Wednesday, 25 November 2009

Record debasement of British Pound! : 2009-11-25

Don't worry, these are not British pounds - we are not there (yet)!

Wednesday 25th November 2009 at 16:58.

So the record high in gold in pounds Sterling gives a new record low for the British pound in terms of gold. Let's see just how much our government and bankers have managed to debase the pound over the last century.

Easy to calculate. The present value of the £ compared to its value under the Gold Standard is the reciprocal of the current bullion price of a gold Sovereign coin which used to be a £1 coin worth £1!

Sovereign gold content = 0.2354 ounces
Present bullion value = 0.2354*706.73 (today's 'PM Fix' London gold price)
= £166.36 in today's 'money'.
It has been debased by a factor of 166 times.

Reciprocal of this (1/x function) = 0.006011 (oh dear).

Conclusion: The pound Sterling is now worth 0.6% of its original value under the gold standard when Sovereigns were issued annually for nearly 100 years between 1817-1914 for use as money before Britain left the Gold Standard.

It has lost 99.4% of its value since then; rather, 99.4% of its value has been taken away.

Let's calculate the new £ in terms of the old 'LSD' money (pounds, shillings and pence) where 20 shillings made £1 and 12 pence ('12d') made a shilling, ie 240d to the pound.

0.06011*240=1.44 d (old pence)

Interestingly, as an aside, in 1797 England issued 'Cartwheel Twopences' struck by the Matthew Boulton steam coin press (when Britain was the major industrial power in the world) and these weighed 2 ounces - almost like being on a gold/silver/copper trimetallic monetary standard, the price of copper being 1d per ounce.

In terms of this, today's pound sterling would be worth 1.44 ounces of copper when it used to be worth nearly 1/4 ounce of gold!

This fits neatly with the idea (the fact) that, when a government takes precious metals out of the coinage and replaces them with base metals, it allows them to debase the currency over time until the coins actually reach the intrinsic market value of the base metals they contain! The pound is now indeed a base metal coin, as are the dollar and the euro (and all the rest). Well, base metals dollars were produced in year 2000 and anyway, the alternative is a paper dollar, also very cheap to make. Eventually, a stage is reached when even the base metals in the coinage become more valuable than the face value of the coins for the lower value demoninations and have to be :

a) replaced by cheaper metals (copper pennies in Britain replaced by copper-plated steel in 1992 which is magnetic - you can separate these 1992-onwards minted coins using a magnet),
b) shrunk to fit the new shrunken metal value of the currency - (the cupro-nickel (formerly silver!) British coins were shrunk around the same time by about half, presumably for this reason), or
c) discontinued altogether (the smallest demonination English coins such as farthings and halfpennies were sequentially phased out, presumably because they couldn't buy anything or they were too costly to manufacture).

Eventually, under a paper money system, the monetary value of the paper note can be decreased until it is worth as much as the actual paper and ink plus perhaps the processing cost for manufacturing the actual note.

After that one is exhausted, you just add more zeros to the note, until you can hardly fit any more onto it.

Thanks to the wonderful Wikipedia for pictures.

New gold highs in Sterling! : 2009-11-25

Wednesday 25th November 2009 at 16:26.

I blinked and I missed it! Over last weekend the gold price zipped past its old all-time high in pounds Sterling of around £693 per ounce set around the beginning of February 2009 and has registered six London Fixes all above £700.

Today 2009-11-25 : GBP 704.45 706.73
Yesterday 2009-11-24 : GBP 708.81 703.30
Monday 2009-11-23 : GBP 702.41 702.87
compared to last week :-
Friday 2009-11-20: GBP 690.83 691.04
Thursday 2009-11-19: GBP 681.55 682.84

Last Friday's close was £696.81 (US$1150.90 with$1.6517:£1), which I think is clearly abover the old high from earlier this year.

Currently at 11:02 NY time on 2009-11-25, 16:02 London time, the Sterling price is £707.33 (or US$1178.40-1178.50 depending on which end of the Kitco page you are reading ,with $1.6660:£1).

What would be bullish for gold? 2009-11-25

Wednesday 25th November 2009 at about 16:00.

If India's Central Bank bought the remaining 200 tonnes of IMF gold. That would be bullish for gold.

