Thursday, April 8, 2010
It's Just Gold's Time
I congratulate GATA and applaud whistleblowers for taking risk to life and career to expose the market manipulation in precious metals. It exists. It is not a tinfoil hat thing, it is reality.
However, it is important to not lose sight of the longer term and in the longer term, manipulation doesn't work. Gold will go where it was meant to go regardless of the "powers that be." For those who are shocked by the paper Gold schemes out there, you haven't read your history. For paper Gold schemes are as old as the hills. Gold is the enemy of a paper fiat regime because it exposes the truth, but it has also been used by powerful financial interests to make money for centuries. Gold is money and has long acted as the basis for lucrative ponzi schemes.
So, yes JP Morgan, the federal reserve and others can fight the paper Gold price at opportune times and slow its growth briefly. Just as they do in the stock market, bond market and currency market. It all depends on how you define manipulation. Is every options expiration week an act of fraud in front of our eyes? Perhaps it is depending on one's definition.
Gold will continue to move higher regardless of what any "cartel" wants. Why? Because it is in a bull market! A secular credit contraction in the private sector equals a Gold and Gold stock bull market. This will continue until the Dow to Gold ratio gets to 2, and we may well go below 1 this cycle.
But to call the current paper Gold ponzi scheme the greatest financial crime in history is incorrect in my opinion. The crime is paper money backed by nothing and allowing a private corporation to control the issuance of a sovereign nation's money. I think Nixon closing the Gold window and Roosevelt criminalizing private Gold ownership are much worse than trying to suppress the paper Gold price.
The other crime is that so many paperbugs believe the misinformation campaign of those who hold the monetary reigns. Gold is denigrated, smeared and ridiculed because propaganda works! Economics as taught in universities around the world is as scientific as creationism. If people in positions of power say something over and over again, most people accept it as truth.
Those who understand what is happening and where we are in the economic cycle have been quietly accumulating precious metals for some time. They will be financially rewarded, regardless of any short-term blips in the price. And the funny thing is that JP Morgan will make more money off the rise in the paper Gold price than almost anyone, as they will be long at the right time and will use massive leverage. It is frustrating to acknowledge, but such is the way the world works. We ants have to accept what we cannot control unless we seek to lead or join a revolution.
There will be a panic into Gold before this bull market is over, but it is rational to expect it and it requires no conspiracy theories to occur. I am not saying there are not conspiracies - of course there are and there always have been. For me, though, there is politics and there is investing/speculating. Though they are intertwined, I am more interested in the financial side of things, as I have given up on politics changing in any meaningful way. The United States began on the road to fascism the day the federal reserve was created. Things are simply speeding up slightly, that is all.
Gold's bull market has a long ways to go. JP Morgan can't stop it, nor can the federal reserve. Investing in Gold is not a vote of confidence in the economy. But once the Dow to Gold ratio hits 2, it is time to develop an exit strategy. For someday soon, people at cocktail parties will actually discuss Gold investing without laughing or rolling their eyes. They will do it without speaking of eating the Gold or buying a log cabin. This will be about the time that Gold is getting overvalued.
I won't be holding my precious metals or precious metal stocks forever, as the swinging pendulum of history dictates that cash-producing businesses and the stocks behind them will become undervalued at some point. I don't fear missing this opportunity in general stocks, I fear being too early in buying regular stocks. For now and the forseeable future, it is all things precious and metal where money should be invested. All I see right now is a Gold market moving higher since the early February lows, with Gold stocks outperforming the metal price since this low. This is bullish. New highs in Gold and Gold stocks are ahead, regardless of what the boogeymen want.