Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Is Gold a Stupid "Pet Rock" or a Bedrock Asset?

Commodities / Gold and Silver 2015 Jul 21, 2015 - 11:51 AM GMT

By: MoneyMetals

Commodities

Greece defaulted at the end of June, and metals investors expected higher prices in July. What we expected isn’t what we got. It isn’t the first or last time markets surprised investors. Do lower spot prices mean precious metals are failing as a safe-haven investment?


Jason Zweig, from the Wall Street Journal, thinks so. He’s deriding gold, calling it a “pet rock.” Given this month’s disappointing price action, he does have a point. But he needs to distinguish the physical rock from the paper rock.

We could forgive Mr. Zweig for drawing his conclusion if he was he simply looking at the spot (paper) price. To be sure, paper gold and silver are weak.

The “rock” itself is doing something else entirely. There has been a huge demand for physical metal in the past four weeks. Zweig knows it, but he dismisses it in the same condescending way so many on Wall Street do.

Zweig wrote, “gold-bugs… resemble the subjects of a laboratory experiment on the psychology of cognitive dissonance.” The more evidence they get indicating they are wrong, according to Zweig, the more convinced they become they are right. In other words, he thinks the paper markets are rational, but bullion investors aren’t.

Someone should tell Zweig not to be so dismissive of “gold bugs.” Does he know the term includes central bankers who have been adding large amounts to their national stockpiles in recent years?

And how about the state of Texas? There are some folks buying “rocks” that even a reporter with the Wall Street Journal should pay attention too.

Investors are responding to events in Greece and China in a predictable, and imminently rational, way. They are buying bullion. The story that should be investigated is why paper markets aren’t reflecting rising investment demand for the physical metal.

Conspiracy theory has become conspiracy fact. Zweig isn’t acknowledging it, but some others at the Wall Street Journal, and elsewhere, certainly are. Major banks have been caught rigging prices in a number of markets, including the gold market.

Central banks routinely intervene in markets such as bonds, equities and metals as just another policy tool.

High frequency trading makes for extraordinary volatility, and flesh and blood traders must worry about front running on any order they place.

And the leverage in the paper markets is breathtaking. Sometimes contracts representing an entire year’s worth of mine production trade in a single day.

This isn’t the first time we’ve seen a major disconnect between futures and bullion. Coin prices spiked relative to spot prices in the months following the 2008 financial crisis and a handful of times since spot prices began correcting in 2011. Time will tell if the current pergence is temporary or something more permanent.

But one thing is for sure in these uncertain times. The less useful futures markets are, as a gauge of safe-haven buying in precious metals, the less relevant the spot prices published there will become.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2015 Clint Siegner - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules