The gold price collapse will reveal the true value of solid gold

B

bubbleboy

Member
Solid gold is not the same thing as the gold price on our computer screens, to confuse the value of these two things could be a problem during the coming price collapse.

Some things to consider:
There is estimated to be 170,000 tonnes of solid gold above ground, this gold has not been offered up for sale even after more than 10 years of price rises.
Every year about 2500 tonnes of solid gold is mined and 1000 tonnes of gold jewelery being offloaded in the west is scrapped and this is the only solid gold being offered for sale on the global market.
The global market for solid gold offered for sale globally is not growing larger, 2500 tonnes is about all we can get each year.
"Australia gold output declines for third consecutive quarter"
http://www.miningweekly.com/article...ines-for-third-consecutive-quarter-2012-06-25

In London alone the paper gold sales are over 2,000,000 tonnes per year, almost all of this paper gold is up for sale, that's more than ten times the total solid gold mined in all of history being traded each year on paper. This paper gold is what determines the gold price we use to 'value' our solid gold today when we buy from the comparatively tiny mining and scrap supply, while almost all of the global total 170,000 tonnes of solid gold is simply not offered up for sale on any market.
http://www.lbma.org.uk/assets/Loco_London_Liquidity_Surveyrv.pdf

At some point this paper gold will be increasingly be offered up for sale in larger and larger amounts. This will collapse the gold price bubble, the gold price will fall dramatically.

"Gold's Technical Picture Is Broken; Collapse Coming"
http://seekingalpha.com/article/681481-gold-s-technical-picture-is-broken-collapse-coming
"The gold bubble is about to burst, as investors and buyers rush out. Prices have been volatile, and gold hasn't soared thousands of dollars as many investors were expecting. Instead, gold is falling during the stock market crisis rather than rising. Gold is not acting as such a great "safe haven" as buyers had hoped. Investors are beginning to realize that gold is much riskier than they had thought."

The gold price is a bubble that will one day collapse to way less than $700/oz, but this event will shortly afterwards reveal the underlying value of solid gold at way more than $10,000/oz.

It will be necessary for the gold price bubble to collapse to an unimaginably low level in order to get to the multiple tens of thousands of dollars per ounce that the majority of holders of the 170,000 tonnes of gold value their solid gold at.

If you can keep your solid gold through this time as the holders of the other 170,000 tonnes have already been doing for years and years then well done, the price collapse won't be an easy week for solid gold holders, but afterwards . . .

Disclosure: I am long solid gold.
 
I agree. It's been proven paper gold investments are somewhere near 100:1 (paper:physical).
 
Very interesting! i've been thinking about adding a bit more gold to my stack but it just seems so overpriced! when i could get 1kg of silver or around 20grams of gold for similar price.

If and when this price crash doe's happen do you think there will be buying opportunities to purchase physical gold at the highly reduced spot price before the big run up back to record highs?

Also im imagining if gold doe's go up to $10,000 surely silver will fetch $100 or $200 an oz?

Cheers Jimmy
 
Jimmy1986 said:
Very interesting! i've been thinking about adding a bit more gold to my stack but it just seems so overpriced! when i could get 1kg of silver or around 20grams of gold for similar price.
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You could also buy almost 18 metric ton of coal instead of an ounce of Gold ;)



Or you could look at it this way. 20 grams of gold is far easier to carry, hide and post than 1kg of silver and they are both "worth" the same
 
bubbleboy said:
In London alone the paper gold sales are over 2,000,000 tonnes per year
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If I sell you an ounce of gold and you sell it back to me and we do this 2,000,000 times does that mean it would show up as 2,000,000oz of gold sales? Or 2,000,000oz of gold traded?
 
Why would ordinary people rush out to buy physical
gold(and force the price up) when the "price of gold"
had been falling dramatically.They don't see the difference.
And business would see it as very risky,also?

Quote
"The gold price is a bubble that will one day collapse to way less than $700/oz, but this event will shortly afterwards reveal the underlying value of solid gold at way more than $10,000/oz."

By what mechanism will this happen?

How do you determine underlying value?

Wouldn't The central banks of countries that hold physical gold counter a fall towards $700?

And the collapse of the value of currencies would counter the fall in value of gold?

Very confusing.

Have we been looking at a fall in the price of gold,or US dollar rising on safehaven:
and so that means that gold has been going up in other currencies.
The US is just one of many countries
Wouldn't other countries continue to want to buy?

In the last crash gold fell too.The share gamblers all sold their good stuff to cover their bad bets.
This is again happening.

....But admittedly the general direction of what your saying is worrying.
 
