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Gold Losing Battle Versus U.S. Dollar in 2012

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Gold bears are exuberant these days. Their mood is epitomized by a recent Bloomberg headline:  “Gold Erases Year’s Gain as Europe Concern Boosts Dollar” – which was then dutifully parroted by thousands of mainstream drones. The implication was clear: gold was on its way down and the dollar is on its way “up”, so everyone should sell their gold.

Such confidence (depending on the source) is a reflection of either serial dishonesty or extreme delusion. The dollar-shills at Bloomberg explained what was happening:

concern that Europe’s debt-crisis is deepening strengthened the dollar [emphasis mine].

Let’s examine that short statement. Let’s totally put aside the fact that Europe’s debt-crisis was caused by the economic terrorism of Wall Street bankers. Again it is clear what Bloomberg is implying: the euro is weakening and the dollar is strengthening.

I’ve dealt with this inherently and deliberately dishonest statement by the mainstream media on multiple occasions in the past. In the past 100 years (i.e. ever since the Federal Reserve was given the responsibility of “protecting the dollar”) the U.S. dollar has lost 98% of its value. That rate of collapse has increased significantly in the past 40 years (i.e. ever since Nixon eliminated the last vestige of a gold standard).

The dollar is not “strengthening” – that is an outright lie. It is simply plummeting a little less slowly than the other (worthless) paper. Example: two people jump off a 100-storey building at the same time. While falling, one of the individuals climbs on top of the shoulders of the other one.

Has that individual “strengthened” himself? Obviously not. He will simply go “splat” a millisecond later.

(Legitimate) gold commentators have explained this basic fact again and again, yet had little success in penetrating the media’s brainwashing. So let me try a personal anecdote which might be more successful in reaching the gastrically-inclined mind of the average North American.

Having an unusually hot May day on the West Coast yesterday, I decided to opt for a cool submarine sandwich for dinner, and headed to Subway for the first time in several years. I ordered my favorite foot-long sandwich, and had it prepared exactly as I had done when I used to purchase sub’s on a more regular basis.

However where my memory clashed with reality was when I went to pay for my sub. The cashier asked for $8.50. I politely informed her that she had quoted the wrong price – and pointed to the $4.50 posted on the wall, the price I used to pay for my favorite sub.

She politely corrected me that I had (carelessly) quoted the price for a six-inch sandwich, not the foot-long. I had yet another experience with 21st century “sticker shock”: in just a few years my paper had (literally) lost half its value.

Then there is gold. A hundred years ago, a man could purchase a fine suit for an ounce of gold. Two thousand years ago, stylish Romans could purchase the finest toga for an ounce of gold. And today, despite the fact that gold has been pushed more than 20% below its recent high, one could still buy a more-than-adequate suit for the $1550 currently quoted for an ounce of gold.

Yet for 100 years, as the U.S. dollar has been relentlessly losing virtually all of its value, while gold has virtually perfectly preserved its entire value we have been hearing a consistent message from the mainstream media: the U.S. dollar is a “safe haven”, while gold is a “barbarous relic”.

How can the media tell us that the bankers’ paper, which has already lost almost all of its value is “safe”? How can the media tell us that gold, which perfectly protects the wealth of the holder century after century is “too risky”? The media lies.

As I wrote previously, gold is a perfect vessel for storing one’s wealth (safely), while the U.S. dollar is nothing more than a “leaky bucket”. So when we hear the media maliciously whispering in our ears that we should sell an asset because “it’s losing value”, then obviously the first thing we should be dumping is anything and everything denominated in U.S. dollars. Better late than never!

Of course this is only one reason why the dishonest gold bears urge gold- and silver-holders to dump their precious metals (any time and every time the banking cabal gets some traction with their market-manipulation). Since the price of gold is usually going up, the much more common reason why the mainstream Chicken Littles “warn us” to sell our gold is because it is a “bubble” – precisely what they were clucking only a few months earlier.

As I and many others have explained (again and again), the so-called “record price” for gold a few months ago was anything but. Even using the phony, “official” inflation numbers of the U.S. government, the price of gold would have had to go to roughly $2500/oz just to equal its previous high from 1980.

However, for any people who choose to use real inflation numbers to discount the price of gold (like John Williams of Shadowstats.com), then we calculate that the price of gold would have to rise to over $7000/oz just to equal the 1980 price. Meanwhile, Bloomberg was recently reporting (out of the other side of its mouth) that the gold miners were struggling to remain profitable at current prices. Some “bubble”!

