LAWRIE WILLIAMS: Clutching At Straws. Gold's Mega Bugs Look For Silver Linings
When the gold price is moving upwards, gold's mega-bug commentators tend to be self-congratulatory, predicting ever-higher price movements. The holy grail looks to be $5,000 gold and higher. We're not saying that they are not going to be correct one day - it's not so long ago that $1,000 gold looked to be beyond the pale and inflation and currency value destruction will no doubt get us to $5,000 and up in the long run, but in our view such stellar appreciation remains well into the future although an uptick to a more reasonable level in the near future is not out of the question.
But what has become noticeable is that every time gold does go through a downwards patch, the usual suspects among the pro-gold community come up with a variety of reasons why the downturn will be reversed almost immediately. It seldom is! Often these indicators take the form of historical data sets purportedly showing that gold behaved in a positive manner under supposedly similar financial conditions, or perhaps pointing to geopolitical events which they feel will undoubtedly move the gold price upwards. After all gold supposedly thrives on uncertainty. But time after time gold may move up a few ticks, but then comes crashing down again.
Similarly, the anti-gold brigade, equally set in their opinions as to the direction the gold price is taking, are looking for a sub-$1,000 gold price and again will often draw on data from a bygone, and currently largely irrelevant, era to support their predictions. Times are different and so are the principal gold price drivers.
There are also those who will point to financial and/or governmental interventions to suppress the price. It has always been recognised that a strong gold price is an indicator of other weaknesses in the political and economic systems, but today's politicians are experts in spin and, with the apparent connivance of the mainstream media, realize that it is the perceptions of the public with regard to how well they are doing that will perhsps keep them in power. Consequently key economic and labour statistics are changed and massaged to present a more upbeat picture and it is certainly not beyond the bounds of possibility that the gold price is indeed suppressed similarly to maintain the perception that economic indicators are stronger, and doing better than they are in reality when compared with earlier times.
It is a continuing argument as to whether gold price suppression is necessary as a part of political economic spin given there is a feeling that the general public does not understand the role of gold as an economic indicator. However it is apparent from past statements that key Fed and government economic advisers like Paul Volcker and Alan Greenspan have been only too aware of the place of the yellow metal in global perceptions as a vital guide to economic strength and may well have intervened accordingly. The jury is out.
However, the likelihood of price manipulation by the financial sector has been given a boost by the revelations of Deutsche Bank with respect to the silver market. Surely if the silver price was being played with to the benefit of the price setting banks, then gold must have been too? However gold is a hugely bigger market than silver so the cost, and risks, would be commensurately bigger if it was occurring.
But back to the original premise of this article. Gold's proponents, like its detractors, are seldom moved from their own overall agendas. Indeed many rely on their opinions being broadcast continually to drag in paid subscribers to their newsletters and websites and will have their slew of followers who are usually just as committed to their cause and probably feel the need to be fed with data supporting it on a regular basis. So overall it's probably not too surprising that some opinions that are used to support the pro-or anti-gold premise may have little real relevance or impact. It's just important that those reading these opinions are a little wary about making significant investment decisions based on them.