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.