Then there is the U.S. Treasuries market. Unlike other markets, we don’t have to discount Treasuries for inflation to examine their prices, since Treasury prices are a direct, inverse function of interest rates. Put another way, as interest rates go to zero Treasuries (and any bonds) go to their maximum theoretical price – since obviously lenders do not pay borrowers to lend them money.

What have we seen in the U.S. Treasuries market for the past four years? The Federal Reserve has permanently frozen interest rates at 0% (the absolute maximum), and then printed-up countless $billions buying-up every (unwanted) Treasury in sight, to push the effective price for Treasuries closer and closer to its theoretical maximum.

Now what do we see today in the U.S. Treasuries market today? Treasuries officials are busily restructuring the market, in anticipation of buyers lining up to pay higher-than-maximum prices. Talk about déjà vu!

In 2006, after U.S. house prices had tripled in roughly a decade, Chief Market-Pumper B.S. Bernanke was getting in front of microphones on a daily basis boasting about the U.S. “Goldilocks economy”, where house prices would just keep going up “forever”. However, there is one huge difference between the delusional (dishonest?) words of B.S. Bernanke in 2006 versus the delusional actions of Treasury officials today – in preparing for higher-than-maximum prices.

House prices have no built-in “maximum price”. It was at least theoretically possible that Bernanke’s market-pumping could have continued for a little longer…and then the bubble would have burst. With the U.S. Treasuries market, this is it: maximum prices already.

Maximum prices, at a time when maximum supply is being dumped onto the market (and the supply continues to increase). Maximum prices, despite the fact that one-by-one the buyers of U.S. Treasuries are dropping out of the market. Indeed, the former largest buyer – China – is now a (competing) seller of Treasuries, further undercutting prices. In other words, if one were to construct some extreme, hypothetical example in order to illustrate the definition of an asset bubble in its most-obvious form, it would be impossible to invent a better example than today’s U.S. Treasuries market.

So when readers are subjected to more of the dishonest fear-mongering from the mainstream media that we should sell our gold because it’s “losing value”, as a matter of simple logic we should not begin to sell our first ounce of gold until we have already rid ourselves of our last, dying U.S. dollar.

And when a few months down the road (when bullion prices are again soaring) we hear the mainstream media talking out of the other side of their mouths and telling us to sell our gold because “it’s a bubble”, again our rational strategy is clear. We should not begin to sell our first ounce of gold until we have already rid ourselves of our last U.S. (bubble) bond – assuming that bubble hasn’t already collapsed.

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Jeff Nielson
...
written by Jeff Nielson, May 17, 2012
While mainstream media and Bernanke are tring to convince the worldwide public that Gold is a relic, most Central banks and governments are busy buying gold. Gold is mostly flowing like a torrential river from US and Europe to the rest of the world. Even the Bank of International Settlements have prioritized Gold in their Charter of Incorpration. Who are the Banksters and Bernanke think they are fooling? The Federal Reserve Bank is of the BIS founders!
It looks like the East is calling the Western Banksters SHORT Hand in the world gold Poker game; and Bernanke, Jamie, and friends are getting creamed.
Is bankster shorting gold and silver the same as having your pants down while your margin has just been called? Gold is not a relic when the banksters use it in their poker games instead of fiat currencies. I sense the winning smiles of the BRICS as the Gold Chips are going into their Vaults.


Paxjds, the "answer" from the bankers/politicians/media/Oligarchs to these developments seems to be just to tell bigger and bigger LIES.

Just in the last couple of days I've seen propaganda trying to suggest that the Chinese are CURBING their buying, followed by some highly MISLEADING "statistics" from the WGC trying to suggest a general slowing in demand.

Understand that "jawboning" in markets is the last refuge of the desperate. They are HOPING that buy cranking-up their anti-gold and -silver megaphones with the message that "no one wants these relics" that it will CURB the Sheep from buying. There is little else they can do.

This is looking more and more like THE "Last Stand" of the banksters...so get out of the way when the dam bursts!!
Jeff Nielson
...
written by Jeff Nielson, May 17, 2012
Jeff, did you ever have that $5 dollar foot long deal being advertised in Canada? I haven't eaten at Subway in so long, nor do I watch TV, so am unsure myself what the going rate is now. I'd say they would be unable to offer such a price any longer without going bankrupt.