What about China? Well, they have been said to have purchased 454 tonnes since 2003. See this article:

China admits to building up stockpile of gold
"'s [China's] reserves had risen by 454 tonnes from 600 tonnes since 2003."

Maybe they have bought enough for the time being? They were often expected to be going to be the purchasers of the IMF gold but maybe India might take the rest. Either way, these facts are a sure sign of the debasement of the US dollar and other currencies and also of the transfer of wealth from west to east in the world and the impoverishment that is to come for the average people in Britain and America in the future.

Our priest at Kettering Parish Church in England was talking about the gold price this lunchtime after reading about it in the paper.

I think we are in the midst of a spike up in the price that is going to be followed by a major correction at some point. With the news media following moves in gold and the Commitment of Traders net short position in gold at record levels and concentrated in a few powerful bankers' hands, it seems like we are entering a highly dangerous situation for speculators in the near future.

Saturday, 21 November 2009

Jim Sinclair's Swiss Stairs in Gold: 2009-11-21

Jim Sinclair's Swiss Stairs in Gold!
Saturday 21st November at 11:50 am

In his great interview on King World News: ,

Jim Sinclair talks about the Indian Central Bank's purchase of 200 tonnes of gold from the IMF. He mentions that he could see some market action indicating central bank buying in the gold chart in the 'Swiss Stairs' formation in recent weeks. I recall that he showed an example of a 'Swiss Stairs' formation onb a chart a few years ago on his webaite and now we see a real one in gold!

I went and looked at the chart on Here is the link, look between September and November 2009 at the price action from August to November 2009 at prices fromabout $920 to $1150.$gold

Here is my cutout from the chart (click the chart for a better resolution):

Fabulous interviews:Eric King with Jim Sinclair and Pierre Lassonde: 2009-11-21

Fabulous interviews:Eric King with Jim Sinclair and Pierre Lassonde: 2009-11-21
Saturday 12st November 2009 at 11:43 am

Two really superb interviews by Eric King (two of many, a superb site) were put on last week. One is with the legendary Mr. Gold, Jim Sinclaur, the other is with Pierre Lassonde, former boss of Franco-Nevada and Newmont Mining.

Jim Sinclair:

Pierre Lassonde:

They are both well worth a listen!

So is the Matt Simmons interview regarding Peak Oil on the same website:

Happy listening!

Gold closes at weekly high for second week! 2009-11-21

Gold closes at weekly high for second week! 2009-11-21
Saturday 21 November 2009 at 10:51

Here are the closing prices from Kitco on Friday night:

Bid/Ask: 1150.90-1151.90
Low/High: 1150.90-1151.90

So it closes at the exact high at the end of the week. I have heardly ever seen this before in 8 years watching the gold market. Except for last week, when gold closed practically at the high on Friday's close.

Nov 13, 2009 17:15 NY Time
Bid/Ask 1118.50 - 1119.50
Low/High 1101.90 - 1120.40

Is that bearish action?

Maybe we do have a speculative fautures rally right now as John Nadler states in te LA Times.
Gold market disconnect: Record prices, but not demand
November 20, 2009 2:42 pm

The Commitment of Traders (COT) report shows an all-time record of short position of the major gold banks; this often happens before a big price tumble. However, on new gold price highs, these positions have tended to increase higher than at the previous peak. See this great essay on gold Commitment of Traders numbers by Adam Hamilton at Zeal Intelligence:
and it might be a good idea to take a look at its predecessors too.

Remember that this time last year, gold dipped to $680 from $1000 during the credit crunch and demand was up a lot at that $680 price. Premiums on coins were huge (I heard from a coin dealer this week that at a major coin show, premiums on US pre-1933 $20s are huge again).

Perhaps you can't expect demand at $1150 to be the same as demand was a year ago at $680!

Although it is Indian gold demand that is supposed to be down this year (apart from their central bank buying 200 tonnes at $1045 per ounce a couple of weeks ago, perhaps showing the lead to their people), Kitco linked to this article. Interesting.

