Friday, May 21, 2010

Russia Adds 5.7 Tonnes of Gold In April; Golden Truth 1 - BAC 0...

Just in:  Bloomberg posted an article that reports Central Banks expanded their gold holdings the most since 1964:  LINK  Wonder what that means?  The world was on a fractional gold standard per Bretton Woods back then...

Russia's insatiable appetite for gold accumulation continues in April:

(Chart courtesy of Richard Nachbar, - click to enlarge)

On another note, last Friday Bank of America poo poo'd the massive, record outflow of capital from the high yield market.  I commented HERE that historically it was a bad omen for the stock market when hedge fund money races out of the junk bond market.  Since last Thurday's close thru right now, the Dow is down 6.7% and the SPX has dropped 7.3%.  

And today Bloomberg reports this:  "The loss in junk bonds this month is on pace to exceed the 3.47 percent drop in February 2009, which was last year’s worst. It is on course to be the biggest drop in the market since the debt tumbled 8.43 percent in November 2008" LINK.  Wall Street analysts typically suck in their market assessments.  B of A sucked in junk bonds back in the 1990's and it's good to see that nothing has changed since then.

Have a great weekend.  If I get off my lazy ass I'm going to put together a post on the housing market.  In the meantime Happy Friday


  1. I am about to cook mup some personal size pizzas aon the Keg for tonight. This weekend looks a little BBQ empty but next week I am making babyback ribs and MOINKs (meatballs wrapped in bacon) for a big party at a friends house. I will have pics of the food before I leave but NO PICS from the party which usually runs a little wild.

  2. Hey Dave,
    I've currently got about 1/3 of my portfolio in gold, rest in cash. I am considering converting another 1/3 into gold. However I am a bit hesitant because of the large run up in the past year. I hear lots of speculators saying the avg cost of extraction is $500 an oz and that a lot of supply will be coming online in the next few years, and they show charts of SPX:Gold and it has already been driven down so much that you'd think its due for a reversal. Then I also see charts like Russia and China's holdings exploding, and it makes me think if they are doing it, so should I. Then there is also the concern of the dollar and US debt, but many individuals feel this could take 10+ years to unfold and there are better opportunities in the mean time. Any thoughts?

  3. Happy Friday Davey.

    Miracle Max

  4. Hey Max! GYC: how 'bout some pics of the party? LOL

  5. hey dave, ya'ever been to Dave's Gold and Silver down on South Broadway?

    Another Dave from Denver

  6. TX = Revenue: nice blog! You would REALLY be pissed if you lived in NYC. LOL

    Before I throw in my two cents, read this:

    The avg cost of extraction has NOTHING to do with the total cost of getting an ounce of gold out of the ground. In terms of this supposed supply coming, that's complete and utter bullshit. The number of major deposits discovered (greater than 2.5mm ounces) has dropped off precipitously over the last 2 decades. It has nothing to do with cost. A couple of years ago, mine production peaked and has started declining. Whoever is saying a lot of supply is coming doesn't know what they are talking about.

    Don't worry about the Dow/gold ratio until it's near 1. It may go below 1. It has from time to time, especially pre-1900.

    Gold is going much, much higher, albeit certainly not in a straight line. On the assumption the U.S. actually has the 8100 tonnes it says it has, the price of gold would have to be revalued up to $15,000/oz. for the U.S. to fully back its outstanding Treasury debt as per Bretton Woods. Assume the U.S. doesn't have anywhere near 8100 tonnes.

    The cash you hold will continue to be devalued and one of the few assets that will go up in value against your dollars is gold.

    I don't know how long it will take before the U.S. dollar collapses. But I do know that gold will keep going higher against ALL currencies until a gold-backed reserve currency is reinstated - probably by China. I doubt it will take 10 years...

  7. You should read the comments to that WSJ article. Here are a few gems:

    - The 2008 Housing Bubble TODAY is Gold!
    Lesson…Short Gold. Price will hover around current levels. Time to Trade in and out.
    - Golds has no intrinsic value. You are simply hoping that you can find somebody at a later date that you can sell it to at a higher price than you paid.
    - Gold is not fungible.
    - Does your local Safeway accept gold coins? The commissions on buy/sell are staggering and as much as 20%! Gold investors are betting against the USA, dumb bet! We WILL take back America!
    - You can't take a gold brick to the Safeway to buy your groceries
    - At the rate obama is driving the USA over the cliff people will be throwing their gold and silver coins out in the street calling them worthless.

