In the last Supply and Demand update, we discussed some different theories which attempt to explain what causes the gold and silver prices to move. We mentioned the:
“…attempt to hold up a famous buyer of metal, while ignoring the thousands of not-famous sellers who sold the metal to said famous buyer.”
Since then, Ireland has bought gold for the first time in over a decade. And predictably, most voices in the gold community see this as a bullish sign.
By the way, we did not see any data about the prices paid on what dates, but the articles on December 1 mention a series of buys over a few months. Assuming a few means two, it looks like Ireland may have paid more than the current price.
The Different Theories on What Moves Gold and Silver Prices
Back to the common bullish view of Ireland’s wisdom, what of the opinions of the 64,300 people who sold their gold to Ireland (assuming the average seller sold an ounce)? Surely, these people believed the price will go down?
Famous and Anonymous Price Movers
There are two competing theories for how to interpret the conflicting views when one market participant is famous and the other is a bunch of anonymous people. One is the “famous buyer” theory, and the other is the “incompetent bureaucrat” theory. The latter was used to explain the sale of half of Britain’s gold between 1999 and 2002.
How could we have known that the UK government was foolish to sell back then, and the anonymous 12,699,250 buyers were right? Whereas today, the Irish bureaucrats are right, and the 64,300 sellers are wrong?
This is just a bias towards bullishness.
…click on the above link to read the rest of the article…