In India, you're in gold's own country - Times of India, Nov 21 2009 2:03AM

Friday, 13 November 2009

Forecasting skills of John Nadler = C-minus. 2009-11-13

Forecasting skills of John Nadler = C-minus. 2009-11-13

It was time to take a look and try to find what perennial bearish John Nadler at Kitco who is the wet blanket for all gold investors had forecast for the 2008 price. I seemed to recall that he mentioned about US $740 as the price for gold for 2009 but I might have been wrong, so I listened to some downloaded interviews and then google'd a bit:

Here he mentions India’s Associated Chamber of Commerce and Industry (Assocham):
who forecast:
"$740 price for same, come next year. Start sending them 'why are you a bear' e-mails, shall we?"
on 26 Feb 2009.
He seems to give this some credibility. Maybe he mentioned this price in some online interview around that time. He added:
"some players see every day that passes with gold spending time above $900 as a reason for messianic fervor. ... The L.A. Times finds that 'gold already has been widely labeled "the next bubble.' "
There's always hope, eh, John?

from 24 October 2007.
"Nadler’s forecast was $665 for one year from now and $775 in five year’s time."

Actually he wasn't that far off on the first one because gold dipped to about $680 in the credit crunch.

The weekly chart on :$gold
shows the low of 681 that occurred in October 2008 so he gets an 'A' grade for that one, falling into the deflationist camp with Robert Prechter I guess. No gold bugs predicted that so it is not wise merely to dismiss John Nadler. However the deflationists are a bit like a stopped clock. They were correct on one occasion, that was September to November 2008. Will they be right again?

However, John is getting a D-minus or possibly an F for his 2009 forcast because as you can see from adding a 45 week moving average to the weekly chart for gold, the average price for 2009 is around $950-960, so he is low by a clear $200!

A poster here recalls a forecast for $640!
"$640 gold in 2009 predicted Mr. Nadler. Is there no accountability for guys like this"

Here he proposes that 2009 investment demand will slow:
and says will it end up at $900, 800 or 700 - he's not sure, no mention of $1100!

This post recalls:
"John Nadler, senior Kitco analyst, predicted gold would trade between 640$ and 940$ an ounce for 2009. At the moment, gold is over $1100 an ounce."

On The Gold Report interview he says:
TGR: Earlier you suggested that in a deflationary period or one just slightly inflationary, gold might be somewhere in the $500-$600 range. But over the longer term, you think it is more likely to stabilize somewhere between $650 and $850?
JN: I think that’s what we’re looking at in order to reflect current levels of supply and demand, basically make the mining community reasonably happy and keep India buying, which it’s currently not. Anything over $850 is just too much as far as they’re concerned, and they’ve demonstrated that stance for most of this year. ... We’re in Indian Festival season and they’re lamenting about very poor sales.

One thing he mentioned that I missed:
"I think in part that’s one of the things that delayed supplies from Valcambi, one of the refiners in Switzerland, which is probably trying to focus on ramping up to send a gazillion one-gram coins throughout India"

True that Indian demand has been low in 2008 and now also in 2009. Except for the Indian Central Bank, that is!
India buys 200 tonnes of IMF gold - Telegraph
3 Nov 2009 ... The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India for $6.7bn (£4.1bn). The sale represents almost ...
ACtually, I am not sure they are correct there. It's half of what they are selliing, ie half of 400 tonnes for sale. They have more but technically doesn't it belong to the central banks of the member countries. So perhaps it's half of the maximum they can sell without taking it from the member countries' banks. Too complicated! Ever wondered if some of this central bank gold could have multiple claims against it?
Meanwhile, on the price projections front, our friends at HSBC have issued theirs today, and they read as follows according to Reuters' Jan Harvey
"HSBC raised its 2009 gold forecast to $825 an ounce from $800, and its 2010 price view to $775 from $725, but left its long-term forecast at $700."

No mention of Bill Murphy's forecast!!!!!!! ;-)

Even deflationist Mike Mish Shedlock disagrees with Nadler's assertion that gold is not in a bull market (Nadler echoes here Paul van Eeden's opinion):
It seems to me that if gold isn't in a bull market then nothing is!

he said,
"If anything, festival-related buying might prevent a faster meltdown towards $700, but if the trends in commodities continue along their current path, it will not be able to turn the gold market ... around and back into bull mode," said Nadler.

Fair enough but the commodities trends did reverse so his caveat was met. However, he seems to love being pessimistic on the gold price!


'Even so, Nadler said he remains a "strong advocate of a core insurance position in gold bullion. Trouble, it seems, is always but one headline away from undoing the best-laid plans." '

Isn't that fair enough? With these pullbacks gold bugs get the chance to load up yet another time!

As long as you don't die before you can cash in a good profit!