The Phaserl


Why the Government Hates Gold

by Bill Bonner, Daily Reckoning:

“It’s a total disaster. It’s like hell here.”

Thus did a trader describe the reopening of the Greek stock market.

The main Athens stock market index, the Athex, ended the day down 16%, after trading was allowed for the first time in five weeks.

And it was down by more than 23% just minutes after the opening bell.

Down and out… despised… scorned – the situation in Greece is excellent.

For investors with ultra-long-term time horizons and strong constitutions, it may be a great time to buy Greek stocks…

Yes, prices are being discovered again… by free declaration of buyers and sellers.

Owners of Greek stocks are discovering that their equity stakes aren’t as valuable as they believed.

But for every seller there is a buyer…

Sellers are losing money. Buyers believe they are getting a bargain.

You can fool all of the people some of the time. Some of the people all of the time. And most of the people once in a while.

You can obstruct price discovery and you can disguise and distort the real value of things. But Mr. Market will get even someday. He always does.

Yesterday, we mentioned but did not explain, that Alan Greenspan betrayed Mr. Market…

In 1987, after President Reagan appointed him Paul Volker’s successor as chairman of the Federal Reserve, Greenspan went over to the zombies… or more precisely, to their allies, the cronies.

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1 comment to Why the Government Hates Gold

  • rich

    Demand For COMEX Physical Gold Deliveries Doubles In August

    Playing a seller, in a fantasy forum, where “sellers” don’t have what they purport to sell is fun and easy when buyers don’t have money to buy. Once buyers have money, the rules change. The games becomes unpleasant. The gaming casino becomes more difficult to manage. That is important, because physical gold buyers are quite different than their under-capitalized hedge fund manager counterparts.

    The buyers who will take delivery this month, for example, have deposited the full cash value of 921,500 troy ounces of gold! The June bailout saved some COMEX clearing members from doom, but it also provided the perception that the US government stands behind COMEX deliveries. As the delivery months pass, the demand for forcing physical gold out of COMEX will grow ever larger.

    Will COMEX implode? Not necessarily. There are more bailouts to come. World gold price control is a precious resource, as explained in detail here. It will not be relinquished easily. But, reliable forecasts are suggesting that total gold supplies, including mining, scrap and ETF selling in 2015 will amount to 4,155, which is 695 tons less than in 2013. Similarly, supplies are expected to shrink even further, to 3,585 tons in 2016, 260 tons less than in 2015. And, demand will rise higher if prices stay this low or fall further.

    In 2013, there was a large deficiency of gold, but it was washed away by equally large ETF redemption. In 2014, there was a deficiency of about 600 tons. This year, the deficiency looks certain to be at least 1,350 tons. In 2016, there’s a decent chance of a 2,603 ton deficiency if current demand trends hold. Even if the supplier of last resort has 8,100 tons of gold on hand, how long can this go on?

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