Gold: Stopped Making Sense

Good luck trying to make sense of the gold price

Bullion.Directory precious metals analysis 16 December, 2014
By Terry Kinder
Investor, Technical Analyst

I have been waiting for the great gold Guru-Moses to deliver the gold price from its desert wanderings but, as of yet, the great gold prophet has not appeared.

Yes, there are many gurus who will tell of the reasons the gold price must go up. China is buying. India is buying. Russia is buying. GOFO. Supplies are tight. Gold-backed Yuan. Renminbi, Renminbi, Renminbi.

The crashing oil price is going to blow up the credit market. Quadrillion dollar derivatives market.

Blah, blah, blah, blah, blah.

I consider myself part of the gold community. I believe it makes sense to hold a portion of your wealth as physical gold. I’m not quite ready to put on my sackcloth, sell all of my possessions and walk the streets holding a sign saying “The end is near”.

I have heard most of the gold and silver memes across multiple decades. The Chinese plus the solar and electronics markets demand has supposedly outstripped available silver supply since the 1980’s.

Before that, Lyndon Johnson cited a worldwide shortage of silver as a reason for removing silver from U.S. coinage. Yes, my Dad used to get a newsletter that stated something similar back about thirty years ago.

That siren Malthusian song has attracted many a gold and silver bug to run their investment ships aground. We’re running out of everything – gold, silver, oil (whoops, never mind), land, air, water, and Chia Pets.

They are all scarce and rare.

If they aren’t scarce and rare, then they will be when a bazillion dollars in derivatives blows sky high, or China creates its gold-backed Yuan, or we have a worldwide economic collapse, or somebody pushes the button and starts World War III, or the government confiscates all the gold, or the COMEX defaults, or the U.S. Dollar collapses, or the dollar devaluation comes, or hyperinflation or hyperdeflation or you forget and give a Gremlin a bath. (Don’t give a Gremlin a bath.)

All of this talk about financial apocalypse has gotten so bad that it’s driving bankers to make the ultimate sacrifice (and no I don’t mean forgoing their bonuses) It’s depressing spending so much time just thinking about the past, the current and the next depression.

No wonder the bankers are literally at the end of their rope.

The light at the end of the tunnel is just another train bearing down on us. It reminds me a bit of the poster I once saw that read, “Life, you’ll never get out of it alive”. Money dies, countries die, everything dies. I suppose if our glorious leaders finally can’t stand their itchy fingers any longer and decide to push the button that drops the big one, all that will survive will be gold and cockroaches.

I wonder if the roaches will have a debate about the intrinsic value of gold.

Somewhere between Keynes’ barbarous relic (referring to the gold standard and not gold itself), Harry Dent’s $700 gold, and Harvey Organ’s $10,000 gold, lies gold’s reality.

Of course gold is manipulated. It’s manipulated to get it out of the ground. It’s manipulated from the time the first hole is drilled to search for it until its final form as rounds, bars, jewelry, etc. It’s manipulated when we place a value on it.

Where does the intrinsic value of gold come from? It comes from us.

If we should all disappear from this planet tomorrow what will an ounce of gold be worth to a tree? Our brains constantly work attempting to see patterns and understand them. We plot current gold prices, compare them to past prices, look at prices in one currency versus another, compare gold prices to oil prices, wonder if the price rises or falls in relation to the interest rate, and compare the ratio of the gold to silver price. We plot, we figure, we calculate, we compare, we debate, we fret and worry, and wonder what tomorrow will bring.

We do a reasonably good job divining the price until we don’t any longer.

Gold: Trapped in the dark, chained by our own beliefs. Image: pixabay

We see the shadows cast on the cave wall and believe we have seen the truth. It all makes sense now and we rush to share the truth in our possession with the rest of the world. Then the clouds cover the light of truth and the shadows on the cave wall blend into the darkness as if they never existed at all. What made sense today may stop making sense tomorrow.

But tomorrow, next week or next year another enlightened one will appear and reveal to us the truth that only they see and they will tell us what tomorrow, next week and next year will bring us. They will interpret the shadows on the cave wall for us and tell us the shape of the world tomorrow. They will reveal what the gold price shall be and why – for their eyes can pierce the darkness better than those of any other.

But, like those chained to the wall in Plato’s Cave, we live in darkness and believe we bear light.

We only see shadows of the truth. Our flashes of insight illuminate but dimly, like candles in a cave. We haven’t ever truly seen the light of the sun and therefore only fleetingly see truth’s shadow. Of course, the truth is altogether too big for any one of us to possess. Many prefer to remain chained to old beliefs, comforting truths, and familiar stories rather than break off their shackles and seek the light of day.

There will always be another guru to interpret the shadows on the cave wall for you.

They will probably even allow you to pay them for the privilege of interpreting the dancing shadows created by their own candles. Don’t worry, if you don’t like their interpretation, another guru will be close behind to offer another. For me, their stories stopped making sense a long time ago.

So, it’s time to break free from old beliefs, to be wise enough to know that the shadows I have seen are not reality, and be foolish enough to seek the light of truth no matter where it leads…

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