As these words are getting, written gold is consolidating at the $1,640 an ounce level soon after peaking at $1,900 in August of 2011. In addition, gold has fallen under both its 50 day and 200 day moving averages. For the army of technical analysis who now look to rule Wall Street it is game over for gold. There is no shortage of financial commentators across the Wall Street spectrum that is ready to create gold’s obituary but is the bullmarket in gold genuinely completed?
The most curious issue about all of this is the Wall Street consensus opinion. An opinion, which has not deviated for decades. The consensus opinion has normally been that gold is a barbarous relic and consequently a terrible investment. Following all that is what Keynes stated and how could Keynes, be incorrect. Then Wall Street was mugged by gold. For 12 straight years, gold out performed the S&P 500.
Even so, the genuine story is far worse than that. In August of 1971 president Nixon took the United States off the gold normal. At that, time gold was selling for $35.00 an ounce. In the 41 years considering the fact that 1971, the value of gold has risen 54.28 occasions to its all time higher of 1900 and 46.85 occasions to its present higher. At that time the Dow Jones industrials was then selling at about 890. The Dow peaked in October of 2007 at 14,164 for a rise of 15.91 times. Its existing cost is 13,038 a rise of 14.64 instances.
Wall Street necessary a new story. The new story was that gold was in a bubble and as a result need to not be purchased. Overnight it went from being a barbarous relic that was a bad investment to getting a bubble without having ever being a get.
The initial issue you have to know about gold is its amazing rarity. The authoritative consensus is that from the starting of recorded history to the present in between 150,000 metric tons and 165,000 metric tons has been made. At its most optimistic, that translates to about.76 troy ounces per human being. In other words if you gave just about every human getting on earth a rather substantial gold ring you would wipe out the world’s gold supply.
For an asset to be in a bubble a lot more is necessary than a historically high price. The crucial requirement is that the asset ought to be owned by folks, speculators really who will be panicked into dumping the asset by falling rates developing a death spiral.
When you look at the gold industry what hits you in the head is how small gold the speculators own. The following is the recent Planet Gold Council estimates.
What do the speculators own?
Jewelry- 52%
Central banks -18%
Investment-16%
Industrial – 12%
Other- 2%
Jewelry at 52% dominates the gold market. What do you believe the possibilities are that if the value of gold falls a different 25% or 50% hysterical husbands are going to rip off their wives wedding rings and rush off to the pawnshop to sell it?
Central banks the second biggest holders of gold at 18% are no longer dumping gold. They are now purchasers of gold. They no longer trust the currencies of other nations. It is about time that they snapped out of their stupidity.
The industrial users of gold are not going to freak-out and quit applying gold if the cost falls. They will buy more. No body uses gold for industrial purposes if there is an alternative.
The only part of the market place that is up for grabs is the 16% that is applied for investment purposes, which is in the form of gold coins and bars. This is the only location where speculation matters.
Now let us look at who buys gold. 1 of the preferred proofs of the “gold is in a bubble crowd” is the constant advertisements for gold that we see in the newspapers. Of course, it in no way dawns on them that there is a thing very strange about these ads. At least 95% of all the ads are offers to buy gold and nearly under no circumstances presents to sell gold. Just verify out these ads for oneself. If gold had been in a bubble then the thrust of these ads would be to dump gold on stupid, unsuspecting investors. Yet, the reverse is taking place. That brings up the vital point of just where is this gold going. It is going to Asia.
916 Gold Singapore of annual worldwide consumption in 2011 have been India with a whopping 745 metric tons. Followed by China, which consumed 428 metric tons, and a lame United States consuming 128 metric tons. On a worldwide basis Asia has turn into a giant vortex sucking in gold from just about every corner of the globe. Gold is flowing from exactly where it is disdained to exactly where it is treasured. The far more prosperous Asia becomes the a lot more gold it buys. According to the Planet Gold Council in 2011 consumer gold demand rose 25% in China and a staggering 38% in India.
What do you believe the possibilities are that the Wall Street consensus that gold is in a bubble will panic the Asians into dumping their gold?
In June of 2012, the Pan Asia Gold exchange will open in China and unlike the ugly shenanigans in the United States, each and every contract will have actual title to gold. They will be the initial future gold contracts ever to be totally backed by gold. There is a really actual possibility that the days when the value of gold was set in New York and London are ending. After all, if the gold is in Asia should not the price of gold be set in Asia?
It is extended past time for the American people today to wake up. The days when the dollar was as excellent as gold are more than with. The barbarous relic is not gold. It is the paper currencies of the globe that are being debased at a frightening price. There is not a single sound currency left on the face of the earth.