2000s, we had greed bubbles. Both those bubbles burst, and the weird result was a fear bubble, which manifested itself in negative risk-free real interest rates and a soaring price of gold. Let’s hope that what we’re seeing right now is the fear bubble bursting. It’s what the world needs.

Source: http://blogs.reuters.com/felix-salmon/2013/04/15/gold-the-fear-bubble-bursts/