Friday, June 22, 2012

The Lustre is off Gold: Really?

So, gold down to US$1566 today, silver down to US$26.90.

Gold and silver are finished. It's a race to the bottom.

Not.

Interest.co.nz today has an article about gold. The headline reads; "The lustre is off the gold price as central bank actions and weak Indian jewellery demand both work against the precious metal".

The central banks are not working against the price of gold. This is nonsense. Do we see any central banks on the planet selling gold? The Federal Reserve maybe? No. Do we see any of them buying it, most certainly. In fact, in spades. If the writer deems the Fed not handing out QE3 right now as 'working against gold', then that is an assumption based on a narrow view of what is currently happening.

Moreover, the graphs in the article actually show quite bullish trends over the past 12 months. Now I don't subscribe to the gold bug mantra that the MSM (main-stream media) are always trying to talk down gold and silver. I just think the MSM don't quite understand the way money works. Big call I know, but when you get major economists and even powerful politicians mis-understanding the way this system works, then sure, gold and silver will also be misunderstood.

For New Zealanders, gold still highly outperforms most other 'conservative' investments, including the delusional kiwisaver.

Look at this from Local Bulletin. They delve closely into kiwisaver and come up with some surprisingly negative conclusions. Here is kiwisaver's performances as against other investment classes:





Interestingly, here's their recommendation on kiwisaver:

"to opt out (of kiwisaver) is the second best thing you can do, right after the first best thing which is never joining this scheme in the first place. In our several previous articles we argued why KiwiSaver is a bad retirement investment choice for you. Our recommendation is to avoid it and if you are already in then opting out of there."

Perhaps gold and silver will drop some more, but if you put the puzzle together of how the system works and what is required to keep it going, you only come up with a single answer to all the shenanigans. More QE (money printing) is required. It is how the system works. Here is a quote from the Daily Reckoning yesterday which best explains this:

"If they do print then all I have to say is buy gold. Lots of it. Buy gold stocks. Even buy silver. If Bernanke is happy to embark on QE3 with the stock market 4% from its highs then you can rest assured he is going to keep printing until the whole rotten edifice comes crashing down on his head. Gold will be trading above $5,000-10,000 by then.

Lastly, if you have a spare couple of hours, watch this video about how money works. It is well constructed and relatively easy to understand. It does have political overtones, but you can screen those out yourself.

Gold in New Zealand dollars: $1988.00 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $34.13 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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The Anglo-Far East Company
AFE is the gold bullion custodial provider of choice for the sophisticated investor,
families, and institutions that require the highest level of discretion, competence,
safety, and service.
Your reference: an-001
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