Gold, Grandma and Greece – a WORLDWIDE Phenomenon
By: John Fisher Gold, Grandma and Greece – a Worldwide Phenomenon. We live in our own little microcosm here in the United States. We tend to think that the gold price is largely driven by Bernanke, Geitner, Obama, Congress, JP Morgan, China, budget deficits, money printing, QE 1/2/3, and on and on. And in part, that’s true.
Although the London Bullion Market Association (LBMA) may trade more ounces, gold market pricing around the world, 23 hours 15 minutes a day (the market is closed from 5:15 to 6:00pm Eastern), is driven by the CME (Chicago Mercantile Exchange), of which the COMEX in New York is a division. Add to that the fact that gold is priced in Dollars and the U.S. does influence the gold price substantially.
However, little of what goes on in New York involves physical delivery of gold. Much of what goes on in London involves only the paper change of ownership of physical metal that never leaves the vault.
In today’s gold bull market, pricing is ultimately being driven by incremental investment demand around the world. Consider the following
- A Greek merchant is buying Krugerrands out of fear that his economy will default. He may know little or nothing about QE3.
- The Pakistani school teacher is buying British Sovereigns in case the Taliban overthrows the government and she has to flee.
- The Chinese dentist is snatching up Chinese gold Panda’s because gold ownership has just been made legal, and Chinese inflation is running at almost 8%. He has never been to London and doesn’t understand how any country can spend more than it takes in.
- There are more $100 bills in Russia than in the U.S. A Russian business owner exchanges his Dollars and Euro’s for Swiss 20 gold francs. He wonders what the difference is between the Treasury and the Central Bank?
- Indians are becoming increasingly affluent. They are the largest gold buying country in the world – by multiples. They hold most of their wealth in gold. They always have, and always will. And, Indian wedding season is almost upon us. Washington and New York don’t hit their radar screen.
- And finally, Grandma doesn’t really understand what’s going on in Washington, but she does know that her CD’s yield nothing and her Social Security check went up by a mere $18 last year. She decides she has to do something, and calls me.
All Things Considered – John’s Commentary
The gold price is driven by buyers and sellers in every country of the world every minute of every day. It is anything but a U.S. phenomenon. As the U.S. continues to weaken financially, gold pricing will increasingly be driven by factors outside of the U.S.
What to buy: There are extremely low premiums right now on gold US Mint Medallions and South African 2 Rand coins. Pre-1965 silver coin is still far and away the best value available on the market. We just bought all three to add to our personal holdings.
Quote of the day: “Gold opens all locks, no lock will hold against the power of gold.” – George Herber
