Recent Gold Hype Sounds Like Grade-School Chant; Five Non-Hype Reasons to Own Gold

Reader David emailed a link to GATA, SHAKA ZULU, And The Coming Gold/Silver STORM! with a note "please see fit to write about this!!!"

The article is by Bill Murphy, the Gold Anti-Trust Action Committee (GATA) chairman. Here are the key snips.

To get right to the point, three quality sources told me three weeks ago that the gold and silver markets were going to take off in August and I have been pounding the table on such ever since.

It is time for things to happen. As you know by now, I have been jumping up and down for fireworks to happen in August. We shall see. All I can say is that what has been brought to my attention over last three week period from the "best of" sources all points to the same conclusion. It will be nitty gritty time SOON. Perhaps that “soon” is “now” the way gold has traded the past three days.

If what I think I know is correct, it will be time to pour it on our adversaries and send them running for the hills.

Grade-School Chant

As I read that, I was wondering what exactly I was supposed to comment on. Murphy has three sources, all unnamed. 

Worse yet, Murphy will not even state what the news is. The entire posts smacks of the playground chant "I know something you don't know, a ha, and a hen, and a ho ho ho."

There is no story here, there is not even a rumor. There is only a rumor of a rumor. I am commenting because I was asked.

Seasonality

Murphy has at least one thing going for his call: seasonality. August is generally (but not always) a good time to buy gold.

If nothing happens, Murphy will be on his bull horn complaining of manipulation, singing the same tired chant about gold shorts suppressing the price of gold.

Manipulations

Is the gold market manipulated?  A better question is "what isn't?" Certainly the Fed manipulates interest rates. The LIBOR scandal proved banks acted to manipulate LIBOR. The rating agencies manipulated pure garbage into AAA rated securities.

Nearly everything is manipulated to some degree. However, I do not believe it is possible to manipulate prices for decades against the long-term trend.

If there has been an effort to suppress the price of gold it certainly has failed miserably. Gold has gone from $250 to $1900 and is now $1620.

Yet, every time gold declines the conspiracy clowns scream manipulation as if the price can never go down ever. Now they are singing playground chants.

Five Reasons to Own Gold

There are plenty of reasons to own gold without all the needless hype.

1. Gold is a nice insurance policy against a currency crisis and I think one is coming. When or what country kicks things off that crisis, I don't know, but I suspect it is more likely to be the Japan, Italy, or some other country in Europe as opposed to the US.
2. Gold, contrary to popular myth, is actually a great hedge against deflation in the senior currency (clearly the US dollar).
3. Physical gold is a currency that is not someone else's liability and cannot be printed electronically.
4. Central banks (not just the Fed) have been pouring on the liquidity as the global economy moves from one crisis to another. Odds strongly favor more coordinated central bank liquidity moves, and those liquidity moves tend to benefit gold in the long-haul.
5. Should the world return to a gold standard with a 100% gold-backed dollar, $1600 an ounce will likely look like an extreme bargain. 

GATA would be wise to stop the needless hype and instead concentrate on fundamentals because "I know something but I ain't sayin' what" is sure a silly thing for anyone to be banking on.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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