Wednesday, December 14, 2011

Precious Metals Getting Slaughtered, Hardly a Surprise, Get Ready To Buy With Both Hands

I love it when I hear some asshole on CNBC talk about what terrible investments gold and silver are. That happened this morning as gold was trading down 80.00 bucks an ounce. The "expert" was calling for 1000 dollar gold. Gold doesn't pay dividends he said. I was listening from my bedroom- so I didn't get a look at the suspect your honor. I have heard that rhetoric before.

My favorite line was this. Gold as an investment and a safe haven is 100% based on perception! No shit. That's what he said. Like that's a bad thing.

Now I want you to think about any decision you have ever made. Have you ever done anything- not based 100% on your own perception? Just when do we avail ourselves of our own perception to make decisions? I don't know when that happens.

Ok enough of that. Here are the reasons that today's selling comes as no surprise.

1. Central banks and investment arms all over the world are selling gold to raise cash. The euro is toast. It is trading at 129 and change as I write this. Europe is in big trouble. They are paying people to borrow gold. Negative lease rates. This is suppressing the paper price.

2. This is a "paper" gold price. Investors everywhere are fleeing paper investments. Why? Because MF Global stole at least 1.2 billion worth of customers' money and apparently nobody cares except the poor saps who have investment funds at risk.

3. Bullion banks and banks subject to position limits next year- desperately want to cover their enormous short positions as cheaply as possible. They can do this by driving prices down as fast and as hard as they can and then cover their short positions. This has already happened today in both gold and silver. As I write this gold and silver are rebounding. Gosh who would buy this bubble? Hmmm...

4. The world is broke. That has not changed. In fact, it continues to get worse. Ultimately, all strong currencies in history are backed by precious metals. That is precisely why China continues to buy bullion in record setting amounts. They want to be the world's reserve currency and they will be.

Fundamentally, nothing has changed. Make rational decisions, not emotionally driven decisions.

None of this metals downdraft is a surprise. I will not be surprised to see it get worse through the end of the year. Between Christmas and New Years, I am going to the coin shop. I will be buying with both hands.

I'd like you to remember something. If you do not have physical gold and silver actually in your possession- you don't actually possess it. I mean that. You cannot trust anyone to hold it. You must come up with a strategy for storing precious metals that you think is safe. The government is not stupid. If they move to confiscate precious metals like they did in the 30's- they will ask their buddies at the bank to close vaults containing safety deposit boxes until those boxes can be opened and their contents inventoried. I do not think that scenario is ridiculous. It has already happened once.

The absolute best investment in 2012 is going to be gold and silver. Nothing short of world austerity, honest and courageous politicians, and a deux ex machina (miraculous ending) solution can change this. If you think all that is going to happen, you might want to call CNBC and offer yourself up for an on "air interview" like that brainiac this morning. Let's hope precious metals can go lower so we can buy more!


Always On Watch said...

Mu husband and I used to be in the coins and precious-metals business.

My advice: buy the physical merchandise.

Anonymous said...

Do you just walk into a coin shop and buy gold coins? I always wondered how people do that.

Brian said...

Yes. I always try to buy one ounce ingots and coins. Usually 20 or 30 at a time. They charge a buck or two commish per oz.
On gold it is 50-75 bucks.

I am configuring a safe storage system as we speak.

Anonymous said...

Do you think now is a good time to place a large order for silver?

Brian said...

I see downside risk at the most as another 4 bucks- maybe 25.

Not a big deal. I never catch perfect tops or bottoms anyway. I think this is an excellent opportunity to grab some silver. In fact, I thought I was shut out. But these greedy banker bastards cannot stop manipulating these markets...

Anonymous said...

I still *think* it may be worth waiting a couple days to see what happens price wise.

I've been in this market since 2003 and for some reason this sell off has affected me more than the others.

I remember when gold lost 30% years ago...I also remember when silver dropped almost 60%. Back then I could deal with those declines. But for some weird reason this decline has got me seriously wondering what awaits us in the next few months in the PM markets...