Thursday, April 5, 2012

Today's Gold Price Action

Today's price action is more than liely a hangover from the action yesterday when the FOMC released it's minutes from its January meeting. Yes, January. The market now reacts to Fed Speak from two months ago. No more QE just yet, was the word.

Just yet.

However, the price is heading south, so I repeat a comment from Turd Ferguson's site today. Well worth the reading.

"Look, the gold market that we chart is a physical gold derivative market. This derivative market sets the price of physical gold that we should all be stacking. This market is dying. Upon its death a physical only market will take precedence and the true price of physical gold will emerge, untainted by derivative paper gold supply that cannot provide a path to real and physical ounces.

The Comex will collapse along with the price of gold established by it. This is nothing more than the market rejecting a derivative that cannot possibly perform in favor of the underlying asset. Stackers should be quite pleased with the current price action because as long as this market can remain liquid they are getting more ounces of real and physical gold for their dollars. Additionally, the path to Freegold as described at the FOFOA blog, is through the collapse of the price of "paper gold", not via a moonshot in price. If price is falling we always face the possibility that the US Dollar International Monetary and Financial System is finally approaching its last gasp. That means Freegold valuation and a physical gold price that is many multiples of the current price.

Understand that the process of Freegold price discovery will not occur as a result of continuous market action where we watch our gold climb up and to the right on the chart. It will result following a discontinuity in the market when the paper price discovery mechanism collapses and ceases the possibility of physical delivery. There will be the mother of all waterfalls and then a period where you will have no idea what physical gold is worth. Just try buying a physical ounce when all the "claims" for gold try to perform. At some point some entity of size, likely a central bank will initiate a physical only market where the bid and ask will water your eyes. Then the stacker will know the value of his gold in currency terms.

The hand wringing about the gold price is symptomatic of paper gold traders and their belief that paper gold can save them and their wealth. It is also symptomatic of someone who knows their stack is not yet big enough and who is afraid that access to physical gold may be coming to an end too soon.

Turd says that people should quit trading and simply acquire physical gold in hand. I agree. I am quite pleased that Comex gold is plunging. I will be buying physical below $1600 WITH CREDIT. I hope Comex gold crashes all the way to 3 figures. It will mean Freegold is at hand and I am retired. If this kind of thinking doesn't make sense, I suggest a thorough examination of the FOFOA blog and the concept of Freegold."

And then this comment from Jim Sinclair:

"I really think ego has overcome the profit motive in the last two days. This changes nothing as to where gold is going in 2012 and beyond. It just makes trading impossible and charts useless, leaving only international fundamentals that will not be MOPEd away to make the final determination of the gold price.

It coils the spring in the market even tighter than physics will allow, making the break out to the upside when it comes something to behold."

Then this from Truth In Gold, "How will the U.S. Government fund all of the additional budget deficit spending that has already been built into this year's spending plans if the Fed does not print money in some fashion in order to help finance all of the new Treasury debt issuance in 2012? "

Remember, these are unprecedented times, the markets are not normal. Do not be shaken out of holding physical gold and silver.

Gold in New Zealand dollars: $1991.41 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $38.43 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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