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Jim Roache
Member since May 2012
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Misconceptions about Gold

- Mish - Global Economic Analysis

Mish,

One problem. Two Words - paper gold. To say that the supply is limited and price a function of supply and demand is no longer correct. They collateralize it, leverage it, trade it, lease it, sell it disguised as ETFs, give people certificates (paper) in lieu and they fill it with tungsten, etc., etc. When demand was through the roof in Europe and Japan recently, the spot price hardly moved. Don't look now, but they have done to gold what reserve banking has done to money and a lot more besides. Until everyone demands bullion for precious metals they will continue to (mis)manage it using paper substitutes leaving "owners" worse off than it thay had cash if there is ever a run. If your bullion is stored in the 95% pool, you are unsecured. You don't even have the equivalent of Bank Insurance.

How can supply and demand push price where it ought to be, when tons of gold can aand added into the supply by paper substitute. Convenience? No sale.

Take the paper out of the equation - how did it get in, and why is it allowed to stay in? - and they would still play games, but we would have something approximating a real market for a scare and valuable asset.

How can a piece of paper or even non-available bullion leased, loaned, swapped or leveraged by a vault as an unsecured asset be considered a store of value? We are all being had....by the usual suspects.

Commented 5225 days ago

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Beginning of the headline :Few markets are as widely misunderstood and subject to so many misconceptions as gold. Many of those misconceptions stem from gold's dual role as a commodity and money. This post will attempt to clear up some of those misconception with a few facts. Let's start with one key fact. Gold is Money Gold is Money... Read More

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