Gold is money, not a commodity
Global commodities are in a deep and awful rout at present due to a world in economic doldrums. We find ourselves this week with the situation on the COMEX gold futures exchange where we have a record number of contract claims to each eligible physical ounce, the ‘managed money’ speculator category at record short positions (selling something they don’t own with a view to buying it back at a lower price before ‘delivery’) and the commercial’s (banks, miner hedges, etc – i.e. the ‘smart’ money) the opposite. Indeed the speculators are short by 11m oz and the market as a whole short by a record 1.4m oz. But there are a couple of takeaways from this:
- Firstly, as we’ve reported before – the Commercial’s have a canny knack of being in the right position at the right time. But don’t say ‘manipulation’.
- Secondly – the wall street spiv speculators appear to be wrapping gold up with the bearish commodities complex. 15 of the 24 commodities available through the CFTC are in a similar position, oil too at a record short position. In our humble opinion gold is not a commodity. Its industrial use these days is minuscule and it is not ‘used’. Gold is money. Gold is a safe haven investment.
- Finally, with so few ounces to each contact – what if just a few demand delivery of their physical safe haven money?
When, not if, the next economic crisis hits, we have a setup in gold at present that looks nothing short of extraordinary.