The Only Expert On Gold Is...

October 5, 2010

There is no shortage of predictions and opinions, experts and forecasters, theories and ideas. Despite this, certainty is in short supply and chaos threatens to become the new norm.

Jobs, wealth, sanity and values are constantly at risk as imbalances between supply and demand, expectations and sacrifice and performance and rewards are creating dysfunctional individuals, families, corporations, economies and societies.

One of the most disturbing developments is that everything seems to be taking on the appearance of a guess followed by a bet, rather than a vision followed by a strategy and action. In short, it seems that profit is pursued for profit's sake.

It is for this reason that I find the constant guesses about the future price of gold or silver to be disturbing. An individual who really understands the value and role of gold and silver in a historical context is never overly concerned about their fluctuating price. The person who is fixated on price tends to forget that banks might close their doors, that corporations can go broke, that governments can break promises but that gold and silver can never do such things.

Do you want a prediction about the price of gold? How about the one given by none other than Paul Walker the CEO of GFMS Ltd back in September 2008 at the convention held in Denver?

As you can see, Mr Walker made not one but three predictions about the price of gold in 2010. The lowest price was around $630 and the highest was around $930. Not much of an expert on the face of it even though Mr Nadler of Kitco gives him star billing in his column of October 1, 2010.

The point of using Mr Walker and his predictions is not to ridicule the man but to emphasise how markets that are constantly being interfered with will make fools of all of us and our predictions when we choose to base them on the expectation that governments will pursue logical strategies rather than insane interventions. The writer who predicts $7,000 is also mistaken in believing that a functioning dollar could still be circulating at that level of gold price.

What we all need to understand is that gold and silver silently and without assistance, track the sum total of all financial, economic, political and sociological developments even when they are buried in the ground or stashed in some safe. Gold in particular is a strange chimera that is part mirror, part canary, part thermometer and part armour. In short, the only expert on gold is gold itself just as nature is the only true expert on nature.

Mr Walker, with all due respect to you and your friend Mr Nadler, I must voice some serious reservations with your observations as noted by Mr Nadler. In short my position is as follows in relation the summary of your position provided by Mr Nadler:

  1. The fall off in jewellery demand and the take-off in investment demand is nothing more than the welcome rediscovery that gold is in effect wealth that requires no legal system or contract to survive both time and human folly.
  2. Investment demand is not fickle. In fact one must understand that the true level of gold purchases for jewellery is not what is paid for raw gold but what is paid for retail acquisition of jewellery itself. People are belatedly realising that buying gold bullion will give them more bang for their buck than buying jewellery.
  3. You say that investment demand must inevitably turn negative within the next five years. I agree, but only if nations give up massive operating deficits, reverse gargantuan national debt piles, make social security and Medicare promises sustainable and reduce unemployment to under 7%. How possible are these changes?
  4. The bull case for gold will not be over until governments allocate to gold a meaningfully functional role in the world's financial system. The ongoing persistence by governments to ignore and debone gold is only securing its upward ascent despite the occasional pull back. Moreover, one wonders why governments place greater trust in QE.
  5. If and when the US Fed decides to return to positive interest rates this will be more of a threat to housing and the accumulated national debt than it is to gold. Your belief that the US economy will return to growth in the next two to three years does not recognise the true level of growth that is needed to reverse years of economic ineptitude and damage. The US will have to destroy debt to reverse its predicament and all debt is in paper. Gold however, is not paper and cannot be destroyed.
  6. People will not stop buying gold until a nation's currency is once again a store of value and is not subjected to concerted efforts to devalue it by its own government. The dollar has not been a store of value since the Fed came into existence almost 100 years ago. Do you honestly think it will become a store of value in the middle of efforts to write-off debts by debasing currency?
  7. You acknowledge that you have no problem with gold going over $1400 given the current economic mess. The next step will be to understand the worsening mess that awaits us once QE2 works its magic.
  8. You have a suspicion that positive real interest rates will return sooner than most of us think but you do not explain what will happen to the rest of the economy including housing, the national debt and unemployment. Perhaps you need to view the recent 8 minute You Tube video by Congressman Alan Grayson explaining the US Foreclosure Fraud Crisis.

Gold is ignored by the establishment in the same way that many capable human beings are ignored for higher positions. The masters of the system have a vested interest in maintaining the status quo and for this reason gold will also have to wait for its day to well and truly return.

I repeat dear readers: if you find the developments in this world to be confusing, frightening and illogical and have problems deciding on a strategy, then place a decent percentage of your liquid and paper wealth in precious metals and get on with the rest of your life. Gold and silver after all, are not magic bullets for everything that afflicts humanity, but they sure do beat the leeches in government and banking that are trying to drink our blood.

Sydney Australia

Small amounts of natural gold were found in Spanish caves used by the Paleolithic Man about 40,000 B.C.

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