So this morning, I woke up to an email forward from someone that used to be a client. The forward was an anti-gold rant from a sell-side (Wall Street) broker who will remain unnamed. The piece was so biased and ridiculous I took the time to write a somewhat lengthy response. I am not going to include this person’s message since it is the property of his employer, but you can tell his arguments based on my answer. Hope this helps anyone that feels the need to make the bull gold argument cogently to a sheeple should you run into one in the wild.
Only someone on Wall Street could write something so foolish. It is so easy to pick this guy’s arguments apart it is not even funny. First, he claims gold has no intrinsic value. I’d love for him to define what “intrinsic” value is? So let’s say a painting is just a piece of canvas with a blue solid image on it. It may look like nothing or garbage to me but others may see brilliance and pay $5 million for it in the market. Because I look at it and see junk does that mean it has no intrinsic value? Gold has been the money of Kings for 5,000 years and even in the “modern” world it remains the asset people gravitate to as a store of value. I’d say having high value consistently for the entire span of human civilization gives it intrinsic value. It has value as alternative money and a store of wealth. That is the value of gold. Also why are regulators considering making gold a Tier 1 asset if it has no value and is archaic. See here. Finally, no one put it better that the fiat pimp himself Alan Greenspan in his article “Gold and Economic Freedom.”
Also, Warren Buffett’s own dad, Congressman Howard Buffett, did the same in this piece, “Human Freedom Rests on Gold Redeemable Money.”
He also claims that “gold is the ultimate market scam.” Really? Well all of the governments of the Western world and financial media discourage gold at every step of the way. Capital gains are taxed at income in the U.S. as a “collectible” to make it less attractive versus paper assets. Yet still people go to it and buy it. Further, the U.S. basically makes the whole world use the dollar with a gun to its head. Is this guy really so naïve that he doesn’t understand the entire war/aggressive posture of U.S. foreign policy in the Middle East is solely to preserve the petro-dollar (make people use it to pay for oil and commodities). So what is really the scam? Would he really rather put $1 million U.S. paper dollars in a chest and bury it and leave to his great grandchildren or $1 million in bullion? For someone that questions gold he doesn’t question digital money that can be and is being created in infinite amounts at the whim of mere mortals who think they know what they are doing? What a joke.
He seems to imply that the anti-gold rants of Indian officials as of late are bearish. I couldn’t disagree more and see it as a bullish sign. They are freaking out! Governments hate gold because it is a sign of no confidence in them. Then they act like petulant children to ban it. So what is the scam really? In any event, people already think China will overtake India in gold buying. They will buy every ounce India doesn’t want. India’s drop in demand has been in large part related to the rupee crash? Does he think it will crash further? What if it rallies?
Just look at the relationship of U.S. debt levels to the gold price. Very strong relationship. It makes sense since when the debt becomes terminal two options are available, default or massive inflation. Both are good for gold since both are bad for the dollar’s standing in the world.
Finally, he should put his money where his mouth is. To write such a vehemently negative piece on gold, he should personally be willing to put a major short position on with HIS OWN MONEY. I challenge him to do so. I have most of my money in precious metals so at least I walk the walk. I would love to see him do the same with a short position. But of course he won’t because he is just spouting, like all the others, when people like me are actually playing for keeps. Would love to see him do that into the seasonally strong period we are entering. I’m also curious as to whether he has been a bull for the last twelve years on gold when it has rallied from $250/oz to $1,620/oz currently. If he never saw the trade in the first place why would anyone care what he thinks of a asset that he admittedly “always has struggled with.” You’re still struggling pal.
More Wall Street toilet paper.