The price of gold and
silver has seen a massive decline as of late, prompting one analyst
to suggest that
there is no compelling fundamental reason to own precious metals and the only
thing investors can do now is “hope and panic, in that order.”
But while current prices
and technical charts may leave some with the feeling that gold’s bull run is
over and the bubble has
popped, others
are scooping up as much yellow and silver metal as they can find, and in some
cases they’re doing it by the tens of thousands of ounces.
According to recent data
from the Chicago Mercantile Exchange, private investors are rapidly exchanging
their paper holdings and turning them into deliverable physical assets, an
indication that the purported ‘free market’ price for gold on global
exchanges is grossly undervalued.
Brinks
is now being depleted.
They have gone from
447,199 on July 3rd to 134,525 on July 9th which is a drop of 312,674
oz.
If this is
correct, then this is a decline of 70 percent in the gold held
in private accounts at Brinks in just one week.
If this is data
is correct, it would not be too much of a stretch to say that
this has the appearance of ‘a run on the bank.’
Jesse’s Cafe
Americain
via Steve Quayle
Commodities guru Doug
Casey recently
noted that it
costs mining companies about $1200 an ounce to get gold out of the ground.
Given that the price of gold is hovering right at that amount as of this
writing it should be obvious that the going price for gold at this time is
not sustainable. Either demand has waned and gold producers are going to be
closing up shop soon because their business models will not be able to
function under these prices, or we’re set to see prices bounce back
significantly in coming months and years.
If we are to believe that
investors are losing interest in precious metals, then how is it possible that
major gold retailers like JM Bullion were reporting weeks-long delivery
delays citing
“astounding volume” from the retail sector?
Even the US Mint has seen
such high demand (118% increase year-over-year) that they have actually suspended
the sale of some
of their gold American Eagles because they are unable to source the gold
blanks required to strike the coins.
Obviously what mainstream
analysts are reporting and what is happening in the real world are two
different things, as evidenced by the large scale physical deliveries being
reported around the globe.
The price of gold may
have dropped 25% in the last 12 months, but a similar scenario unfolded from 1975 to 1976 when gold dropped nearly 50%, only to
recover and go to new highs, quadrupling in value over the subsequent five
years.
We’ve noted previously
that the volatility in financial markets will be so extreme that even gold
investors will be shaken.
If there’s one thing that
should be clear, it’s that the global economic crisis is nowhere close to be resolved, and recovery could be a decade or more away.
In fact, chances are we have yet
to see the worst of it.
It is during environments
exactly like these – when the people fear their government and lose
confidence in its ability to mitigate crises – that
precious metals become the investment asset of last resort.
It has happened
throughout history. And it’s happening right now.
