-- Published: Wednesday, 11 March 2015 | Print | Disqus
- Bloomberg View’s Mark Gilbert misrepresents our widely read Apple gold demand
- CNBC quoted extensively and favourably from our market update
- Gilbert quoted selectively from our piece to misrepresent “gold bugs”
- Silly gold ‘bug’ name calling shows bias against gold and towards stocks
- “Gold bugs” and “stock roaches” can peacefully coexist
- In these uncertain times diversification is what remains vitally important
In his column on Monday, Bloomberg columnist Mark Gilbert made reference to our Market Update released last Friday – Apple Major New Gold Buyer – Propel Gold Higher?. Our piece was very widely read – Apple being the sexy tech and investment story of today. It was picked up very widely including being quoted from favorably and extensively by CNBC.
Gilberts article, ‘Apple Watch Won’t Rescue Gold Bugs’, describes our analysis as “breathless”. It suggests to us that he may have not read our entire piece and the many qualifications and caveats in the piece. If he had read the entire piece and the important context and substantive points made, it is unlikely that he would have described it with such negative bias.
We based our analysis on data provided by the Wall Street Journal which, like Bloomberg, has vast resources at its disposal with which to conduct research.
Gilbert does not disparage the Wall Street Journal over their possibly questionable information. Instead, he attacks us for having the temerity to use this information to promote the positive supply and demand equation in the gold market and the case for owning gold.
He doesn’t seem to realise that we ourselves disputed the figures put forward by the Wall Street Journal for Apple’s projected sales of their luxury range of watches. We also questioned the notion that a full two ounces of gold would be used in each watch.
The fact remains that a major new buyer, in the form of Apple, has come into the market for gold. On Sunday, Forbes reported that each watch will, in fact, contain around one half an ounce of gold – excluding the bracelet – due to a newly-patented low density alloy. The Edition will contain 75% gold by weight but not by volume.
As we said in our piece it would be a “tall order” for Apple to shift the number of Edition watches the Wall Street Journal suggested that Apple expects to, especially at the now confirmed price of $10,000. However, if Apple manage to clear even one million units in an entire year it would require roughly 15 tonnes of gold.
And, for reasons we explored in our piece, it is unlikely that these sales would come from buyers ordinarily in the market for luxury watches. They would be, primarily, customers in the market specifically for an exclusive Apple product. As such, it represents new gold demand.
Gold prices are down markedly from their 2011 highs, as Gilbert points out. This decline is more a function of the bullion bank market rigging and suppression of prices – now proven – rather than real world supply and demand fundamentals.
The deficit is being made up from existing above-ground stocks. In such an environment gold prices should be rising. However, enormous volumes of paper contracts and derivatives for gold are being sold – by entities who are not in actual possession of the asset they are selling – relative to the actual amount of physical gold being purchased which is causing the price to decline.
Gilbert’s piece is disparaging toward an illusory class of investor called “gold bugs” – among whom we apparently number. We feel no need to refer to those who tout stocks – despite their trading at record highs due to central bank intervention in the form of the continuing reckless monetary experiment that is ‘QE’ – as “stock-roaches”.
He sneers that these gold-bugs “only ever seem to see reasons to buy”.
We could say the same about most bank and other analysts in the City of London and Wall Street and their pollyanna attitude toward stocks and indeed property.
We would add, however, that there is always a reason to buy physical gold. Gold is financial insurance.
There is never a bad time to acquire fire insurance, motor insurance or health insurance. So it is true for gold.
That proponents of a particular asset class should have their very own pejorative epithet says more about the user of such terminology than it does about the person being described.
There is already a negative connotation with the expression of ‘gold bug’.
The pejorative language used regarding those who advocate owning gold is another very interesting point and one we have pointed out before. People who are bullish on stocks or the dollar are not called ‘stock roaches’ or ‘dollar bugs’ rather they are stock bulls and dollar bulls.
When one resorts to name-calling in the place of rational discussion we suspect a weakness in one’s position. Gold is reviled in certain sections of the banking, financial and indeed political world because it represents monetary discipline in a world drowning in ever-expanding unpayable debt.
Gilbert then goes on to make an odd distinction between “gold-bugs” and “those investors who use it as a store of value rather than to speculate on its price”. He describes us as the later when in fact we consistently advise our readers to own gold as a store of value and never as a speculative tool. We stated as much at the bottom of our piece – the same piece on which Gilbert based his article.
We have only ever advocated allocating a portion of one’s portfolio to gold – between 5% and 10% depending on one’s assessment of the global macroeconomic and geopolitical situation.
We seldom encounter investors who wish to invest more than this proportion of their wealth in gold. So neither we, nor our clients qualify as gold bugs by Gilbert’s own criteria.
We do have clients who have higher allocations to precious metals. Even so – should they be called ‘gold bugs’?
As for those who speculate on the price of gold, we don’t believe they have any ideological attachment to the stuff – they are simply momentum chasers on the latest bandwagon. Good luck to them as most will need luck in the volatile markets of today. But they, therefore, do not qualify as gold-bugs either.
What remains most important in these uncertain times is diversification. Gold is a proven hedging instrument and a safe haven asset in a diversified portfolio. Rather than labelling people who hold this view as “gold bugs,” maybe journalists and those with an anti gold bias might look at the historical record and the empirical data as seen here.
We look forward to Mark Gilbert’s acknowledgement of this data and the historical record in the coming days and indeed would welcome the opportunity to have a rational debate on the subject.
What say you Mark?
MARKET UPDATE
Today’s AM fix was USD 1,158.75, EUR 1,096.06 and GBP 769.42 per ounce.
Yesterday’s AM fix was USD 1,161.00, EUR 1,079.40 and GBP 770.41 per ounce.
Gold fell 0.48% percent or $5.60 and closed at $1,161.30 an ounce yesterday, while silver slipped 0.7% or $0.11 to $15.68 an ounce.
Gold in Euros – 1 Day
Gold remained steady at its lowest levels in three months as the U.S. dollar moves closer to parity with the euro.
In Singapore, towards the end of the trading day, gold for immediate delivery was $1,164.05 an ounce.
Recent U.S. economic data like the positive employment figures have stoked hopes the U.S. Fed will raise interest rates in June and this is hurting the yellow metal.
Asian physical demand will support prices as Chinese buyers tend to buy the dip. The premiums gold is trading at in Asia recently has been between $4-$6 over London benchmarks.
The Troika are meeting with Greece today who again needs help with debt repayments. Grexit is still a question mark and it is effecting the euro. Gold in euros is rising while gold in U.S. dollars is falling.
The euro has fallen below 1.06 versus the dollar and is approaching its lowest since March 21, 2003, after Draghi cautioned that inflation in the eurozone, which dipped into negative territory in December, will remain at low or negative levels for several months.
However, with Draghi’s big QE guns (buying up bonds) he notes the the ECB’s asset purchase programme will ultimately succeed in stoking inflation near the bank’s two percent target and that the slowdown in growth has been reversed.
In London in late morning trading, spot gold is trading at $1,158.59 or off 0.46 percent. Silver is $15.63 or $1,125.20 or down 0.36 percent. Platinum has been trading at its lowest levels since 2009.
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-- Published: Wednesday, 11 March 2015 | E-Mail | Print | Source: GoldSeek.com