I guess that the gamble is that gold is the End Game. If you think that there will come a point where currencies fail and people are burned and lose faith in paper then something has to become the baseline store of value again. If currencies are to be trusted again they will have to be backed by something. If you think that gold will be it, buy some. If you think that clams or cans of beans will become the trusted currency backing then buy those.

A couple of simple questions: Who owns large amounts of physical bullion? Is it in their interest for that bullion, which cost a fortune for them to accumulate and store to become near worthless? Or is it in their interest for gold to be cheap while they accumulate as much as they can, then for one day soon after become the most valuable thing in the world?

Gold is held in large amounts by the people at the top of the pyramid. I doubt that they will let their investment become worthless in the end.
 
"while almost all of the global total 170,000 tonnes of solid gold is simply not offered up for sale on any market"

On what basis/evidence do you make that statement? We do not know how much of this stock is turned over, but I can assure you it does.

"If I sell you an ounce of gold and you sell it back to me and we do this 2,000,000 times does that mean it would show up as 2,000,000oz of gold sales? Or 2,000,000oz of gold traded?"

It would show up as 2moz of gold traded. High turnover is not a problem, it is actually a sign of a highly liquid market. Would you invest in a company who's shares hardly traded?
 
If the spot price drops to 700/oz why would you buy gold for 10,000/oz i don't get it. I think this is abit of a myth that there will be a big dilution between spot and physical prices. I believe if we have a spike in the physical price spot will follow.
 
Nukz said:
If the spot price drops to 700/oz why would you buy gold for 10,000/oz i don't get it. I think this is abit of a myth that there will be a big dilution between spot and physical prices. I believe if we have a spike in the physical price spot will follow.
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If the exchanges run out of physical (which is entirely possible as they run a fractional reserve system) and a forward contract had 0% change of being delivered in physical and 100% change of being settled in Fiat. If inflation was running high I would expect 0 buyers and heaps of sellers, so I think a physical/paper divergence is almost guaranteed. So seeing a $0 price on gold could be a distinct possibility if they have not packed in the towel by then.

It is like a game of musical chairs, while the music is going all is well. Once the music stop and people start taking a seat it will become obvious there are more receipts then gold and it'll be ON!
 
The question is if gold down from 1600 to 700 or even lower, will dealers still offer that price?

Will the minting companies deliver on that price when it is under their production cost?
 
bron suchecki said:
"while almost all of the global total 170,000 tonnes of solid gold is simply not offered up for sale on any market"

On what basis/evidence do you make that statement? We do not know how much of this stock is turned over, but I can assure you it does.
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Of the 170,000, central banks have 30,000, the bullion banking system 20,000, wives in India 20,000 and we have 70,000 already that does not go up for sale. Bullion banks may turn over gold but they don't sell it off, we may not know the turnover but we do know they don't sell it off even at the peak of the price bubble.

There are gold treasures from the time of the Roman Empire and Egypt, ancient gold is not being sold. Aristocratic gold going back hundreds of years in Europe still being held by the families with no intention to sell. Saudi gold, they went to a lot of effort to get paid in gold in the first half of the 20th century are in no hurry to sell. After speaking with many people living outside of the G7 I have realized that most of the world simply keeps their gold except for absolute personal emergencies, at which time it is sold to someone else outside of the G7 who will then again simply hold it for themselves.

Jimmy1986 said:
If and when this price crash doe's happen do you think there will be buying opportunities to purchase physical gold at the highly reduced spot price before the big run up back to record highs?

Also im imagining if gold doe's go up to $10,000 surely silver will fetch $100 or $200 an oz?

Cheers Jimmy
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The holders of solid gold as mentioned in the reply to bron above will not be selling, they didn't sell when the price went up five times and they won't when the price falls by more than half. I'm sure some people in the west aka G7 countries will sell some of their solid gold, you may have to get to them before the local gold buying shops do. There may not be enough solid gold around for sale by that point. My strategy has been to join the 170,000 tonne gold holders now before the price collapse to avoid missing out. Silver appears to be more about it's industrial uses, I'm just not sure what will happen there, outside of the G7 silver is ok, but just ok.

Peter said:
Why would ordinary people rush out to buy physical
gold(and force the price up) when the "price of gold"
had been falling dramatically.They don't see the difference.
And business would see it as very risky,also?
Click to expand...

It's not that people would rush out any buy, it's that the people that already have solid gold will not sell. There can be the same number of buyers for solid gold but as sellers diminish the true value is then realized as being much higher than the falling bubble price.

Peter said:
Quote
"The gold price is a bubble that will one day collapse to way less than $700/oz, but this event will shortly afterwards reveal the underlying value of solid gold at way more than $10,000/oz."

