And Gold Is Down $500

Let me see if I've got this straight...

In late August and early September of 2011, gold peaked at a price just north of $1900. It is now May of 2013. In the 20 months since, we've seen:

  • Total U.S debt increase by $2,000,000,000,000. And yet gold is down $500.
  • A pegging of the value of the Swiss Franc to the euro. And yet gold is down $500.
  • The collapse of MFGlobal and outright theft of client assets. And yet gold is down $500.
  • Civil war and revolution in Tunisia, Egypt and Syria. And yet gold is down $500.
  • The expiration of "Operation Twist", leaving The Fed's balance sheet with nothing but longer-term treasuries and near-worthless Mortgage Backed Securities. And yet gold is down $500.
  • The re-election of Barack Obama ensured a continuation of his Keynesian-inspired, virtually limitless deficit spending policies. And yet gold is down $500.
  • The Fed announces that it will create from thin air $40B per month in order to fluff the balance sheets of Primary Dealer banks. The Fed will create this $40B and exchange it or near-worthless CDS at a full price, $1:1 rate. And yet gold is down $500.
  • The U.S eked out a measly 2.2% in GDP growth in 2012 and will not likely see even that much "growth" in 2013. And yet gold is down $500.
  • The U.S Labor Force Participation Rate has fallen to the lowest level since 1979. And yet gold is down $500.
  • In December of 2012, The Fed announces that they will resume the direct monetization of U.S. debt, to the tune of $45,000,000,000 per month. And yet gold is down $500.
  • U.S. interest rates have fallen to historic lows, with the 10-year note yielding just 1.63%. And yet gold is down $500.
  • The U.S. Congress voted to suspend their subjectivity to the "debt ceiling". Therefore, they are not currently bound by a single spending constraint. And yet gold is down $500.
  • In Cyprus, bank depositors are informed that, as a matter of fact, their deposits are NOT insured and that they will be subject to losses ranging from 10% to 100%. This clearly sets a template for future eurozone bank insolvencies. And yet gold is down $500.
  • The S&P 500 has rallied over 30%. And yet gold is down $500.
  • China officially imported through Hong Kong 835 metric tonnes of gold in 2012, up 94% from 2011. And yet gold is down $500.
  • The Shanghai Gold Exchange has allocated and delivered over 1000 metric tonnes YTD in 2013. And yet gold is down $500.
  • The Shanghai Commission of Commerce reports that retail gold and jewelry demand is tracking 108% higher over 2012. And yet gold is down $500.
  • China establishes multiple, direct global currency swap agreements and its finance ministers are quoted as expressing approval of a new gold standard. And yet gold is down $500.
  • India imported nearly 800 metric tonnes in 2012 and looks to import another 600 metric tonnes in 2013. And yet gold is down $500.
  • For the first four months of 2013, reports out of London indicate daily allocations and deliveries of 15-25 metric tonnes. And yet gold is down $500.
  • Comex gold inventories have sunk to levels last seen in 2008 and total registered gold is just 65 metric tonnes. And yet gold is down $500.
  • Comex gold deliveries for February and April 2013 exceed the combined total of all six delivery months in 2012. And yet gold is down $500.
  • Germany announces a plan to repatriate some 700 metric tonnes of gold from storage in France and New York. Curiously, it will take over seven years for this plan to be completed. And yet gold is down $500.
  • In April 2013, the U.S. Mint sold 209,500 ounces of gold, more than 10X the amount sold in April of 2012. This is also more than the combined sales of April 2010, April 2011 and April 2012. And yet gold is down $500.
  • Year to date, The Mint has sold 502,000 ounces of gold. This is a run rate of 1,500,000 ounces. This is double the total for 2012 of 753,000. This is 50% more than the total for 2011. And it puts 2013 on a pace to exceed 2009 as the biggest selling year ever. And yet gold is down $500.
  • The Japanese government has set out on a course to significantly devalue the Yen. In just the past seven months, the Yen has fallen in value by nearly 30% when compared to the U.S. dollar. This at a time when the U.S. Fed is actively devaluing the Dollar by creating from whole cloth 85B new dollars each month. And yet gold is down $500.
  • Interest rates on German bunds hover near zero, at times going negative. And yet gold is down $500.
  • The price of a barrel of crude oil is up about 15%. And yet gold is down $500.
  • Yesterday, the FOMC indicated that they were "prepared to increase or reduce the pace of its purchases". This is the first time The Fed has stated that $85B/month may not be enough and that QE∞ may soon "increase", instead of diminishing and ending. And yet gold is down $500.
  • Today, the ECB indicated that they have "an open mind toward a negative deposit rate". This means that, soon, eurozone depositors and savers will have to pay the banks for the luxury of having the banks hold their deposits for them. And yet gold is down $500.

I think I'll just stop there. As you can see, despite this list of overwhelmingly positive fundamentals, the fiat-conversion value of gold has fallen by nearly 25% since August 2011. What happened then and why is that date so important?

  1. The U.S. credit rating was downgraded by S&P to AA+.
  2. The U.S. "debt ceiling debate" demonstrated to the world the complete unwillingness of U.S. politicians to harness runaway fiscal and entitlement spending, guaranteeing continued and endless dollar devaluation.
  3. The pegging of the Swiss Franc to the euro left the world without a single, responsible fiat currency. As such, the only remaining "safe haven" currency became gold and this left gold in final and direct competition to the existing fiat currency structure. 

So, now, you are left with a choice. Are you a thinking person OR are you part of the mind-numbed masses? Do you trust your own accumulated wisdom and instincts OR are you easily persuaded by the bureaucrats and their agenda-toting media accomplices? Will you remain steadfast and recognize these events for what they are OR will you capitulate and succumb to MOPE-induced doubt?

If you are who I think you are, then I look forward to seeing you back here tomorrow. It's BLSBS day again and the action is certain to be volatile. Have a great day.