Thursday, May 3, 2012

Gold Revisited Part II

Earlier today in part I of Gold Revisited I described how gold had fallen throw its long term trend, described why this was happening and gave my opinion on why I'm still bullish.

After reading this story on King World News I'm even more bullish as this may very well explain why the gold take down on Monday failed.

In addition, its been my thesis that 2012 may very well be the year that the "paper" price of gold set on the COMEX diverges from the physical price of gold. There were already reports of this last year describing how large purchases of gold had to be bought at substantial premiums.

Egon Von Greyerz of Matterhorn Asset Management describes (bold print emphasis is mine):

Today Egon von Greyerz told King World News that Swiss refiners are “working round the clock because demand for gold is so massive.”  Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland.  Von Greyerz also said the financial world is headed into trouble that will be much worse than 2008.  But first, here is what Greyerz had to say about Swiss refiners:  “The gold market may appear quiet right now, but underneath the quiet there is a great deal of action in the physical market.  Swiss refiners are telling me they are working ‘round the clock’ because demand for gold is so massive.”

“At the same time, we are reading that a number of central banks are buying gold.  So the nonsense coming from the mainstream media that people are not interested in gold is completely false.  We are seeing massive accumulation of physical gold.  This decline today is clearly only in the paper market.

Once people wake up to the fact that the paper market is not even a real market, meaning it’s a false market that can never deliver the real goods, once investors realize this, that is when people will really panic....

“The paper market will then be either non-existent or we will see a massive premium between physical and paper.  I think those days are not far away.

I don’t think people are focusing enough on the long-term consequences.  The masses are just living day-to-day and hoping the current problems will go away, but they won’t.  The same people who did not see the problem in 2007/2008 are now saying, ‘It’s over.’  Nothing is over.  

We are actually going to go into a situation that is much worse than in 2008.  Once again, people are in total denial, and that includes governments and central bankers.  The first consequence of the enormous deficits and massive credit bubbles is going to be hyperinflation.
The hyperinflation will come as a result of governments printing unlimited amounts of money.  During this hyperinflationary depression, people will see currencies falling in value against real money, gold.  In a hyperfinflation, nobody benefits from the money creation except the ones standing nearest to the printing press.

So governments will help themselves and banks will get some benefit, but by the time the money gets to the people it will be worthless.  Pensions will be wiped out as well.  When Germany went through the Weimar hyperinflation, at that time people were more self-sufficient.  Today, many people are dependent on governments.

This is why we will have more social unrest and anarchy.  I don’t think governments will be able to control it because people will be poor, hungry, and homeless in many cases.  The consequences of all of this reckless behavior is going to be very serious for all of us.

This is the first time in history that we will see hyperinflation occurring simultaneously in many countries.  Previously, this type of event has been isolated to one country at any one time.  Gold will be an extremely important means of survival and payment during this hyperinflationary period.”

This why I say you must own physical gold, not an ETF. As one person said, "If you can't stand in front of it and defend it with a gun, you don't own it".

Just ask former account holders at MF Global.

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