  8. Gold's main function is to be looked at. We hang it on ourselves, stand it on our homes, or hide it in vaults and tell ourselves it represents wealth when we look at it. But we don't and can't really use it.
    People rob for it, people die for it. Governments overthrow whole institutions for it.
    With complex computers, instant communications, and massive data at hand on almost every subject under the sun--that in such a seemingly advanced world a man's word cannot be sufficient backing for his international trading?
    How much time and energy are spent, pain and misery are caused, because man is still barbaric. He must use a silent, nearly useless master, a metal, as a way of forcing himself to keep his word when trading with others.
    Gold is more a devil than a God. Gold is a monument to man's barbarity, not to his highest self. It is a reminder that without some sort of mutual economic weapon that everyone can use, man's inhumanity to man, man's greed, man's lust for power and fame will cause him to lie, cheat, steal and distort. In gold we trust. In words we mistrust. And, so far, rightly so.
    Man may evolve enough in time to escape this dependency. But, in my opinion it will take a thousand years.
    And until man has evolved, maybe we should be grateful that we have gold, for it will always work; it can help pull us out of a hole. In a world where we send men off to be killed in the name of patriotism or in the name of somebody else's government, in a world where wars are still being fought because of clashing religious views, in such a world gold doesn't look so terribly barbaric.
    It's strange that the politicians who resent the controlling mechanism of gold despairingly refer to gold as a barbaric metal. It is not that they are condemning gold as much as they are pretending that man is elevated above barbarism. He isn't not really. And until he is, then i must reiterate that, much as we may dislike gold for symbolizing our lack of evolution, gold is going to be around-to scorn us silently when we try to remove it from our monetary system. Gold will be there when, out of chaos and misery, we put our monetary systems back together again. Gold is.

    James Sinclair/Harry Schultz

  9. Tyrone, amazing how ignorant most of the hoi polloi are, isn't it? I dunno who Anna Eshoo is but the pic on your blog is hilarious. I'm assuming she lost.

  10. Mike, I agree with everyone you wrote except that "gold is more of a devil than God" comment. I don't think anyone would compare gold to the idea of a higher power, but to the extent that you need honest money to help make society function better, gold certainly embodies spiritual traits that might be part of the general spiritual principles which make up the idea of "God." Gold keeps us honest. I don't think man is meant "evolve" beyond what we are, which is just another form of animal. At our very core spirit is the survival instinct - a natural Darwinian nature that will always prevent humans from evolving into some kind higher-minded, altruistic being. Gold keeps commercialism honest better than anything else.

  11. Sadly, Dave, Ms. Eshoo, my local House Representative, did not lose. Who else does California have... Boxer, Feinstein, Eshoo, Laura Richardson, Maxine Waters,...

    clueless idiots.

  12. Oh boy. Everyone in Congress except Ron Paul sucks, but that's an exceptionally bad list there. Maxine Waters is especially an embarrassment. She made sure her husband's bank got TARP money that it didn't even need.

  13. Hey Dave in Denver,

    I'm just a regular guy who's only investment is just a few hundred ounces in silver coins (in the form of maples, eagles, etc)

    what is your advice for a guy that has a small amount of money? I might be the only guy here that can't tell a diiference between a hedge fund manager and a week old peeled banana, lol. I would love to invest in some mining shares but I doubt $1k worth of shares is worth it and maybe just sticking to getting some more silver coins.

    Sorry for the noob advice, but I enjoy reading your blog and getting your input, thanks

  14. Hey Anonymous. Thanks for the feedback on my blog. You're clearly not a "noob" if you know to invest in silver coins. With $1000 you could buy roughly 500 shares of EMX.TO/ESMNF - Eurasian Minerals - and possibly get a 5x payoff or mayb more. But your first instinct is probably better - keep buying silver coins. One other alternative would be to buy some fractional gold coins 1/10th oz gold eagles or maple leafs. Look for offerings on craiglist that might be cheaper than coin dealers. The premiums on fractionals are high, but they will go even higher down the road.

  15. Hey Dave,

    I've seen that graph of the Russian central banks gold holdings bandied about for a while now. Though I have to say that I find the layout of the graph somewhat misleading, with the range in the bottom left corner starting at 12 million ounces, instead of zero.

    In fact, I find the following statement more enlightening: The Russian central bank has increased its gold holdings from 12.5 million ounces to 21.5 million ounces in the last 3.5 years, an increase of 72%.

    Now, if only we really knew how much gold China has been buying in the 3.5 years...

  16. We may never know what China has accumulated until they roll out a gold backed currency. They do a lot of their accumulating thru their various sovereign wealth funds, which don't have to report holdings to the BIS, like the Central Banks do.

  17. Ok its Sunday so I have pics of sirloin tip skewers if you want to look.

  18. Wow. Glad I didn't know those pics were full until after I had a stomach full of righteous shrimp cocktail!

  19. LOL. Not sure where Whole Foods gets its shrimp, but it was tasty.

  20. @Dave in Denver

    I am a regular reader of your blog and i want your guidance in a gold investment i am thinking to make.. I am located in Europe and i want to invest around 10000 euros in gold bars. What would you suggest is bars or coins?

    Thanks for your time

  21. @Europe: I don't think you can go wrong either way. I prefer sovereign-minted 1 oz. coins (philharmonics, maple leafs, krugerrands) even though they have a higher premium than the bars because my view is that they are ultimately more fungible. I also believe the premiums will going higher on 1 oz. coins so you can make money 2 ways: price of gold going higher and premiums expanding.