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The Once and Future Unit of Finance – Precious Metals Supply and Demand

The Once and Future Unit of Finance – Precious Metals Supply and Demand

Sally Forth and Speculate on my Behalf!

Last week, the price of gold was down ten bucks and silver four cents. Someone on Twitter demanded if we didn’t find it odd that the biggest sovereign debt bubble has managed to inflate a bubble in virtually every asset price except for gold.

 

Snapshot from a recent Goldbugs Anonymous meeting. Why, oh why have you failed to bubble my asset, dear fellow speculators? [PT]

 

Given that he went on to assert there is a bubble in paper gold claims, he is trying to say that gold has to besuppressed. Otherwise its price would be much higher. We won’t reiterate here the proof that this conspiracy theory is false.

Instead, we want to address two points. One, the term bubble is used quite flexibly. Does it mean the price of something is too high? For example, the S&P Index at nearly 3000. Or does it mean there is too much quantity of something, e.g. debt.

Or that something is being done to unhealthy degree, e.g. sending non-students off to university to get degrees that will not increase their employability? One should use each word with care and precision. Otherwise ambiguity permits one to migrate freely between different concepts.

Clearly, this guy is jealous that the prices of other assets have gone up, making other speculators rich. But the price of gold has not, thus not making him rich. Instead of admitting he was wrong to believe the gold-to-$10,000 story, he blames the world. Also, he is wrong about something else. The price of oil has not exactly gone up;  or real estate in many non-trendy locations.

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