Weiss Report position. Larry Edelson is making several points regarding how vulnerable gold, silver and stocks are to the incoming deflation. This topic has occupied me and I'll open up the floor to anyone to comment on his points, which strongly run counter to the general thread consensus:
1) Demand for gold coins is at record highs but the price of gold has barely budged.
2) Jewelry demand is slumping worldwide — especially in Asian countries where trillions in capital have been destroyed by the global deflation. With their currencies walloped, one might expect that demand for gold to skyrocket. For a short time, it did. But demand in Asia has fallen apart. Reason: Although an excellent store of value long term, gold cannot easily be used to pay bills. So, they're hoarding cash instead.
3) Industrial demand for gold is also slowing dramatically. It's slumped over 10% in the past six months.
4) The renewed prospect of gold sales from European central banks.
For the past year, I've warned that European central banks would not sell any more gold. They didn't.
But in recent weeks, I've become gravely concerned that they will start to sell some of the yellow metal in 1999. Here's what is behind this fundamental change:
First, the new European Central Bank, or ECB, recently DECLASSIFIED gold as a reserve asset. That means the gold stored in the continent's central banks is now considered currency. So, if additional liquidity is needed within the European banking system, gold could be liquidated for cash in a heartbeat. In short, without official reserve status, European central banks have moved one BIG step closer to additional gold sales.
5) Don't fall for the mantra that "gold does well in deflation." It doesn't. That's only true when deflation is on the verge of exhaustion, a far cry from today's reality.
Unfortunately Edelson provides little quantitative info. Comments anyone? Richard, Ram, Bill, Street, Terry, Ole49r, Alex?
Bob |
