Gold Bull or Bear? Think of Gold As An Insurance Policy.

During a recent webinar by a gold expert panel discussed the question if gold is still in a bull market. The outcome of the discussion was that gold being in a bull or bear market is somehow irrelevant. The gold price does matter, of course; owners of physical gold have a hard time stomaching the recent price decline. But the key point is that gold is a currency. So owners of PHYSICAL gold are holding the metal as an insurance policy against a currency crisis. Obviously that is not the trader’s perspective.

Eric Sprott being one of the speakers looked back to the recent gold price decline by making the following comments:

  • there were many signs of a gold shortage in the first 4 months of the year, right before the big crash of the gold price
  • the slam in the gold price was manufactured and primarily meant to roll gold into the market
  • Sprott expressed his suspicion that shorters needed to cover gold in the paper market and shortage in physical market

He continues saying: “What bothers me is that paper money is able to push down the price of physical through the paper gold market (ETF’s and futures market), for sure in the light of overwhelmingly positive fundamentals of precious metals.”

Doug Casey, another speaker of the webinar, explained how he sees an economic catastrophe of gigantic proportions coming. He suggests to avoid any kind of paper investment except for short term speculation. Similarly he believes that gold plays an important role in an unstable world as it is the only financial asset that isn’t anyone else’s liability. He looks at gold as a vehicle to conserve wealth.

What follows are some fundamental quotes from the webinar:

  • Ask yourself two fundamental questions, he says: “Do we believe in zero interest rates, and do we believe in printing money?”
  • So people who need gold for physical delivery, or want to own physical could have used ETFs as a means to that end: “I take the partial draining of the GLD as an extremely positive event that’s transpired and really tells you about the physical shortage that’s going on.”
  • “I suspect that the Western Central Banks have surreptitiously been supplying the market. We’ve seen COMEX inventories plunge from 11 million ounces to around 7.6 million ounces in the last few months, and it seems to me that people are finally taking their gold out of the system.”

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