I read this kind of analysis four or five times already today:
‘…gold will head towards $1,700 an ounce or higher as central bank moves into purchase and production problems increase the demand for gold, analysts said…’
As we’ll see, those ‘production problems’ are not all they seem.
Yes – these are factors about the resurgent gold price, no doubt about it. Also a third factor is folks gambling on the alleged certainty of QE3…although the logic behind the gamble continues to elude me: QE means messing with the Dollar and thus compromising its value, but rather more directly it leads to higher stock market dividends and consequently reduced interest in gold as a stock market hedge.
However, none of that explains the overall sentiment for alternatives to cash, stocks and commodities in the context of falling global confidence in fiat currencies per se.
The Spanish bank run is the start of the accelerator against the euro, but when any currency is withdrawn, do people just stick it under the mattress? Peasants do, but the sleazy elite doesn’t.
The growing appetite for glitzy bricks
Here’s some fascinating news about top-end property prices in Five-Star locations: there is a rush to buy. In France, for example, while anything up to €550,000 simply isn’t selling, stuff in the €950,000-€3million band over the last three weeks has been flying off the agency shelves. So-called ‘known’ or ‘famous’ locations have been reporting a rush since the middle of August at the top end: it doesn’t matter whether it’s Nice on the /cote D’Azure or Issigeac in the Dordogne, the money is pouring in – at over 80% cash levels, and not for occupation, but for investment.
A similar syndrome has been under way in central London, as well as top-end Los Angeles, the West Indies, Singapore, Zurich and Vienna. But it is especially marked in ‘Raj’ Manhattan. As Shaun Osher, the chief executive of CORE says, “A lot of high-end buyers and sellers want to get on the gilded bandwagon.” Before long these may be more crowded than the last helicopter out of Saigon in 1973.
A new handful of properties in Manhattan are about to come on the market with listing prices of $90 million or more, And the wrinklies are partying in upmarket Miami neighbourhoods: apartments and single-family homes in and around Miami Beach are being listed and sold for record numbers…but again, very often not for occupation – more for ROI and a stable asset.
If the euro’s catatonic response to the liquidity emergency stays that way, other bank runs will begin….and currencies outside the eurozone must follow: banks will empty at record rates, and the property rush will become a stampede.
But very little of this is about swanky postcodes: the magic 3% with megamoney to spend are concerned to protect. They’re heading for places likely to keep both the value and the law and order.
The Coming Gold Rush
The one thing still holding gold back as a sector is the rapidly rising awareness – now well beyond blogosphere accusers like me – that the gold price is a fix designed to do all sorts of things. Things that can be summarised as ‘stopping the escape from all things prone to derivatives, zero demand, and exponential plunges’.
But there are signs that this inhibition is about to be cast to the four winds….above the sound of which can be heard the approach of the Four Horsemen of the Apocalypse. “No, it’s some guy arsing about with empty coconuts” isn’t going to suffice for much longer as an explanation. The smell of doom-dung approacheth.
As long as QE is on the horizon – and Ben, Merv and Mario are weighing up the pros and cons – gold will wobble up unreliably from one plateau and small drop to another. But then – as and when the bank-emptying takes off and the property options run out – the shiny metal will break out once and for all.
Off the radar, it already has. I posted towards the end of last year about how lots of gold-trade middle-men are being cut out by wealthy investment combines and Arabian/Asian Sovereigns and their advisers approaching the miners direct. They offer the producers mouth-watering deals: have the cash now, set aside the gold for us in (say) six months time…have the money interest-free. Just sign here saying come what may, you’ll give us the gold.
Now I’m being told that the mining ‘production problems’ are not all they seem: that unrecorded output is being syphoned off direct to those off-the-record purchasers. Thus does yet another investment move I made (buying mining shares) fall victim to The Big Fix put in by The Big Money.
I’ve been out of that for some time now. I sold my last Gold Tracker at the $1872 level last year…a profit in excess of 120%. Now it’s back at $1690 in New York. As top-end bricks and mortar are way out of my league these days, I’m tempted by the amber gamble again.
My thought is to wait for the next euro-fudge and QE confirmation, hope for a smallish price fall, and then buy gold again….the real stuff this time. Commonsense says there will be millions of squeezed middles thinking exactly the same as me. I can but hope.
But like I opined at the start of this piece, the sense one gets researching, listening, asking, watching and monitoring today is that the flight from fiat money has just let go of it’s last booster stage. The escape-speed for these alternative investments is yet to be ascertained: but with stocks and commodities (outside some crops) looking sick, it seems clear that we are off to the Moon.