I agree, the media cannot be trusted. Came to this conclusion while being educated in the public school system. If you can catch them making one lie, then why should we grant them any trust to speak the truth on any other matter?

Newspapers seem to offer a modicum of investigative detail, while TV is a non-stop assault on the senses and mental faculties. The same elites who are in control of banking are sure to be calling the shots as to what exactly is portrayed, and how, for all those audiences just waiting to be told what to do and believe. Once again, all praise to the freedom of the Internet!

Just bought my first gold 1 oz. coin early this month. Caught the high end of the tumultuous market, but not worried. Will be going back for more silver after the next payday. This JP Morgan loss has me hoping against hope they are finally taking some punches to the wallet when it comes to manipulating the markets through massive shorts.


Lol Dalkrin!

For some reason I LOVED that commercial - but had forgotten all about it until your comment. So THAT explains both why I suddenly walked through the doors of a Subway again AND also accounts for my embarrassing faux pas on the price (lol)!

Nice to see swapping paper for metal. It's TOUGH to break the programming and BEGIN the process of REJECTING paper CURRENCY, and seeking only gold and silver MONEY. However, I can attest personally that it becomes MUCH easier with each purchase.

Furthermore, with the HORRIFYING things the banksters are doing in our markets, and the even MORE-HORRIFYING things the idiot-politicians are doing running our governments, I'm guessing that (unfortunately) it's going to get MUCH "easier" for people to start reaching for gold and silver...
paxjds
...
written by paxjds, May 16, 2012
While mainstream media and Bernanke are tring to convince the worldwide public that Gold is a relic, most Central banks and governments are busy buying gold. Gold is mostly flowing like a torrential river from US and Europe to the rest of the world. Even the Bank of International Settlements have prioritized Gold in their Charter of Incorpration. Who are the Banksters and Bernanke think they are fooling? The Federal Reserve Bank is of the BIS founders!
It looks like the East is calling the Western Banksters SHORT Hand in the world gold Poker game; and Bernanke, Jamie, and friends are getting creamed.
Is bankster shorting gold and silver the same as having your pants down while your margin has just been called? Gold is not a relic when the banksters use it in their poker games instead of fiat currencies. I sense the winning smiles of the BRICS as the Gold Chips are going into their Vaults.
Dalkrin
...
written by Dalkrin, May 16, 2012
Jeff, did you ever have that $5 dollar foot long deal being advertised in Canada? I haven't eaten at Subway in so long, nor do I watch TV, so am unsure myself what the going rate is now. I'd say they would be unable to offer such a price any longer without going bankrupt.

I agree, the media cannot be trusted. Came to this conclusion while being educated in the public school system. If you can catch them making one lie, then why should we grant them any trust to speak the truth on any other matter?

Newspapers seem to offer a modicum of investigative detail, while TV is a non-stop assault on the senses and mental faculties. The same elites who are in control of banking are sure to be calling the shots as to what exactly is portrayed, and how, for all those audiences just waiting to be told what to do and believe. Once again, all praise to the freedom of the Internet!

Just bought my first gold 1 oz. coin early this month. Caught the high end of the tumultuous market, but not worried. Will be going back for more silver after the next payday. This JP Morgan loss has me hoping against hope they are finally taking some punches to the wallet when it comes to manipulating the markets through massive shorts. smilies/cool.gif
apberusdisvet
...
written by apberusdisvet, May 16, 2012
JEFF: methinks the gold price is being slammed to allow TPTB to last-ditch effort to obtain as much as they can at rock bottom prices, because the end is nigh. It could just be that the extend and pretend endgame is now visible, what with Greece, the entire Eurozone, JPM losses, or just the growing awareness of the piss poor global economy underneath the nuclear derivative bomb. Thoughtful PM analysts believe that the vaults are being emptied at a fast pace and that CB vault holdings may be less than 10% of that stated. The growing popular requests for repatriation of German and Dutch gold might end in the epiphany that the vaults at LBMA, Fort Knox and under the NY FED may be echo chambers. Who knows; all the leasing and swap documents over the past two decades may refer to the same single remaining stash of 20 million ounces.

The bottom logically is around $1400, the cost plus a small profit for most gold miners; even then not enough to take the extraordinary risks in this sector. The World Gold Council (bankster controlled, like the Silver Institute) envisons a price above $3000 within 5 years. I honestly don't see it taking that long.

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