Sunday, October 27, 2013

Eventually The Manipulation and Capping of Gold Will be Overwhelmed

What happened back in the 1960s is, eventually, governments threw in the towel. There was 12,000 tons of gold hoarded from Fort Knox, officially. There may have been even more done unofficially. We don’t know because there’s never been an outside audit of Fort Knox since the 1950s.

But the point I’m making is that the market is bigger than any government or group of governments. And when something is undervalued, or conversely when something is overvalued, the market doesn’t like it. And the market will respond accordingly.

And what we’ve seen over the past few months, particularly, is this huge demand for physical gold. A wave of buying because price is so cheap. Here at $1,270 an ounce, just like gold was cheap at $35 an ounce back in the 1960s. So it’s taking time, more time than I thought it would take.

But that’s the thing about markets. You can sort of forecast which way the market is heading, and you can determine which assets are overvalued or undervalued, but you can never predict the timing of these things. And what markets require is patience.

But as long as you’re acquiring an undervalued asset, you should be patient. And hope that eventually the market will return to a free market environment, without concerted government intervention trying to cap the gold price, and trying to deny the reality of the situation that gold is very undervalued at these levels.

There’s a bigger issue here too, Nathan. Gold has been money for 5,000 years. It didn’t stop being money in 1971. It stopped circulating as currency in 1971, but it’s still money because it’s useful in economic calculation. In other words, it’s still useful to measure the price of goods and services with gold to determine what’s truly happening.

An ounce of gold still buys the same amount of crude oil it did 60 years ago. You can’t say that for the dollar or any other national currency, which are constantly being debased. So even though gold doesn’t circulate as currency anymore, except in a few places like Turkey, and Vietnam, and parts of the Middle East, it’s still money. And it’s still useful for that reason. And eventually the manipulation and capping of the gold price will be overwhelmed, just like it was back in the 1960s when the London Gold Pool feel apart in March of 1968.

- Source, Sprott Money: