I gave some thought to this recent price uptick in AU prices. Hopeful that prices might recover. Frankly, I found myself somewhat confused in my hope..
Obviously the market is reacting to the Fed's impending 25 basis point increase (market estimate, CNBC) and the market is pricing that into gold. There is speculation and hope that the AU price will strengthen near term.
But how can gold possibly strengthen long term? I hear so much talk of conspiracies by Governments, CB, bullion and investment banks. If that is true why would the conspirators let AU prices rise? Because they don't have any gold in CBs to sell?
And let say that they don't have as much gold as we think they do (not quite a provable fact basis). They could simple and quite transparently sell amongst themselves (CB, investment banks, bullion bank etc) the gold they don't have.
Unless there is some disaster of huge proportions I just do not see an exogenous shock that can overcome the near and mid term manipulation or operations (depending on what you believe) of AU prices. Especially in a steady state where we have order in the marketplace. Yes, in the long run someone has to pay the piper. But who knows when the time will arrive? 1999, 2007 or 2010?
In essence there in no supply demand imbalance. As long as CBs are willing to lend/lease to the market we are screwed if we wait for gold prices to rise.
If you believe that gold has bottomed out how can we ever believe that it isn't going to stay there (not indefinitely but for sometime) with a group hell bent on keeping it low. And they have the enough gold to fight the increase in gold price.
We need a killer shock to the system. No, not the commercial and industrial supply and demand equation for gold. The exogenous demand for the monetary gold to preserve value equation for gold.
When that time comes no one (lawyers, accountant or public relations firms) will accept stock options as part payment for services(can you believe faith in stock options are so high that people are accepting options instead of dollars?). Gold bugs complain about people accepting non-gold back dollars what about paper (stock) backed by dollars of profit in the future (if! they can even earn a profit).
In conclusion, I don't think in a steady state (no sense of panic) anyone who believes in a conspiracy can hope for an increase in gold price. You have to wait till the poop hits the fan where CBs cannot adequately overcome the monetary demand for Gold by lending/leasing .
Your thoughts are welcomed.
Exsrch |
