Paper Gold doesn’t Glitter
By Egon von Greyerz
Today when gold in US dollars is making a new correction low, the paper shorts are elated. They believe they can win this game of frightening every gold investor to sell their holding. But this elation is likely to soon turn to desperation.
Supply tight in gold and silver
As I have discussed many times, the physical market in gold and silver is very tight. Bullion banks have low stock levels and central banks have leased or sold a major part of their gold. But since they refuse to be properly audited they are desperately trying to hide the real position. China and India are continuing to buy more than the annual production of gold by the miners. And the supply situation from the refiners is tight with delivery delays for bigger orders.
Dollar strength is ephemeral
So gold seems very weak. But that is only in US dollars. In virtually every other currency gold is holding well. That includes the Euro, the Pound, the Canadian dollar, the Aussie dollar, the Yen, even the Swiss Franc and of course weaker currencies like the Ruble as well as most others.
The dollar is on its last swansong. The strength could last a bit longer but the reserve currency of the world is living on borrowed time.The technical picture for gold is indicating misplaced optimism from the dollar bulls. And fundamentally the most indebted country in the world will soon realise that the road to prosperity cannot be built with printed pieces of paper. No economy that runs budget deficits for over 50 years and current account deficits for over 40 years can survive. Retail sales are declining and the major retailers trading is under real pressure. Industrial production is weak and so is housing. Freight and trade is declining fast and these are important advance indicators of economic activity...
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