Author: Gold News Club

Bullion Star/Ronan Manly/3-2-2020

“Given that international gold price discovery takes place on derivatives markets which have little or no connection to the physical gold market and that the prices are merely blips on a screen (screen gold), we can therefore say that the gold price plunge last Friday was driven by trading in these markets, led by the COMEX, and also that the gold price fall last Friday was unconnected to the physical gold market.

While the mainstream financial press will never question gold price discovery or the difference between screen gold and physical gold, they do predictably try to come up with reasons to explain price movements. Unfortunately, most of these reasons are often not based on anything other than off-the-cuff the remarks of stockbrokers, trading desks, and buy side investment bank analysts. Unfortunately also, by not explicitly distinguishing between prices derived in an electronic casino and the real physical safe haven asset of tangible gold, the reasons provided by these reporters will fall into the trap of jumbling up two different things.”

USAGOLD note 1:  The tail wags the dog and quite often, as the cartoon above suggests, to the surprise of the dog or, better put, to the surprise of the dog’s owners. In this piece, Manyly makes a distinction between the price “taker” (physical gold) and the price “maker” (the paper gold markets). That dichotomy has been the centerpiece discussion in the gold market for the past quarter-century. Though a source of great frustration to speculators in the short run, big price drops like the one we had this past Friday create opportunities for knowledgeable, strong-handed buyers to accumulate physical metal. Asia comes to mind. So do American professional money managers who have joined them in loading up on the dips.

USAGOLD note 2: Sooner or later, demand for the physical metal translates to the paper markets, even if cause and effect do not always match-up precisely on the timeline. If that were not the case, the price of gold would still be at $35 per ounce and physical supplies would have disappeared from the face of the earth long ago.

Image courtesy of Bullion Star

Bloomberg/Joe Nocera/3-2-2020

“The greatest risks, [Nassim NIcholas Taleb] believes, aren’t the ones you can see and measure but the ones you can’t see and therefore can’t measure. But I think another factor is at play, which is the complacency that comes from living in a period that makes you forget that times were not always like this one.”

USAGOLD note:  Sometimes the black swan exposes, even releases, other dangers that have been lying in wait. Perhaps, as many have suggested, that is the case with the coronavirus – perhaps not.  Time will tell.  On the complacency issue, we are reminded of Benjamin Franklin’s maxim – “By failing to prepare you are preparing to fail.”

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The Power of Gold Diversification
“Although it is needed in good times, it can be vital when times are difficult.”

This short article begins with reference to a speech by Sir Peter Tapsell on the merits of gold ownership before the House of Commons in 1999. The occasion was Britain’s proposed sale of over half of its gold reserves at under $300 per ounce. It ends by comparing the performance of two investment portfolios from the time of that speech to present. One portfolio – the more successful of the two – included a diversification with gold; the other did not. Sir Tapsell, who passed away in 2018, lived to see his defense of gold vindicated. Though his argument before the House of Commons failed to stop the sales, it goes down as one of the most eloquent appeals ever made on the merits of gold ownership for nation-states and individuals alike.

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Important! – Gold’s Century: While stocks dominated headlines, gold quietly performed

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