04 December 2012
Hugo Salinas-Price: The Price of the Dollar
“...the broken wall, the burning roof and tower, and Agamemnon dead.”
W. B. Yeats, Leda and the Swan
Hugo Salinas-Price reminds us of something important in a striking 'heart of the matter' essay.
Gold is the standard of monetary value, because of its unique characteristics which are founded in nature, and are contingent on no other counterparty.
And this is why central bankers are so interested in the relative value of their paper and gold, even if they choose to feign indifference.
The ratio of increase of gold bullion is relatively steady at 1.75% increase per year, also known as the 'stock-to-flow' ratio. This is discussed in more detail by Ronald-Peter Stöferle, Analyst at Erste Bank, and James Turk, in the video below.
Gold and silver are the benchmarks, the 'north star' if you will of monetary exchange fluctuations throughout history. It is how one finds their way through the troubled waters of currency devaluations, war, and temporal customs and regimes.
Empires rise and fall, and currencies come and go; gold and silver endure.
The Price of the Dollar
By Hugo Salinas Price
December 4, 2012
It is a mistake to attribute a price to gold.
What is in question today – and has been in question for a century – is not the price of gold, but rather the price of the dollar, and in turn, the price of all the fiat currencies of the world, which are nothing more than derivatives of the fiat dollar.
The price of the dollar today is 0.01835 grams of gold. That it to say, it is less that two-hundredths of a gram of gold; physically, a tiny speck of gold. We have to turn the popularly quoted “price” of gold around: at $1,695 dollars for an ounce of gold.
If you want the price of the dollar in ounces of gold, take $1 dollar and divide it by 1695 = 0.0005899 ounces of gold. In other words, slightly less than six ten-thousandths of an ounce of gold will buy you a dollar.
Since gold is the numeraire – the substance which prices all fiat currencies – it is not the price of gold which is fluctuating, as the popular press and mainstream media would have us believe. What fluctuate are the diverse prices of all currencies.
We know that the banking cartels which issue these currencies all strive to control the dollar prices of their currencies by numberless forms of intervention in the world markets. Of course, the prime fiat currency (of which all the others are derivatives) is the US dollar and its price in gold is continuously manipulated in a vain attempt to keep it from falling.
The false “dollar price of gold” is promoted and published as a deft and subtle means of throwing public opinion on a mistaken track right at the start of any consideration of gold. The “dollar price of gold” is a case of the tail wagging the dog.
The gold price of the dollar has fallen from 0.8886572 grams of gold in 1934 (at “$35 dollars an ounce”) or slightly less that nine-tenths of a gram, to less than two-hundredths of a gram today.
Unless monetary policy changes in a revolutionary manner, the gold price of the dollar is going to continue to fall until it approaches zero. In other words, eventually the dollar will be worthless in terms of gold.
"I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away."
Percy Bysshe Shelley
Gold Daily and Silver Weekly Charts - Bear Raid of a Sort
Intraday commentary on the metals and Sprott Silver here.
I received 'No' 'none' 'zero' 'zip' emails today concerned about gold or silver and the very obvious smackdown today.
Well done.
It was announced today that Elizabeth Warren will have a seat on the Senate Banking Committee. The Wall Street lobbyists were adamantly opposed to this.
Have a pleasant evening.
SP 500 and NDX Futures Daily Charts
A relatively uneventful day despite the updown wash and rinse in a range.
VIX is creeping up a bit. Let's keep an eye on it.
Pandora guided lower after the close and the stock is getting beaten up after hours.
I think going over the 'fiscal cliff' is a decent bet, as it serves the political interests of both political parties. There will be histrionics, and a market tantrum.
Barry Ritholtz points out that the last day for proposing legislation for this year is 18 December.
Net Asset Value Premiums of Certain Precious Metal Trusts and Funds
As I suspected there were additional funds that were received by the Sprott Physical Silver Trust that were more recently booked as bullion and cash. These came from the underwriters take on their allotment as stated in this Nov 30 press release which updated the completion release of Nov 14.
"Including this exercise of the over-allotment option, the gross proceeds of the Offering were US$310,011,250, consisting of 23,575,000 Units offered at US$13.15 per Unit."
In a separate statement at another venue, Eric Sprott said that if there are any 'fails to deliver' in their bullion purchases, down to the last bar, they would announce them.
There was a two step bear raid on the metals this morning that was a bit fake, and provided a secondary buying opportunity for shorter term traders, particularly in silver.
I bought a largish position in silver during the opening ten minutes and added a little to gold. I am hedged.
I suspect that the US will go over this mythical 'fiscal cliff' and that the markets may lean on policy makers to attempt to get the things that they want, in the manner of TARP. So this *could* mean a lower stock market for a period of time, with pressure on other assets. But the negotiations are still in the early dancing stage, so it is hard to see how this might play out yet in detail. I like the probability of a dip over 'the cliff' which is largely theatrical.
03 December 2012
Gold Daily and Silver Weekly Charts - Swiss Franc Cash Account Rates Negative
The most interesting news for me today was Credit Suisse Sets Negative Interest Rates For Cash Accounts.
The reaction in the euro - swiss cross trade was decided. The Swiss do not wish to see the franc appreciate because of their cross trade with the Eurozone.
Fiat. It is a matter of will. Watch and be amazed.
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