{"id":37627,"date":"2013-04-17T12:26:09","date_gmt":"2013-04-17T16:26:09","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37627"},"modified":"2013-04-17T11:27:03","modified_gmt":"2013-04-17T15:27:03","slug":"why-im-delighted-to-see-gold-smacked-down","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/17\/why-im-delighted-to-see-gold-smacked-down\/","title":{"rendered":"Why I’m Delighted to See Gold Smacked Down"},"content":{"rendered":"

By Bill Bonner<\/strong><\/p>\n

We are delighted to see gold getting smacked down. From the International Business Times<\/em>:<\/p>\n

Gold prices posted their biggest
\ntwo-session drop in 30 years Monday as retail investors and large
\ninstitutional speculators capitulated to a six-month downdraft that
\naccelerated in the last week into bear market territory. The violence of
\nMonday’s plunge reinforced the view that the 12-year bull market in
\ngold is finished.<\/em><\/p>\n

In New York trading, a troy ounce of gold closed at $1,360.60, a more than 9% plunge and the most extreme drop since 1983.<\/em><\/p>\n

By the close of trading Monday, the
\nprice was off more than 13%, or more than $200 per ounce, from last
\nThursday’s closing price of $1,564.90.<\/em><\/p>\n

Why is this good news? It settles our nerves. And gives us an opportunity to buy more.<\/p>\n

If you’re in a card game and you look around the table… if you
\ncan’t figure out who the fool is, he might be you. Then you get nervous.
\nYou start rubbing your hands or scratching your forehead. The other
\nplayers will see that you’ve lost your nerve.<\/p>\n

Then you’re finished…<\/p>\n

We’ve been looking around the table of the investment world, too, wondering who’s the fool. The people who are buying stocks<\/a>? Probably, but maybe not. The folks who are buying bonds? Yes. But who knows?<\/p>\n

Then who is it? Are we the fools?<\/p>\n

A lot of people think so. It was beginning to make us nervous.<\/p>\n

Maybe there really is a recovery… however weak. Maybe the feds
\nreally do have the situation under control. Maybe the central banks are
\nright to print money. Maybe it will be clear sailing from now until
\nkingdom come. And we’ll be fools not to be on the boat along with all
\nthe other stock buyers and gold dumpers.<\/p>\n

Why is the price of gold falling? The papers say it’s because
\nspeculators fear that China is slowing… or that Cyprus will dump its
\nholdings. From British newspaper The Guardian<\/em>:<\/p>\n

The price of gold<\/a>
\nfell to its lowest level in more than 18 months on Friday night amid
\nfears that sales of the precious metal forced on Cyprus by its desperate
\nfinancial plight would lead to wholesale dumping by hard-pressed
\ncountries in the coming months.<\/em><\/p>\n

At the end of a week dominated by the
\nplight of the troubled Mediterranean island, gold slid below $1,500 per
\nounce for the first time since July 2011 in anticipation that Cyprus
\nwould seek to raise 400 million euro by offloading a chunk of its
\nreserves.<\/em><\/p>\n

The False Premise<\/h3>\n

“Find the trend whose premise is false,” says George Soros, “and bet against it.”<\/p>\n

And today, behind the drop in the gold price<\/a>
\nis a very foolish notion. The premise is that real money (financial
\nreserves) can be replaced by credit and debt. People who believe this
\nmust be the real fools in the market. Which takes some of the pressure
\noff us.<\/p>\n

Imagine you are a major holder of, say, antique Buicks. Imagine you
\nare in financial trouble. The market for antique Buicks anticipates the
\nupcoming supply. Prices of old Buicks drop.<\/p>\n

OK… but are Buicks the same as gold?<\/p>\n

Imagine that, instead of Buicks, you held cash — a big wad of cash
\nin your vault. Then, in financial trouble, you need to open the vault,
\nget out your cash and use it to pay your creditors. Does the market for
\ncash go down? Does the value of your cash decline because people know
\nyou will have to give it to someone else?<\/p>\n

The premise is false. Real cash does not become less valuable when
\npeople find themselves in financial difficulty; it becomes more
\nvaluable. People scramble to get it. They need to pay their debts…
\nsettle their accounts… reduce their illiquidity by raising cash. They
\nneed cash. The demand for cash goes up, not down.<\/p>\n

But wait. Today’s bills are payable in paper cash… not gold.
\nDebtors must raise paper cash by selling their gold for paper. It’s
\npaper they need… not real money.<\/p>\n

That’s what makes this business so interesting, isn’t it? And so
\nfunny. The system runs on paper money. People spend it. People borrow
\nit. Now people need more of it to pay their bills. So they sell their
\nvaluables — namely, gold — to get more paper money. Gold goes down,
\nwhile central banks print up more paper money — just to make sure
\nthere’s plenty to go around.<\/p>\n

But one day… and we won’t say when… (saying “what” seems like
\nmore than enough to ask from a free publication)… people will stop
\nworrying about the quantity of the paper and begin worrying about the
\nquality of it.<\/p>\n

They will find that they have plenty of paper… and that more is
\ncoming all the time. They will look in their vaults and wonder what they
\nwill do with all this paper money.<\/p>\n

They will have bills to pay then too… and creditors with sharper
\neyes and tougher standards. When they offer these new creditors more of
\ntheir paper money, they will say, “Uh-uh.”<\/p>\n

They’ll want some better cash. Gold, in other words.<\/p>\n

Regards,<\/p>\n

\"Bill<\/p>\n

Bill<\/p>\n

To learn more about Bill visit his Google+<\/a> page or Bill Bonner’s Diary<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Bill Bonner We are delighted to see gold getting smacked down. From the International Business Times: Gold prices posted their biggest two-session drop in 30 years Monday as retail investors and large institutional speculators capitulated to a six-month downdraft that accelerated in the last week into bear market territory. The violence of Monday’s plunge … <\/p>\n

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