By what mechanism will this happen?

How do you determine underlying value?
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These are good questions but it doesn't look like it will be a fall and then a visible climb on a chart, more like a disruption in the market based on huge amounts of paper which is then replaced by a market based on the smaller amounts of solid gold itself. The mechanism will be the collapsing of the gold price in London and New York. The underlying value will be determined by the majority of the 170,000 tonne holders doing even more so than what they have always been doing, holding and not selling.
 
The mechanism will be the collapsing of the gold price in London and New York. The underlying value will be determined by the majority of the 170,000 tonne holders doing even more so than what they have always been doing, holding and not selling.
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I agree and the depressing scenario I see is a total collapse of the world's currency markets, meaning every country for itself. Massive depression (deflation) and destruction of wealth on a level not seen outside of conquering armies pillaging and burning in retreat. When the dust settles and some actual real high level talks have worked out a way to move forward, there will be a gold based reserve currency and governments will make their own decisions on how they get the gold held by citizens into their stockpiles so they remain players. That could be swapping for the new version of fiat (hopefully at a fair ratio), or outright theft (by raiding deposit boxes for 'financial terrorist funds' or just outlawing private gold ownership). Considering the usual behaviour of governments something along the lines of theft will occur.

I think the major thing to consider is that the world has never been this intertwined, mutually committed to the finance game of cards, and dependent on other countries for food or technology or both. If this unravels in a 'worst case scenario', the only hope you will be holding on to is that you will be able to survive until the sun shines again. The rumours have started that the ongoing computer problem in the UK is because there is actually no cash to move around, just numbers that aren't acceptable at the grocer. You can be sure that if the derivatives mountain falls to dust, you won't have access to those digits in your bank account for months, if ever again - and we'll leave out government sponsored malware, sun spot EMPs and whatever else currently in our purview.

Having a pile of metal in the basement so you can join the elite when the smoke clears is a bad reason to be stacking. Ditto trying to time a collapse so that you can win bigtime. With a massive decline in world living standards on the cards, anything which helps soften that type of future is all that matters. (IMHO). I'm in the camp that sees recognisable small denominational silver as a way to bargain and trade when the grid is down, big silver as speculation, and gold was a way to try and continue a relatively comfortable lifestyle (ie, food, shelter, healthcare) after the grid goes up again. But I hope I'm wrong and metals are just a speculation and a fairly safe way to save long term for my 'golden years'.
 
My left side of the brain is saying that Julie W could be partially right. True the world is interconnected and this will give these banker parasites the opportunity to crash the system and reboot it in their fabian open society image. Expect the revaluation of major international fiat currencies - upset that I think I have bought too much silver. Not comfortable saying my ratio here - even for a small stack. Just buy gold to protect yourself and get your gold out of dodge (Hong Kong). All that you are doing in gold is protecting your purchasing power - save in gold. TP&CS is sadly thinking that George Carlin was right :-(
 
Quoting Julie
"When the dust settles and some actual real high level talks have worked out a way to move forward, there will be a gold based reserve currency and governments will make their own decisions on how they get the gold held by citizens into their stockpiles so they remain players. "
.....
Australia produces a lot of gold(4th?) so,as someone here has said before,nationalization of the gold mines would occur before confiscation was considered.
....
But when you have a complex problem with lots of factors and many,many unknowns ,how can you solve it?How can we really know?
Although we might lose on gold,its still the best bet out of all the possibilities.
That's all I have to know.
 
TeaPot&ChopSticks said:
My left side of the brain is saying that Julie W could be partially right. True the world is interconnected and this will give these banker parasites the opportunity to crash the system and reboot it in their fabian open society image. Expect the revaluation of major international fiat currencies - upset that I think I have bought too much silver. Not comfortable saying my ratio here - even for a small stack. Just buy gold to protect yourself and get your gold out of dodge (Hong Kong). All that you are doing in gold is protecting your purchasing power - save in gold. TP&CS is sadly thinking that George Carlin was right :-(
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Are you saying that Hong Kong is a good or bad storage location? Sorry, it's not clear to me if you were saying get your gold out of dodge and store it somewhere like Hong Kong, or get it out of Hong Kong.

I have some gold stored in a Hong Kong vault and started feeling a little paranoid when Jim Sinclair implied that what's yours may one day become the Chinese government's and that anyone who stores precious metals offshore should be prepared to move to where their metal is. He didn't spell it out, but he probably anticipates governments will introduce capital controls meaning you can't move your metals or (fiat) money across borders if the shit really hits the fan.
 
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